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The Road to Recovery

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Now that the worst of the pandemic is behind us, how can retailers make sure frozen gains stick?

A global pandemic doesn’t offer many silver linings, but for our industry, last year’s 20.6% jump in frozen food sales probably qualifies as one. The $10.1 billion question (that’s how many more dollars were generated last year) is will the gains stick now that the recovery is under way? The short answer is: maybe. Experts we talked to say the frozen department has a better chance of maintaining 2020 sales levels than just about any other, thanks to permanently changed consumer behaviors, the introduction of innovative products that meet new needs, and increased awareness of what frozen food has to offer following what was essentially the biggest product trial event the industry has ever seen.

Recent research by the American Frozen Food Institute, published in its Frozen Food Sales Amid COVID-19 report, reveals that half of consumers who bought frozen food during the pandemic plan to purchase more during the next several months, providing even more reason for optimism. Add that to the 60% who say they plan to eat at home more frequently than before the pandemic and you’ve got a recipe for success. As a result, while other departments may see some 2020 gains shift back to foodservice, Jacksonville, Fla.-based sales and marketing services provider Acosta predicts the frozen segment will actually expand another 0.2% this year — if retailers play their cards right. Read on for 10 of our top tips:

DOUBLE DOWN ON MEAL SOLUTIONS

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With restaurants shuttered or operating with limited capacities, retailers made a killing on meal solutions, including those in the frozen aisle. Consumers who invested in air fryers, Instant Pots and waffle irons want to continue preparing meals at home, but cooking fatigue has set in big time. So chains that want to keep those consumers in the category as restaurants reopen need to up their meal solutions game. Products that offer new experiences (think global cuisine) as well as those that provide a more convenient alternative to ordering from a restaurant (say, premium frozen pizza or signature hot wings) are likely to do well, says James Hedges, senior manager of category solutions at Stamford, Conn.-based Daymon, citing the appeal of restaurant quality at supermarket prices.

“Retailers looking to provide meal solutions for the whole family should also consider modern twists on comfort foods like frozen entrees, frozen pasta and other categories where the inclusion of bold new flavors can shake up mealtime,” he adds. Meal deals that include complementary items — appetizers, salad, sides and dessert — are likely to drive even stronger sales. Bonus points if those products are merchandised together in a single location.

GET FROZEN FOODS ON THE SHOPPING LIST

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Although consumers were pleasantly surprised by the quality of their pandemic purchases, many still view frozen foods as “backup” to have on hand for nights when they don’t have time to cook, to feed unexpected guests or to tide them over until they can get to the store again. But making them a more regular part of the rotation is key to continued growth.

One way retailers can help is to offer meal suggestions — especially online recipes consumers use to “pre-shop” — that include both fresh and frozen foods. Not only does that get frozen foods on the shopping list (even more important now that store visits are less frequent), it also demonstrates that fresh and frozen foods are not mutually exclusive and meals can include some of each. Once a shopper adds, say, frozen veggies to their homemade stir-fry or fajitas, there’s no going back.

CROSS-MERCHANDISE TO INTRODUCE NEW CATEGORIES

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Experts say another key to continued growth is convincing consumers to buy frozen foods across a wider variety of categories, particularly those where they may not be aware frozen alternatives exist — let alone how good they are. Cross-merchandising is an excellent way to introduce shoppers to new items in categories like plant-based meat, fruit smoothies and breakfast sandwiches. Even simple signage can go a long way toward raising awareness of frozen options in adjacent or complementary categories.

LEAN INTO BREAKFAST AND LUNCH

As restaurants reopen, retailers will need to up their meal solutions game with more unique offerings as well as pairing ideas.

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Instead of hitting the McDonald’s drive-thru for their usual Egg McMuffin, consumers working and learning remotely replaced their out-of-home breakfast with equally convenient frozen options, driving some of the biggest gains in the department during the most recent 12 weeks than during the past year. Same story in the lunch segment where the frozen entrees category actually did better during the same period a year ago. That’s because even though workplaces are starting to welcome employees back to the office, many are opting to continue working from home at least part of the time on a permanent basis, creating a big opportunity for retailers to hold on to some of the share of stomach won from foodservice.

‘New twists on familiar flavors can drive frozen category growth as consumers search for new cuisine to offer a change of pace during the week.’

James Hedges

So get creative with your frozen breakfast and lunch programs! Maybe it’s time to bring back multiples pricing on frozen meals, says Hedges. “New twists on familiar flavors can also drive category growth as consumers search for new cuisine to offer a change of pace during the week,” he adds, citing opportunities to spice things up with ethnic offerings as well.

PREPARE FOR THE RETURN OF ON-THE-GO SNACKS

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Although some consumers are making work-from-home permanent, many others will return to offices and schools, sparking renewed demand for on-the-go refrigerated items, especially snacks and RTD beverages, says Colin Stewart, executive vp, business intelligence, at Acosta. So retailers that may have taken their foot off the gas during the past year should revisit those sections in advance of a back-to-school season that’s expected to be particularly strong this year, he adds.

