Frozen Specialties, NEC

SIC 2038

Companies in this industry

Industry report:

This industry is comprised of establishments primarily engaged in manufacturing frozen food specialties, not elsewhere classified, such as frozen dinners and frozen pizza. The manufacture of some important frozen foods and specialties is classified elsewhere. For example, establishments primarily engaged in manufacturing frozen dairy specialties are classified in SIC 2024: Ice Cream and Frozen Desserts; those manufacturing frozen bakery products are classified in SIC 2051: Bread and Other Bakery Products and SIC 2053: Frozen Bakery Products, Except Bread; those manufacturing frozen fruits and vegetables are classified in SIC 2037: Frozen Fruits, Fruit Juices, and Vegetables; and those manufacturing frozen fish and seafood specialties are classified in SIC 2092: Prepared Fresh or Frozen Fish and Seafood.

Industry Snapshot

An estimated 600 firms participated in this industry in 2010. They combined to employ 40,212 and generate annual revenues of nearly $4.16 billion. As convenience continues to rise on the priority list of U.S. consumers, frozen foods have become an increasingly important part of the American diet. According to a report by the Frozen Food Institute, in the 1950s, U.S. consumers spent an average of 2.8 hours every day in food preparation and clean-up. By 1975, that amount of time had dropped to 1.4 hours. In 2008, Americans spent just 31 minutes a day preparing food and cleaning up.

Despite a recessive economy during the late 2000s, which carried over into the early 2010s, both frozen ethnic foods and frozen pizza--two of the top categories in this sector--experienced gains. More Americans, in an attempt to save money, were eating in and turned to frozen foods for variety, flavor, convenience, and price.

Background and Development

Clarence Birdseye is considered the father of the frozen food industry. He created the freezing process so preserved foods did not need to be cooked immediately. Birdseye formed Birds Eye Foods Ltd. in London in 1954, and the company later became a subsidiary of Unilever. According to Quick Frozen Foods International, Birds Eye "virtually held an umbrella over the industry during the squalls of its infancy."

The frozen food industry evolved during the early 1960s as the proliferation of supermarkets and self-service stores made mass marketing of frozen food products profitable. At the same time, refrigerator-freezers and stand-alone freezers gained popularity. The first frozen food products were vegetables, poultry, fish, and fruit in boilable pouches. Items like juice concentrate, ice cream novelties, baked goods, variety dinners, seafood, breakfast items, and pizza gradually entered the industry from the mid-1960s through the 1990s.

Beginning in the 1980s, standard TV dinners gave way to a variety of meals and frozen specialty items that offered more choices and met specific dietary requirements. Busy families who sought quick meal preparation and a wide variety of options were targeted by frozen food manufacturers, many of which also developed new frozen entrees for children.

In the 1990s, dual-income households and the convenience of microwave ovens contributed to annual growth in the frozen food category. The rapid growth in the industry also has been attributed to the increasing popularity of the microwave oven. In fact, Quick Frozen Foods International called the combination of the microwave oven and frozen food a "marriage of convenience: Frozen food performs better in a microwave oven." However, consumers complained about the poor texture and inferior browning of microwaveable foods leading technicians in the food additives field to increase research for methods to improve the flavor, texture, color, shelf-life, and nutritional benefits of frozen foods.

Leading frozen food manufacturers engaged in price wars and expensive trade promotions in the early 1990s. Consequently, many companies began shifting their focus toward generating profits from existing products instead of launching new brands and extending established product lines.

According to Techtronic, Inc., sales of ready-to-eat meals, including microwavable, shelf-stable, and refrigerated items, were threatening to erode the 18 percent share of total supermarket sales in 1999. Industry analysts began to encourage the frozen food industry to develop new prepared foods to deflect the competition and retain market share.

The frozen food industry grew from a $250 million retail business in 1947 to more than $27 billion by the 2000s, according to the National Frozen Food Association. The dinner and entree category was the largest, with sales of more than $5 billion in 2003.

Due to increased competition from such other sectors of the food industry as refrigerated entrees and ready-to-eat meals prepared by grocery store delis, frozen food sales began to weaken in the early 2000s. Frozen food sales grew 5.3 percent in 2001, 4.4 percent in 2002, and 1.4 percent in 2003, when sales totaled $27.1 billion. The frozen food segments performing well despite increased competition included frozen dinners, which reported a sales increase of 8.6 percent in 2003. Although frozen food sales remained flat in 2005, up one percent to $27.4 billion, frozen dinners and entrees continued to be top performers, increasing 4.3 percent to $5.6 billion.

