Frozen Food Market Still Rising in USA,
Retail Value Up 3.1% to $27.5 Billion

Multi-serve, ethnic and lean dishes fuel retail growth. Foodservice value nears $63 billion.

No matter how the election comes out in the United States in November, people will still be eating frozen food at home. But if gasoline prices go up again, or there’s a housing slump, they may not be eating as much away from home.

Frozen poultry export volume could suffer, too, either from a Russian ban or avian flu scares, or both. But anti-dumping tariffs on six nations in Asia and South America don’t seem to have materially impacted the flow of frozen shrimp into the US, and the negative balance of trade might be aggravated.

What’s really hot in frozen foods these days? Multi-serve dinners and entrees, up 5.6% in volume and 10.7% in value, according to Information Resources, Inc. (IRI), Chicago, Illinois. Frozen fruits, long a stagnant category, showed gains of 6.7% and 10.4%, respectively, in supermarkets tracked by IRI.
Ethnic dinners and entrees are also hot, according to ACNielsen, also of Chicago. Italian items were up

10% to $1.464 billion for the 52 weeks ended Aug. 12 of this year, the agency said in the September issue of its online magazine. Mexican dinners and entrees were up 5.9% to $636.6 million, well ahead of Oriental counterparts – up two percent to $488.6 million. Two-food entrees are growing a lot faster in all three segments.

ACNielsen also cited explosive growth in breakfast or omelet meal starters, up a whopping 2,622% to $25.9 million. That lifted the entire meal starters category 73.7% to $47.9 million; breakfast items now account for 54% of the total.

IRI sales for supermarkets and non-food retailers other than Wal-Mart (and excluding ice cream) totaled $21.453 billion, up about 3.3%, but unit volume was actually down slightly. Besides the chronic losers – most notably juice concentrates and pot pies – there were plain vegetables and even pizza. Whether Wal-Mart made up for that is uncertain.

In practically every category, dollar volume was more positive than unit volume. Frozen seafood dollar volume was up 4.4%, but unit volume only 2.3%. Frozen meat was up 2.2% in dollars, but lost 0.8% in units. Frozen breakfast foods gained 4.4% in dollars, but lost 0.8% in units; processed frozen poultry was up 3.3% in dollars, but down 1.2% in units.

Total consumption for calendar 2006 was far greater than that shown by IRI, as the agency doesn’t report on Wal-Mart, which has become the largest grocery distributor in the United States. Last year, Quick Frozen Foods International used a fudge factor of 28% to allow for Wal-Mart. But with the chain opening more and more supercenters, 30% may be a conservative fudge factor for this year.

On that basis, QFFI estimates retail frozen food sales at $27.5 billion for 2005, a 3.1% gain. Because unit volume fell behind dollar volume, however, retail poundage is estimated at 11.851 billion, only about a two percent increase, with that increase nearly all coming from Wal-Mart. Wal-Mart supercenters – some 1,200 of them at the end of last year – boast frozen food sections as large as those at typical supermarkets.

The US Bureau of the Census put combined full service and fast food restaurant sales at $343.8 billion last year, up 6.4% from 2004. Grocery store sales gained only 4.2%, to $519.3 billion. But chances are that actual grocery sales gained faster than that, with Wal-Mart and warehouse clubs making the difference. That would mean frozen foods overall are losing ground to fresh and shelf-stable alternatives. In the $62.9 billion foodservice sector, the greatest volume is in meat, fish and seafood, vegetables and poultry – with full service as well as fast food outlets using frozens.

IRI reported sales of multi-serve dinners and entrees up 3.4% to $1.162 billion. But hand-held entrees grew a lot faster, 9.4% to $1.194 billion. Traditional single-serve dinners and entrees showed the least increase, but still the greatest dollar sales at 2.6% to $3.6 billion.

Some of the multi-serve entrees are under store brands as supermarkets strive to stand out against Wal-Mart and the other competition by offering unique products that will hopefully attract new shoppers and build repeat business.

Wegmans, for example, has developed a multi-serve entrée line that builds on the chain’s own brand awareness. Stuffed peppers, lamb shanks, and vegetable pot roast provincial priced from $8.99 to $14.99 are packaged in rigid cardboard boxes. Multi-serve entrees under the Meijer Gold premium brand at Meijer include Beef Patties with Swiss cheese and portabella mushrooms at $8.99 and Chicken Wellington at $9.99.

In frozen fruits, Dole is taking the lead with fancy items like Marion Blackberries and Pineapple Chunks in better packaging. And while plain frozen vegetables aren’t making any headway, at least in supermarkets, prepared vegetables are showing gains – thanks in large part, no doubt, to Birds Eye’s introduction of steam vegetables, an innovation already popular in Europe.

In international trade, meanwhile, US frozen food imports gained in value but lost a bit in volume, while exports were up in both volume and value. This was despite the severe impact on frozen beef exports by Japan and other countries, but American meat packers may take another hit soon: Russia keeps threatening to cut off chicken imports from the US if Washington keeps opposing its admission to the World Trade Organization (WTO).

Frozen shrimp continues to gain in US supermarket sales, even as other kinds of fish and seafood show negative numbers. Shell-on shrimp imports were up 1.3% to 247,519 tons last year, and prepared shrimp 10.8% to 129,148, even though peeled shrimp imports were down.