CAPITALIZE ON THE “BUY-AHEAD” MINDSET

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In an effort to limit trips to the supermarket during the height of the pandemic, consumers looking to stock up were forced to plan ahead. But according to David Feit, vp of strategic insights at The Hartman Group, Bellevue, Wash., that behavior isn’t going to change overnight — though it may take a slightly different form. “Shoppers will continue to want to buy ahead more for multiple occasions,” he explains, but the opening may be at lunchtime. “At retail locations where refrigerated heat-and-eat and hot fresh-prepared options see traffic at lunchtime, we see an opportunity to cross-sell for future occasions,” i.e. dinner that night or breakfast or lunch tomorrow. So even if it hasn’t worked out in the past, says Feit, “Merchandising that encourages ‘one for now, one for later’ is worth bringing back because the shopper mindset has changed.” We’ve seen it done successfully in categories like the fresh soup category, but perhaps it’s time frozen gets a piece of that pie as well.

‘Merchandising that encourages ‘one for now, one for later’ is worth bringing back because the shopper mindset has changed.’

David Feit

BRACE FOR INFLATION

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On top of a 3.0% increase year to date and a 3.5% bump in 2020, food/consumables inflation is expected to rise another 4.0%+ through the balance of 2021, reports Cleveland Research. And that’s going to put even more pressure on consumers whose incomes may have already taken a big hit through the pandemic. As a result, reports the company, it’s seeing more scenario planning around opening price points and trade-down opportunities. In fact, 57% of respondents to Acosta’s April 2021 C-Suite Survey said they’re expanding better-value large sizes while 39% are planning price pack architectural changes.

“Retailers need to understand their shoppers’ price sensitivities, look for trade up or down opportunities and make corresponding changes to their assortments,” says Stewart. Bottom line: if it doesn’t already, make sure your frozen assortment includes ample offerings for consumers likely to be impacted by rising prices. And watch out for Walmart and other big chains whose high volumes will allow them to hold the line on prices, widening the gap between them and smaller players.

KEEP INNOVATING — BUT IN THE RIGHT AREAS

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The pandemic notwithstanding, a steady stream of innovation — especially on the premium side — deserves much of the credit for the frozen department’s success in recent years, says Stewart, citing ice cream, pizza and lifestyle diet-specific items as examples. And consumers’ appetite for innovative new items shows no signs of slowing: 79% say they crave something new and 35% actively look for new item innovation, he continues. But more than 40% of retailers say they plan to reduce overall SKU counts in the coming year to focus on “on-shelf availability,” making it even more important to add the right innovation. “The bar will be higher for line extensions, which will need to bring something unique and relevant,” confirms Stewart, who suggests leveraging data and technology to help make decisions around new products.

‘The bar will be higher for line extensions, which will need to bring something unique and relevant.’

Colin Stewart

But Hedges says some of the best opportunities are likely to be found in fast-growing plant-based, health-forward, premium comfort food and ethnic-inspired segments whose continued success depends on how well retailers are able to keep up with key trends. “However, there are new trending areas of consumer interest where we are also starting to see more innovation, including diet-specific (keto, gluten-free, etc.) and fortified/food-as-medicine, which will likely provide fertile ground for future product development,” he adds.

HIGHLIGHT HEALTHY

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More than three-quarters of consumers say they’re looking to lead a healthier life now than before the pandemic, but doubts about the nutritional value of frozen foods remains one of the most significant barriers to growth. “So messaging around health, value and freshness will be key post-pandemic,” says Stewart.

Signage, shelf tags and other POS materials that allow health-focused consumers to easily identify healthy products that meet their specific needs (organic, gluten-free, plant-based, etc.) are an easy way to boost your better-for-you profile, says Hedges. But special sections in weekly circulars, educational materials, health fairs and displays can also earn serious points with shoppers.

Of course, offering products with the right healthy attributes is critical — and don’t underestimate the importance of sustainability, whether in terms of animal welfare, packaging or agricultural production. Today’s consumers are eager to support retailers and brands whose values align with theirs, sometimes without much regard for price. So give them what they want. It’s not just good for the environment; it’s good for business.

OPTIMIZE ONLINE SELLING OPPORTUNITIES

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Despite a 16% decline compared to last May, monthly online grocery purchases in May 2021 were 3.5 times higher than in August 2019, jumping from $2 billion to $7 billion, according to the Brick Meets Click/Mercatus Grocery Shopping Survey. Pandemic or not, “The share of grocery spending online will continue to increase…so retailers need to be prepared to be successful in an environment where the business [is] a combination of in-store and online shopping,” says Bill Bishop, chief architect at Barrington, Ill.- based Brick Meets Click.

‘The correct assortment for in-store shoppers is not the same for online shoppers, who are typically younger and more time-pressed.’

Bill Bishop

Improving functionality and ease of use and customizing the experience with pre-filled shopping carts, personalized offers and meal planning solutions are key to growing refrigerated and frozen sales as well as total sales. But Bishop says proper assortment is important, too. “The correct assortment for in-store shoppers is not the same for online shoppers, who are typically younger and more time-pressed. Retailers will sell more online if they promote products targeted to the needs of these shoppers.” They also need to work on reducing the number of substitutions without guidance from consumers, he adds.

Bishop adds that although consumers still have some doubts about maintenance of proper frozen and refrigerated temperatures, a shift from delivery to store pickup is helping alleviate those concerns. Still, retailers should continue to invest in temperature-controlled lockers, insulated delivery totes and other such innovations.

Denise Leathers

Denise Leathers

Denise is the editor of Frozen & Refrigerated Buyer.

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