High Demand for Frozen Food ContinuesBy: Anne-Marie Roerink,President, 210 Analytics

While grocery retailing has officially entered its summer sales season, frozen food sales remain on fire. Based on elevated everyday demand, total retail, center-store edibles, frozen and fresh sales continued to track well ahead of the old baseline the week of May 31, 2020. 210 Analytics, IRI and AFFI partnered to understand how retail sales for frozen foods are developing throughout the pandemic and as restaurants around the country are starting to re-open dine-in facilities.

Retail Market InsightsJune 8, 2020 Update

American Frozen Food Institute www.affi.org

Since early March, frozen foods have been a frontrunner in sales gains and the week of May 31 was no exception. Dollar gains for frozen foods for the last week of March were up 26.7% over the same week in 2019. While about three points down from the gains seen the week prior, this is well ahead of other areas of the store. Meat and produce sales gains are now in the teens and the overall perimeter performance continued to be pulled down by struggles in deli-prepared and in-store bakery that have seen sales losses each week since the end of March. Center store edibles increased 17.5% — making rozen foods once more a sales leader.

American Frozen Food Institute www.affi.org

While grocery retailing has officially entered its summer sales season, frozen food sales remain on fire. Based on elevated everyday demand, total retail, center-store edibles, frozen and fresh sales continued to track well ahead of the old baseline the week of May 31, 2020. 210 Analytics, IRI and AFFI partnered to understand how retail sales for frozen foods are developing throughout the pandemic and as restaurants around the country are starting to re-open dine-in facilities.

Retail Market InsightsJune 8, 2020 Update

Source: IRI, Total US, MULO, 1 week view % change vs. year ago.

One of the very few areas with an increase in the average number of items per store was frozen meat (+3.6%). The tight fresh meat supply means inventory in the meat department is far below normal levels and many meat buyers have ramped up their frozen meat inventory to supplement fresh assortment, where possible.

Supply chain issues are also felt in inflationary pressure in several categories, including meat. While volume sales measures are not available for all areas, several subcategories are starting to see a significant gap between dollar gains and volume gains — pointing to price increases. For meat, dollars tracked 13 percentage points ahead of volume, signaling significant price increases. All frozen food areas had higher dollar than volume gains during the week of May 31 versus the same week in 2019.

Since early March, frozen foods have been a frontrunner in sales gains and the week of May 31 was no exception. Dollar gains for frozen foods for the last week of March were up 26.7% over the same week in 2019. While about three points down from the gains seen the week prior, this is well ahead of other areas of the store. Meat and produce sales gains are now in the teens and the overall perimeter performance continued to be pulled down by struggles in deli-prepared and in-store bakery that have seen sales losses each week since the end of March. Center store edibles increased 17.5% — making rozen foods once more a sales leader.

Frozen foods generated more than $1.2 billion in sales the week of May 31, 2020 — $257 million more than the comparable week in 2019. Supply chain issues combined with the highly elevated consumer demand drove continued out-of-stocks at some stores. On the Retail Feedback Group’s Constant Customer Feedback (CCF) program, a shopper wrote,

“Frozen vegetables were nearly empty and you never seem to have peas and carrots.” Another wrote, “Frozen vegetables like mushrooms and bell pepper were out of stock. Store brand frozen vegetables have little variety and have not been restocked for 10 days.” Others noted understanding of the situation and wrote, “No frozen chopped onions and green peppers. But not to worry, it is completely understandable given the current situation. I will check again next time.”

IRI’s measure reflecting assortment variety shows an uptick in the average number of frozen food items available per store during the two panic buying weeks ending March 15 and March 22. But ever since, the number of items versus the same week in 2019 has been down. Given that consumer demand is up, the smaller assortment is likely directly due to supply chain issues and SKU rationalization decisions to optimize productivity.

Assortment variety was down 6.9% for the week ending May 31 versus the same week in 2019. This reflects the lowest levels of variety seen since the onset of the pandemic and reflects 99 fewer items per store on average than the same week last year.

Some of the hardest-hit areas included the following, with assortment levels down from the prior week for most:

• Frozen pizza: -18.0%• Frozen fruit: -13.5% • Prepared vegetables: -14.7%• Frozen entrees: -13.0%• Plain vegetables: -10.2%• Processed poultry: -6.7%

Source: IRI, Total US, MULO, average weekly items per store selling

3/1 3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3 5/10 5/17 5/24 5/31Total store, incl. fresh 2% 11% 63% 58% 14% 17% 16% 5% 22% 18% 18% 14% 14% 11.5%Edibles minus fresh 3% 9% 78% 80% 25% 29% 30% 11% 31% 25% 24% 22% 20% 17.5%Fresh perimeter -1% 3% 45% 45% 12% 16% 18% 1% 23% 22% 17% 12% 13% 11.2%Frozen 3% 5% 80% 94% 32% 36% 33% 29% 50% 36% 35% 31% 30% 26.7%

-20%

0%

20%

40%

60%

80%

100%Dollar growth versus comparable week in 2019

Source: IRI, Total US, MULO, average weekly items per store selling

One of the very few areas with an increase in the average number of items per store was frozen meat (+3.6%). The tight fresh meat supply means inventory in the meat department is far below normal levels and many meat buyers have ramped up their frozen meat inventory to supplement fresh assortment, where possible.