Convenience in preparation is the primary appeal of frozen foods. Americans used fewer and fewer ingredients to prepare their meals in the late 1990s and early 2000s and often substituted frozen foods for fresh produce. However, the increasing popularity of ready-to-eat refrigerated and microwavable, shelf-stable foods, as well as take-home meals prepared in supermarket delis, began to undercut frozen food sales. While units sold grew 0.8 percent in 2001, prompting sales to jump 5.3 percent, unit sales declined 0.8 percent in 2002 and 0.6 percent in 2003, resulting in sales growth of only 4.4 percent and 1.4 percent, respectively.

Concerns about health and nutrition led consumers to reduce their intake of foods high in fat and sodium in the late 1990s and to reduce their intake of carbohydrates in the early 2000s. The specialty frozen food industry responded by offering low-cholesterol and low-fat products in the late 1990s and low-carb products in the early 2000s. For example, Weight Watchers, which already offered low-fat entrees, sandwiches, desserts, and pizzas in the late 1990s, introduced a line of low-carb frozen dinners in the early 2000s.

At the same time, despite the growing number of health conscious shoppers, the frozen snacks sector, including pizza rolls, frozen pretzels, and Mexican and Asian food snacks, experienced particularly strong growth from the late 1990s through early 2002. Between 1997 and 2002, frozen snack sales grew 53 percent to $908 million, and they were expected to grow 47 percent by 2007, reaching $1.3 billion.

By the early 2000s, a variety of ethnic frozen foods, including Mexican, Tex-Mex, and Asian entrees, had expanded beyond their regional markets to reach the vast majority of U.S. households. Sales of Asian entrees grew 4.4 percent to $512 million in 2003, outpacing overall industry growth considerably.

According to 2007 industry statistics, an estimated 617 establishments were primarily engaged in manufacturing frozen food specialties, not elsewhere classified, with a workforce of 40,148 generating $8.64 million in sales. Frozen specialties, not elsewhere classified, represented 47.2 percent of market share, with sales of $4.07 million. Frozen pizza was a top performer with 18 percent of market share, sales of $2.64 million, and 6,281 employees. Frozen ethnic foods, not elsewhere classified, gained popularity with 15.1 percent in market share, 4,879 employees, and $997.1 million in revenues. While only 29 establishments manufactured frozen and packaged dinners, their revenues totaled $830.6 million.

Other categories within the industry were snacks, including onion rings, cheese sticks, etc., with a value of $31.8 million; frozen soups, which shipped $28.8 million in products; frozen and packaged breakfasts with $18.8 million in sales; and frozen waffles, which generated $22.5 million.

The Neilsen Group conducted a study that tracked the entire frozen food industry within the various retail sectors, including Wal-Mart Stores, Inc., from January 2007 to January 2008. Neilsen found that sales were up five percent from the previous year, reaching $36.9 billion.

A Mintel Research study in the late 2000s found that demand for Chinese, Mexican, and Italian frozen foods continued to perform well, with 45 percent of Chinese frozen cuisine forecast to surpass the traditional American frozen food categories, largely due to increasing diversity in the population. The study also found that people will pay more for a premium product if it meets their expectations for taste and autheticity.

Current Conditions

According to a 2010 industry report by Dun and Bradstreet, frozen specialties, not elsewhere classified, accounted for $2.61 billion (63 percent) of total $4.16 billion in industry revenues. Top individual sectors within the industry included frozen and packaged dinners ($592 million, 14 percent); frozen and packaged breakfasts ($310 million, seven percent); frozen ethnic foods ($286 million, seven percent); frozen pizza ($143 million, three percent); and frozen soups ($138 million, three percent). Smaller categories included frozen snacks and frozen waffles.

The specialty frozen food sector was helped in the late 2000s and into the early 2010s by an economic recession in the United States that kept U.S. consumers on tighter budgets. To save money, consumers ate in more often and turned to the frozen food aisle to find convenience, variety, and flavors reminiscent of their favorite restaurant cuisine. According to a report by the American Frozen Food Institute, almost one-half of Americans surveyed said that they believed that frozen foods would help them through the recession. Seventy percent said that frozen foods helped them eliminate waste and shop less often. According to the same report, the clear impact of the economy on the frozen food industry could be seen in two trends in frozen food marketing during 2009. First, the number of new product launches dropped by 30 percent during 2009, and second, the number of products that were touted as having economical value increased by 72 percent.

In 2009, sales of Asian frozen food increased by 8.4 percent to $545.4 million (in supermarkets, drug stores, and mass merchandisers except Wal-Mart). The number of units sold increased by 6.4 percent to 196.1 million. Certain segments within Asian foods saw explosive sales. For example, sales of frozen egg rolls, which began to be packaged with "crisper sleeves" for microwave use, and wontons jumped as much as 35 percent during the last quarter of 2009. Frozen pizza also saw a jump in sales during 2009. Frozen pizza also continued to improve its reputation for quality; in 2009, 30 percent of consumers surveyed reported that they believed that frozen pizza was as good as or better than restaurant pizza.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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