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SUPER FOODS

Dollars are up across the board ,but which catagories are seeing unit gains as well a — and whats driving that growth?

Thanks to persistent, widespread inflation, dollar sales in the frozen and refrigerated departments jumped 8.5% and 13.0%, respectively, during the 12 weeks ended Jan. 29, according to Chicago-based market research firm Circana, formerly IRI and The NPD Group. In fact, all but a handful of subcategories in both departments saw dollar sales rise during the period. Unit sales, on the other hand, have been much harder to find.

“The cost of food and beverage bought at retail increased 30% from Feb. 2020 — the last month before the pandemic started — to Feb. 2023. But incomes have not gone up 30%, which means inflation is taking a big bite out of consumer’s spending power,” says Anne-Marie Roerink, principal at San Antonio-based 210 Analytics. As a result, “Unit and volume pressure has become the norm in categories across the store.” But there are some notable exceptions.

While the frozen department as a whole saw unit sales tumble 5.8% during the most recent 12 weeks, a dozen subcategories with at least $1 million in sales during the period registered unit gains of 1.0% or more. The refrigerated department (-3.8%) had even more unit sales gainers — 28 to be exact — seven of which did more than $100 million in sales during the period. Why did the refrigerated department produce so many more unit sales successes — and fewer unit losses overall? Pre-pandemic, the perimeter was on a roll, thanks to the perception that refrigerated equals fresh. Now that consumers are no longer stockpiling frozen goods, industry observers say that thinking is driving refrigerated growth once again. But the economy plays a role as well.

“Many [refrigerated foods] represent important staples in consumers’ diets,” explains Roerink, citing products such as milk, cheese, butter and eggs. She adds, “During times of economic pressure, people typically pull back into the basics, opting for versatile items that they know how to prepare to limit waste.” Meanwhile, products like frozen dinners that are convenient but not exactly essential, tend to get left off the shopping list. That said, many frozen categories did exceptionally well in 2020 and 2021, so even though year-over-year comparisons don’t look great, most remain above 2019 levels, says Roerink.

Sally Lyons Wyatt

IT’S THE ECONOMY, STUPID!

Inflation is also leading to a wide array of “trade-offs” that are driving unit gains in some frozen and refrigerated subcategories. For example, many consumers are trying to cut back on restaurants and ordering takeout, but they’re not prepared to make meals from scratch, hence unit growth in subcategories such as refrigerated pizza/pizza kits, dinners/entrees, potato side dishes and pot pies as well as frozen breakfast entrees and side dishes. And then there are frozen plain potatoes and onion rings, which, despite registering some of the biggest price increases in the department, both saw units rise.

“Seven out of 10 Americans are looking to save money by eating at restaurants less,” explains Roerink. “Of those, 61% are trying to recreate restaurant meals at home.” And what’s served with every restaurant meal from burgers to steak?, she asks. “Frozen fries and onion rings can be a super easy way to start recreating some of the most popular restaurant meals.” But beyond some out-of-stock issues last year that may have created artificially high comps, there’s another key driver behind the two categories’ growth.

“Air fryers have been a huge trend these past few years,” explains Sally Lyons Wyatt, executive vp and practice leader, client insights, at Circana. Not only do they allow consumers to make great french fries and onion rings at home (in less time and with less oil), “They allow people to make different things than they can find at restaurants,” including ethnic dishes. As a result, she continues, “Air fryers have provided CPGs with additional tailwinds to keep consumers eating at home even after the economy eases up.”

While some consumers are trading down from restaurant to at-home meals, lower-income shoppers already eating at home are seeking less expensive ways to feed their families, which is reflected in unit growth of categories such as frozen pasta. “We have seen an uptick in sales of ‘belly fillers’ — foods such as pasta and rice — that help with satiety,” confirms Wyatt. Filled pastas such as tortellini/tortelloni and gnocchi, both of which made our list, fit the bill as well. Especially among consumers who recently lost SNAP benefits, “Those are inexpensive ways to feed your family without spending lots of money,” says Wyatt. That same thinking may also be behind unit gains in the ice milk/frozen dairy dessert subcategory, which offers ice cream lovers a less expensive way to enjoy a favorite treat.

