Frozen food: sector melts as economy begins to thaw

As the credit crunch dawned, Britain entered a new ice age. Shoppers went looking for value, and found it in abundance in the freezers. Now the economy has begun to thaw, frozen sales are drying up.

Volumes sales are down in the three key frozen sectors: pastries, fish and pizza. And in ready meals, frozen continues its long-term decline. Value sales offer a little more encouragement in some, but not all, cases but the stellar numbers recorded in the aftermath of the credit crunch are most certainly melting away.

In spite of the more clement economic climate, price is of course still key for many shoppers. And with the discounters increasingly flexing their muscles in frozen food, value is sliding in the supermarkets as they try to compete on price, says Iceland Foods joint MD Nigel Broadhurst.

“The price war is keeping price and value for money uppermost in consumers’ minds,” he says. “Frozen food is seen as real value compared to chilled. People want exceptional value on promotion purchase, bulk-pack or everyday great value lines. We’re seeing movement between lines reflecting relative value, specifically on brands where off-deal volume is limited, bringing into question the real value of a branded product at ‘full’ rsp.”

The frozen pizza category makes this clear. As ever, the two big brands duelling with a pizza slice are Dr Oetker, which also owns Chicago Town, and Goodfella’s, owned by 2 Sisters. Both have taken a messy hit. As Chicago Town has held steady (value is up 1.1%; volume 1%) thanks partly to a big ad push and World Cup activity, Goodfella’s and Dr Oetker have seen sales slide 4.4% and 8.5% respectively, with volumes falling away at an even steeper rate for both.

The pizzas making a big play of value are doing better. Own label is up 4.5% and 2 Sisters has seen its price-marked pack offering, San Marco, climb 36.4%. Meanwhile, though its sales are a fraction of category leader Chicago Town, Hungry Joe’s, which trades on representing big portions on its packaging, has seen sales soar 254.3%. That Hungry Joe’s has sold for an average of 24.9% less than Chicago Town, and 39.7% less than Dr Oetker, in the past year is significant.

“Hungry Joe’s was born out of consumer research that identified a gap in the market for great-tasting, plate-filling meals at an affordable price,” says Jon Creba, category manager for Kerry Foods. “The products are centred on the personality of Hungry Joe, who is designed to appeal to our core consumer, be that a purchaser looking for value for money, or a consumer whose priorities are portion size and flavours that really deliver.”

Nothing hits the hunger spot like a pie, and Birds Eye also enjoyed a 5.3% uptick in sales of its individual sized pies, which Pete Johnson, Birds Eye senior brand manager, attributes to “a significant amount of innovation and renovation.” However, its pasties, slices and family pies are in decline, dragging down its overall frozen pastries sales 9.4%.

However, Birds Eye will always be more famous for fish and its premium Inspirations range is the standout success of 2013, just one example that suggests there are as many people looking to treat themselves as there are on the lookout for cheap deals.

“We’ve noticed a shift from shoppers buying battered and breaded frozen fish, to recipe and lightly-coated frozen fish,” says Johnson. “The Inspirations range is an exciting new development for Birds Eye, showcasing the premium quality and delicious flavour combinations we pride ourselves on.”

That premium appeal has also seen the value sales of Young’s ‘Gastro’ range jump 49.2%. And when it comes to the chips to accompany the fish, products in growth from market leader McCain are its premium Potato Winners and Simply Gorgeous brands.

McCain says a bag of chips from the latter - which offers roast potatoes as well - is aimed at special occasions and is priced at £2.29 for a 550g bag. That compares with £1.93 for a 1.5kg bag of McCain Straight Cut Home Fries - almost triple the price of a standard chip. Value sales of the posh spuds are up 18.9%.

All this suggests there’s still some cause for cheer in frozen. British Frozen Food Federation chairman Brian Young claims overall frozen value across all channels is actually up 1.6%, (although he concedes this is the lowest rate of growth in four years).

“When it comes to online, frozen outperforms chilled and ambient,” he says. “With more spend going online, that is good news.”

And although frozen has enjoyed the ­austerity years, Young says it can hold its own at the burgeoning premium end of the market, too.

“The increase in premium frozen foods is a good sign,” he says. “Cook is going great guns. M&S is heavily promoting frozen ready meals, which are fantastic value compared with chilled lines. That offers some really big opportunities to put some­­ ­better quality products into frozen. The recovery can still be good news for us.”

So, suggests Young, if the economy does continue to improve, there’s no reason why frozen food can’t warm up with it.