The grocery markets are being outperformed by their non-food counterparts. As far as the retailers are concerned, these non-food offerings represent the future of profit. As such, this is not good news for the grocery manufacturers.
With a share of total store sales of 5.4% and declining year on year, frozen food is facing quite a challenge. Relative newcomers to the shop floor such as clothing, home entertainment and electrical goods are all growing quickly and stealing shelf space from some of the more traditional supermarket categories.
However, frozen food manufacturers can point to some more positive news from their sector. In an IRI analysis covering a range of grocery markets, only staples such as pre-packed bread and yellow fats outperform frozen food in terms of sales per sku.
As economic and social trends develop, so do the needs of consumers. Increasingly wealthy and short of time, consumers want convenience, authenticity and quality, all of which have become by-words in the packaged food industry. In contrast to fresh, ambient and chilled food, frozen tends to take longer to prepare and cook. In addition, there are more single person households and more couples without children, historically a mainstay of frozen food consumption. So there are clearly some sizeable obstacles for the frozen food manufacturers to overcome.
Health concerns are becoming more prominent with consumers. Rightly or wrongly, frozen food is sometimes perceived as unhealthy, which, unsurprisingly, can cause problems for manufacturers. In reality, due to the picking and manufacturing process, frozen vegetables are often fresher than so-called fresh vegetables, not to mention canned. Equally, precisely because they are frozen, frozen ready meals do not need as many, if any, of the preservatives used in chilled ready meals and as a result can be healthier.
On top of these prejudices, there remains the age-old problem of encouraging shoppers to spend more time in and around the naturally chilly and often uninviting frozen food in-store environment. So what can manufacturers do to improve the image of the category and its physical surroundings?
Craig Clarkson, Channel Development Manager at Unilever Ice Cream and Frozen explains how his company plans to convey in-store the quality of frozen foods in the Birds Eye range.
“We are aiming to improve the long-term appeal of the frozen category by creating an environment which is simple yet exciting to shop.
“First we need to focus on the basics of range, merchandising and availability. There are too many products crammed into the freezers at the moment. Reducing the range will improve availability and shoppers’ perception of the category. In turn, this will bring new shoppers into frozen and encourage existing shoppers to spend time browsing the aisle as opposed to the current ‘grab and go’ mentality.
“By introducing state-of-the-art, shopper-friendly cabinets which, through attention to ergonomics and lighting, will make the frozen aisle a great place to shop.”
Consumer perception is also that frozen ready meals are not premium, certainly not compared to chilled, and as a result are far less likely to be chosen as a special occasion meal. This premium angle is crucial and one which is likely to be extremely profitable, judging by current social and economic trends. Following declining sales last year, frozen pizza is now growing strongly in value terms, despite a continued fall in volume. This indicates a rise in sales of premium brands such as Dr Oetker’s Ristorante and Good Fellas and is good news for the sector in general.
This trend towards trading up is already occurring within ice cream where the premium sector is being outperformed by luxury products. These luxury alternatives are increasingly being consumed as a snack, as opposed to part of a meal occasion. Snacking is one area in which frozen is not particularly strong and could represent a huge opportunity for the right manufacturer with the right product.
While the challenges of in-store environment and ‘speed to eat’ are by no means insurmountable, frozen food does have a fight on its hands to flourish in the increasingly competitive supermarket arena. But with a willingness to address the issues and a burgeoning premium sector, there could well be resurgence in this £4bn market.