AlixPartners recently collaborated with the American Frozen Food Institute (AFFI) to publish a “How to Win in Frozen” playbook, a landmark study on the state of the department. Download the comprehensive report here and stay tuned to this five-part series, “Opportunities in Frozen,” for insight on how to capture the coming growth.
It's time for brands and grocers to take a fresh look at their frozen strategy. Along with the classic reasons to focus on frozen—its basket-building ability, its appeal across customer sets, its universally relevant use cases—we project frozen sales to grow by $10 billion in the next three years.1
Growing at an expected rate of 4.4% annually, frozen food sales will outpace not only total store but also U.S. GDP as a whole. To win as many of those additional dollars as possible, CPGs and food retailers need to understand the unique forces at play for the frozen shopper and tailor product and merchandising strategies accordingly to capture their fair share.
AlixPartners recently presented at the American Frozen Food Institute’s Frozen IQ event on four key areas—all subjects of upcoming articles in this series—that brands and grocers should investigate:
- Regionality: Distinct preferences exist not only by region but by subregion and have significant implications for assortment, marketing, replenishment, and more.
- Value-conscious consumers: Frozen shoppers are continuing to seek out value due to a difficult macro environment, with the dollar and discount channels increasingly meeting these needs. Tailoring strategies (products, pack sizes, pricing) to these customer groups will be important as overall share continues to migrate.
- Hispanic consumers: These shoppers currently under-index when it comes to frozen, but their projected growth means brands and grocers would be wise to be more intentional about reaching them.
- Renovation and innovation: Balancing investment between conventional offerings and innovation (typically focused on health and wellness and international flavors) will be essential for brands to preserve steady growth.
Addressing each of these dynamics will require effective collaboration between CPGs and food retailers. Indeed, brands and grocers that are able to work seamlessly with trading partners will enjoy the most success in frozen. The recently published ”How to Win in Frozen” playbook, produced in partnership by AlixPartners and AFFI, provides a compelling starting point for collaboration. The playbook is a landmark evaluation of the state of the department that identifies trends and best practices in pricing and promotion, retail execution, innovation, and omnichannel—and charts the path to success.
Given the projected growth for frozen, CPGs that play in multiple categories should consider whether they need to allocate more resources to frozen, especially given that some of the opportunities in the department may qualify as relatively low-hanging fruit; there are additional dollars that could be captured without even developing new products, but rather by better marketing existing ones. More than half of the $10 billion in growth will come from core categories: entrees; appetizers and snacks; pizza; breakfast; and fruits and vegetables.1
For their part, food retailers should maximize frozen sales by implementing effective merchandising strategies, including tailoring assortments to regional preferences, prominently showcasing new and local products, and optimizing pricing and promotional tactics to boost volume from core offerings. In addition, the benefits of getting frozen right extend beyond just frozen sales, given that frozen shoppers typically buy across various categories during the same trip, resulting in much larger baskets. On average, across different retail channels, the total ticket size increases by around 80% when frozen goods are present.2
While brands and grocers can individually set themselves up for success in frozen, they will see more powerful results by working together. They’ll capture the most growth when they dig into the latest research and insights jointly and collaborate on where trade funding, new product development, retail media spending, and other investments will yield the best returns for both trading partners.
- Based on SPINS and Euromonitor data.
- AlixPartners proprietary research based on actual purchases (i.e., scanned receipts), L12M through 7/31/2023.
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