The economy may also be driving unit growth in several frozen and refrigerated dough subcategories. Yes, many Americans rediscovered their inner baker during the pandemic, but the segment’s more recent growth is just as likely to stem from the savings associated with baking rather than buying certain products. As one manufacturer is fond of saying, “A loaf of bread dough can be half to a third the price of a loaf of pre-baked bread. Bread and roll doughs provide one of America’s best bread values.”


Anne Marie Roerink

PREVENTING FOOD WASTE GAINS CONCERN
Roerink adds that many consumers appreciate the flexibility of frozen and refrigerated breads and doughs, which help prevent food waste — an increasingly important concern among shoppers looking to stretch their food budgets and eco-conscious millennials. (Note to manufacturers: If you can put your product in a resealable, family-size package, it’s likely to resonate with many consumers. However, smaller sizes that allow the most vulnerable consumers to stay in key categories is also a smart move.)

Frozen breads and doughs likely are also getting a boost from social media, which Wyatt says is a wild card that often produces retail winners. For example, she reports, in June 2022, there was a recipe for dumplings on TikTok that garnered more than a million likes — and may be at least partly responsible for the pastry/dumpling dough subcategory’s recent 13.6% unit sales gain. “TikTok always helps spur growth…[because] it tells people how to cook with these products.”

Beyond the economy, another key driver of unit sales growth is better-for-you attributes. For example, both kefir and marinated vegetables/fruit, including kimchi, tap into the fermented foods trend while all other fruit juice owes its success mostly to growing demand for coconut water (primarily the Harmless Harvest brand, which offers the added bonus of sustainability). And most of the gains in frozen muffins can be attributed to the veggie-forward Veggies Made Great brand. But perhaps the most important better-for-you attribute is plant-based, which is behind the growth of everything from frozen egg substitutes and processed poultry substitutes to refrigerated processed/imitation cheese-all other and oat milk, the latter of which is the largest plant-based subcategory to make our list.

Beyond those consumers switching from soy- and other plant-based milks to oat milk for health and taste reasons, “I hear all kinds of stories about drinks and smoothies people are making at home with oat milk,” says Wyatt, highlighting the intersection of two mega trends.

Gains in the plant-based meat segment, on the other hand, are a little more complicated. “A third of Americans want to cut back on meat consumption,” says Roerink. But while they used to do it mostly for health reasons, now they’re doing it to save money. However, plant-based meat substitutes aren’t as cheap as beans, lentils and other natural sources of protein. And manufacturers still have some work to do on taste and texture. That’s why sales of refrigerated meat substitutes have fallen so precipitously recently and why so much of the category has moved to frozen (where slower turns aren’t such a problem). That said, a slew of newer, more convenient plant-based meat options, including breaded nuggets and tenders, seem to be resonating with consumers, hence the appearance of processed poultry substitutes on our list. Whether those gains are driven solely by new distribution or repeat sales remains to be seen.

While demand for better-for-you and plant-based products is behind a lot of recent unit gains, industry observers say consumers’ desire for indulgence is also driving growth in some subcategories (frozen cookies and refrigerated pastry/Danish/coffee cakes). Says Wyatt, “We’ve seen consumers trade down on essentials and up on affordable luxury.” She also notes a return to in-person celebrations and entertaining, which may be boosting sales in categories like refrigerated cakes and pies.

‘NOT GOOD FOR THE INDUSTRY’

Since dollar sales continue to climb, Wyatt says retailers may not be as concerned as they should be over widespread unit losses. But she’s worried. “This is not good for the industry,” she says. “We have to spur demand to ensure future growth. It’s important to keep consumers interested and engaged in cooking at home.

“So continue to educate shoppers about these categories, give them ideas and inspiration and make it simple for them to eat at home.” She adds, “Leverage and learn what you can from these [unit gainers] and use that to drive growth in other categories as well.”

Denise Leathers

Denise Leathers

Denise is the Editorial Director for Frozen & Refrigerated Buyer.

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