As frozen food wavers, retailers warm to niches: with many ups and downs, the market looks to bone in on growth

DSN Retailing Today, April 25, 2005

Sales of frozen food have softened, perhaps in part due to a bit of consumer exhaustion after several years of absorbing introduction efforts. As a result, retailers are becoming more discerning in how they approach the category.

Overall, frozen food sales at food, drug and mass-market retailers, not including Wal-Mart, gained 1% in the 52 weeks ended Feb. 2 to $27.94 billion, ACNielsen reported. Among the strongest categories were frozen breakfast food, gaining 4.6% on top of several years of solid growth, and ice, up 6.1%. Frozen pizza/snacks have been consistent lately, gaining 2.3% in the most recent annum.

Many frozen food segments started slipping gradually after stellar growth in 2001, to flat or negative growth in the latest 52-week period. In contrast to ice, frozen novelty sales gained just 0.1% in the latest period, ice cream gained 1.7% and desserts/fruits/toppings gained 1.9%. Frozen unprepared meat/seafood, frozen prepared foods and frozen vegetables have all experienced generally flattening sales over the past few years. Frozen baked goods, orange juice and meal starters all suffered declines.

With no strong growth engine driving frozen foods right now, retailers seem to be approaching the category based on individualized considerations. Stew Leonard's, for example, showcases a broad selection of fat-free frozen yogurt under a private label long after most vendors have moved away from the segment "Frozen yogurt always has been a category staple," said Meghan Flynn, a spokeswoman for the retailer.

Some product lines that created excitement a few years ago have leveled off today. At a Wal-Mart Supercenter in Monroe, N.Y., for example, private-label Great Value bowl meals were no longer available. The overall bowl-meal assortment had been scaled back to a few SKUs from the pioneer, Uncle Ben's.

Yet, Wal-Mart expanded low-carb, sugar-free and other healthy frozen novelties now that obesity and diabetic concerns are strong.

That isn't necessarily a strategic move, though. Bruce Peterson, Wal-Mart senior vp, gmm, perishables, warned, "Don't read to much into what you are seeing. "After all, Wal-Mart merchandising is lead by data and Store of the Community principles, so many changes are simply a reaction to evolving, and often local, customer demand.

Many mass-market food retailers today seem to be taking a more tactical approach to frozen food, making sure to have carefully chosen brands interspersed with private labels on a segment-by-segment basis. At BJ's, the Berkley & Jensen private label only made an occasional appearance in the frozen food case, but was always associated with gourmet brands such as Love & Quiches.

Increasingly consumer-oriented BJ's puts a gourmet cap on its frozen food positioning, with private label the feather tucked within.