FrozenFoodAge.com |

The state fo the frozen food industry is solid. Frozen food products sold at retail remain a key profit center in the major sales channels-supermarkets and mass merchandisers.

Sales in the supermarket, mass and drug retail segments excluding Wal-Mart were $29.8 billion for the 52 weeks ending Dec. 30, 2007, the last reporting period for 2007 from Information Resources Inc. (IRI), Chicago. The 2007 sales were a 2.1% increase compared with the same year-ending numbers of 2006.

That in itself is good news as the 2004 to 2005 increase had been just 1% and the increase from 2005 to 2006 was 1.8%.

When frozen food sales for Wal-Mart Stores are added to the mix, the total sales at retail are approximately $40 billion.

A further look at the IRI data (sans Wal-Mart) shows that among the 10 top categories-all above the $1 billion mark-the big gainers are proteins and vegetables. Seafood is up 4.2% to $1.9 billion. Each of the two poultry categories-processed and IQF-increased 8.2% to $1.3 billion. Plain vegetables moved up 7.3% to $1.7 billion.

The situation at the top of the leader board was a bit troubling. Novelties, a $2.5 billion category, looks to be facing the same pricing issues as ice cream as sales decreased 0.1%. Ice cream was down 1.9% to $4.2 billion.
Sales in the largest category, dinners and entrees, were up just 0.9% to $6.1 billion. Pizza, however, remained solid with a healthy 4.3% increase to $2.8 billion. Breakfast foods were up 2.1% to $1.3 billion.

The real surprise was meat. Despite the problems last year with the food safety recalls in frozen meat and the demise of Topps, one of the category leaders, the meat category posted a 3.2% increase to $1.2 billion, keeping it in the 10th spot among the 10 largest categories.

Unit sales continued in the doldrums, however. Total frozen food units in 2007 were down 1.3% to 10.8 billion.

Plain vegetables had the best showing in unit sales with a 3.3% increase to 1.1 billion. Ice cream fared the worst with a 4.6% decline to 1.3 billion. Novelties were down 1.7% to 789 million. Dinners and entrees fell 1.3% to 2.6 billion.

The other major categories posted slight unit gains in the 0.5% to 1.5% range.

A 7.1% increase to $354.9 million in fruit was encouraging, although units were off 2% to 116.6 million. It was a similar story in juices, with dollar sales up 4.4% to $443.9 million but units down 6.5% to 289.1 million. Orange juice was a big driver with a 10.5% increase to $191.4 million, although units were down 8.5% to 110.5 million, indicating that crop damage from bad weather impacted refrigerated juices and consumers turned to juice concentrates, which also had increased in price but not to the extent of refrigerated juices. However, the increase was in the price per item, not in total units sold.

Behind the numbers, the pricing issues loom large. Commodity cost increases in the fall forced manufacturers like Schwan's to increase their product prices by 5%. J & J Snack Foods has implemented two price increases since then.

"Cheese prices are at the highest levels of the last three or four years and are approaching all-time highs," says Mark Dalrymple, senior vice president of customer strategy and sales, Schwan's Consumer Brands North America, Bloomington, Minn. He adds that oregano has gone up 400% in the past couple of years, while apples are up 40% and soy oil is up 94%.

Those increases started to show up at retail in late fall/early winter and continue to impact consumers, along with high gasoline prices, home energy costs, a sluggish job market and an overall jittery economy.

A survey on FrozenFoodAge.com about vendor increases and how they impacted retailers through early December showed that 10% were "not concerned" while at the opposite end of the spectrum, 24% were "very worried." That same survey through early March shows how the economy has shifted as now just 6% were "not concerned" and 39% were "very worried."

Those marking "not sure" shifted from 43% in December to 31% in March while those selecting "worried" held steady at 24%.

Manufacturers are also facing higher energy costs in production and transportation. Energy bills are also greatly impacting the cold storage industry. "They are pretty dramatic," says Gerard van Dohlen, president, Newark Refrigerated Warehouse Inc., Newark, N.J., "Our energy costs have virtually doubled over the past two or three years."

The good news is that consumers will likely cut back on out-of-the home meal purchases and shop for convenient frozen items in the supermarkets and mass merchandise channels to eat at home.

Click Here for this Article and full Charts