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.

Delivering value has never been more essential for CPGs and food retailers. Consumers across income levels have grown increasingly price-sensitive during the turbulence of the last four years, and that heightened value-consciousness won’t dissipate overnight – especially not with public conversation still decrying higher grocery prices as a significant and unjust hardship for consumers. President Joe Biden recently escalated the rhetoric by accusing the industry of “price gouging, junk fees, greedflation, shrinkflation.” 

While the prospects for a soft landing for the U.S. economy appeared rosier in Q4 2023 than they did in Q3, there remain a plethora of reasons that the vast majority of consumers may keep their purse strings tight for a while. Stimulus payments have ceased. Student loan payment schedules are active again. Credit card debt is at an all-time high. More people are living paycheck to paycheck. Inflation is easing, but that doesn’t make consumers whole after several consecutive years of greatly reduced spending power.

Fortunately, frozen has the opportunity to thrive in this environment. With consumers seeking affordable meal solutions, frozen can be an attractive trade down from a fast-casual restaurant. Given the financial implications of food waste, frozen can also be a compelling alternative to fresh ingredients. When used as a back-up meal solution, frozen can help consumers eschew expensive impulse meals. In addition, due to those benefits and others, frozen already enjoys a perception as an affordable department.

Dollar stores have been taking advantage of these dynamics—particularly the price sensitivity of shoppers and the flexibility of frozen—with pack sizes and prices optimized for consumers with fixed food budgets. The strategy appears to be resonating; while the average frozen shopper spent 7% more per trip in 2023, the average frozen shopper purchasing at dollar stores spent 17% more. 

The growth of frozen in dollar stores highlights an opportunity for CPGs to revisit their price pack architecture and evaluate whether their portfolio has the right mix of solutions for both shoppers on a fixed budget and stock-up shoppers looking for the best value. Similarly, grocers need to consider which of their frozen subcategories may need more options at lower price points to ensure they don’t lose trips to dollar stores and other alternative channels.

Brands should also be responding to the current economic environment by taking a design-to-value approach to new products, line extensions and product reformulations. By laser-focusing on the attributes most important to the consumer and minimizing all other elements, CPGs can deliver the value shoppers are seeking. For example, a brand printing a rotation of special messages on the tamper-proof seal of a given product line might decide to stop printing on the seal to reduce costs and complexity. The change doesn’t impact the quality or food safety of the product, and the consumer gets a more accessible price point.

Grocers and CPGs should work together to optimize their promotional cadence as well. They can cater to more cost-conscious shoppers by timing promotions with monthly stock-up trips, and consumers who are less price-sensitive will buy during the other weeks as they see fit.

In many ways, the current economic environment is less than ideal, but few categories are better positioned to meet these adjusted consumer needs than frozen. Brands and retailers who prioritize strategic review of these opportunities can grow frozen sales in the short term and beyond – and increase market share along the way. 

Want more? Check out these other recent insights from the experts at AlixPartners.

Opportunities in frozen: $10 billion in growth up for grabs over next three years

Opportunities in Frozen: Achieve greater relevance by accounting for regional preferences

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