Supply chain issues are also felt in inflationary pressure in several categories, including meat. While volume sales measures are not available for all areas, several subcategories are starting to see a significant gap between dollar gains and volume gains — pointing to price increases. For meat, dollars tracked 13 percentage points ahead of volume, signaling significant price increases. All frozen food areas had higher dollar than volume gains during the week of May 31 versus the same week in 2019.

American Frozen Food Institute www.affi.org

June 8, 2020 UpdateRetail Market Insights

Frozen foods generated more than $1.2 billion in sales the week of May 31, 2020 — $257 million more than the comparable week in 2019. Supply chain issues combined with the highly elevated consumer demand drove continued out-of-stocks at some stores. On the Retail Feedback Group’s Constant Customer Feedback (CCF) program, a shopper wrote,

“Frozen vegetables were nearly empty and you never seem to have peas and carrots.” Another wrote, “Frozen vegetables like mushrooms and bell pepper were out of stock. Store brand frozen vegetables have little variety and have not been restocked for 10 days.” Others noted understanding of the situation and wrote, “No frozen chopped onions and green peppers. But not to worry, it is completely understandable given the current situation. I will check again next time.”

IRI’s measure reflecting assortment variety shows an uptick in the average number of frozen food items available per store during the two panic buying weeks ending March 15 and March 22. But ever since, the number of items versus the same week in 2019 has been down. Given that consumer demand is up, the smaller assortment is likely directly due to supply chain issues and SKU rationalization decisions to optimize productivity.

Assortment variety was down 6.9% for the week ending May 31 versus the same week in 2019. This reflects the lowest levels of variety seen since the onset of the pandemic and reflects 99 fewer items per store on average than the same week last year.

Some of the hardest-hit areas included the following, with assortment levels down from the prior week for most:

• Frozen pizza: -18.0%• Frozen fruit: -13.5% • Prepared vegetables: -14.7%• Frozen entrees: -13.0%• Plain vegetables: -10.2%• Processed poultry: -6.7%

Source: IRI, Total US, MULO, average weekly items per store selling

3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3 5/10 5/17 5/24 5/31 Average weekly

items/store selling

1,527 1,491 1,370 1,409 1,391 1,382 1,381 1,383 1,379 1,362 1,354 1,340

Change vs. same week in

2019 +5.5% +3.7% -4.7% -3.3% -4.6% -3.8% -2.3% -4.4% -5.3% -5.9% -6.5% -6.9%

Source: IRI, Total US, MULO, dollar and volume sales 1 week change vs. year ago

One of the very few areas with an increase in the average number of items per store was frozen meat (+3.6%). The tight fresh meat supply means inventory in the meat department is far below normal levels and many meat buyers have ramped up their frozen meat inventory to supplement fresh assortment, where possible.

Supply chain issues are also felt in inflationary pressure in several categories, including meat. While volume sales measures are not available for all areas, several subcategories are starting to see a significant gap between dollar gains and volume gains — pointing to price increases. For meat, dollars tracked 13 percentage points ahead of volume, signaling significant price increases. All frozen food areas had higher dollar than volume gains during the week of May 31 versus the same week in 2019.

American Frozen Food Institute www.affi.org

June 8, 2020 UpdateRetail Market Insights

Frozen foods generated more than $1.2 billion in sales the week of May 31, 2020 — $257 million more than the comparable week in 2019. Supply chain issues combined with the highly elevated consumer demand drove continued out-of-stocks at some stores. On the Retail Feedback Group’s Constant Customer Feedback (CCF) program, a shopper wrote,

“Frozen vegetables were nearly empty and you never seem to have peas and carrots.” Another wrote, “Frozen vegetables like mushrooms and bell pepper were out of stock. Store brand frozen vegetables have little variety and have not been restocked for 10 days.” Others noted understanding of the situation and wrote, “No frozen chopped onions and green peppers. But not to worry, it is completely understandable given the current situation. I will check again next time.”

IRI’s measure reflecting assortment variety shows an uptick in the average number of frozen food items available per store during the two panic buying weeks ending March 15 and March 22. But ever since, the number of items versus the same week in 2019 has been down. Given that consumer demand is up, the smaller assortment is likely directly due to supply chain issues and SKU rationalization decisions to optimize productivity.

