Product innovation will benefit firms, but demand for fresh foods will limit growth
Los Angeles, CA (PRWEB) March 27, 2013
Revenue for the Frozen Food Production industry has grown slowly over the past five years. The industry grew strongly in 2009 as a dip in disposable incomes spurred customers to opt for the inexpensive products the industry provides. However, sales soon declined once unemployment fell and disposable incomes ticked upward. “With more money to spend, consumers preferred fresh produce to frozen,” says IBISWorld industry analyst Natalie Everett. “Operators responded to this shift in consumer preferences through product innovation that focused on higher quality and healthier ingredients.” As a result, revenue is anticipated to grow at an annualized rate of 2.6% to $28.4 billion over the five years to 2013. In 2013 alone, revenue is expected to grow an estimated 2.0% as frozen meals will remain attractive to time-poor individuals. In addition, the industry will benefit from successful marketing aimed at its products' healthfulness.
Despite revenue growth in the past five years, Frozen Food Production industry profit suffered due to rising commodity prices and the cost of sweeping marketing campaigns convincing consumers that its products were healthful even compared with fresh food, the industry's main competition. “Complicating the matter, operators were unable to pass on the input cost increases through higher prices because consumers were more price-sensitive during the recession, which caused profit to fall,” adds Everett. As the economy recovers, disposable income increases and quality becomes a larger demand factor, companies will have more leverage to raise prices on premium prepared frozen meals because consumers will pay more for higher quality products. Therefore, profit is expected to expand through 2018.
The industry is moderately concentrated; although the top four firms control a significant proportion of revenue, only a small percentage of firms employ more than 500 workers. Concentration increased slightly as a result of increased growth for some major players, along with an increase in merger and acquisition activity. In the next five years, industry concentration is expected to keep climbing as the major players, including Nestle, Schwan Food Company, ConAgra Foods and H.J. Heinz Company, continue to grow through advanced technology, acquisitions and their ability to bypass wholesalers and sell directly to retailers.
During the next five years, operators will continue to develop products and marketing messages that focus on healthfulness. Further, as more Americans return to work and have less time to prepare meals, they will opt for the convenience of frozen meals. However, consumers are expected to benefit from a recovering economy and more disposable income, allowing them to buy fresh produce. Such competition will hurt demand for frozen food and, therefore, stifle revenue. Ultimately, revenue is expected to rise during the five years to 2018. For more information, visit IBISWorld’s Frozen Food Production in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes firms that produce frozen food products, such as frozen fruits, vegetables and juices; frozen entrees and side dishes (excluding seafood); frozen whipped toppings; and frozen waffles, pancakes and french toast. These products are then distributed to outlets such as grocery wholesalers, retail food stores and the hospitality industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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