Assortment variety was down 6.9% for the week ending May 31 versus the same week in 2019. This reflects the lowest levels of variety seen since the onset of the pandemic and reflects 99 fewer items per store on average than the same week last year.

Some of the hardest-hit areas included the following, with assortment levels down from the prior week for most:

• Frozen pizza: -18.0%• Frozen fruit: -13.5% • Prepared vegetables: -14.7%• Frozen entrees: -13.0%• Plain vegetables: -10.2%• Processed poultry: -6.7%

Source: IRI, Total US, MULO, average weekly items per store selling

Category with % of frozen department sales

% sales change 1 week ending 5/31/2020 versus year ago Dollar sales Volume sales Volume/dollar gap

Frozen meat/poultry/seafood (32%) +41.9% +33.4% -8.5 Processed poultry +42.1% +36.2% -5.9 Meat +30.4% +17.4% -13.0 Seafood +56.4% +48.2% -8.2 Frozen meals (32% of sales) +17.5% +12.2% -5.3 Breakfast food +21.2% +14.1% -7.1 Dinners/entrees +13.1% +8.9% -4.2 Pizza +23.5% +16.4% -7.1 Frozen desserts (26%) +21.3% --- --- Ice cream/sherbet +19.3% +11.3% -8.0 Frozen fruits & vegetables (11%) +28.8% +20.7% -8.1 Frozen baked goods (3%) +30.5% +26.9% -3.6 Frozen snacks (4%) +38.8% +32.9% -5.9 Frozen beverages <1% +35.9% +26.5% -9.4

A Deep-Dive into Frozen Food SalesThe overall 29.8% gains were supported by double-digit increases for all areas of frozen food. The highest gains were achieved by frozen meat, poultry and seafood, at +42.1%. Given the strength in frozen animal protein, combined meat, poultry and seafood overtook frozen meals as the highest selling category. This translated into $393 million in frozen animal protein sales the week of May 31, an additional $116 million versus the same week last year. Frozen meals, now the second largest area, increased 17.5% despite stores carrying many fewer items. Frozen pizza, that had 18% fewer items on average per store, increased sales 23.5% over the week ending May 31 versus the comparable week in 2019.

American Frozen Food Institute www.affi.org

June 8, 2020 Update

Source: IRI, Total US, MULO, 1 week view % change vs. year ago.

Retail Market Insights

Product and share of frozen food department sales for w.e. 5-31-20

% Dollar sales change vs. comparable week ending in 2019

3-01 March (w.e. 3/8-3-29

April (w.e. 4/5-4/26) 5-3 5-10 5-17 5-24 5-31

Frozen dept (ex poultry) +2.6% +52% +37% +36% +35% +31% +30% +26.7% Frozen meat/poultry/seafood (32.2% of sales) +8% +65% +48% +60% +59% +51% +48% +41.9% Processed poultry +4% +75% +48% +50% +51% +45% +47% +42.1% Meat +11% +91% +57% +61% +62% +48% +38% +30.4% Seafood +17% +46% +46% +66% +65% +61% +63% +56.4% Frozen meals (31.5%) -3% +53% +28% +20% +19% +18% +20% +17.5% Breakfast food +1% +44% +30% +22% +21% +24% +27% +21.2% Dinners/entrees -3% +44% +16% +12% +12% +12% +15% +13.1% Pizza -2% +79% +53% +35% +31% +28% +26% +23.5% Frozen desserts (26.2%) +2% +28% +32% +35% +30% +25% +21% +21.3% Ice cream/sherbet -0.2% +30% +35% +34% +29% +25% +21% +19.3% Novelties +6% +28% +31% +35% +30% +24% +20% +22.8% Desserts/toppings +0.2% +23% +18% +43% +37% +34% +25% +28.6% Frozen fruits & vegetables (10.8%) +4% +67% +44% +43% +39% +35% +34% +28.8% Fruit +10% +64% +46% +53% +48% +48% +46% +42.3% Potatoes/onions +3% +67% +56% +54% +49% +44% +42% +37.4% Plain vegetables +5% +72% +38% +34% +31% +24% +25% +18.9% Prepared vegetables -13% +35% +12% +9% +6% +4% +5% +1.5% Frozen baked goods (2.6%) -1% +46% +32% +46% +40% +39% +37% +30.5% Frozen snacks (3.9%) +1% +67% +60% +48% +47% +48% +47% +38.8% Appetizers/snack rolls +1% +67% +60% +48% 47% +48% +47% +38.8% Frozen beverages <1% -2% +80% +58% +49% +55% +49% +38% +35.9% Juices -2% +80% +58% +50% +55% +49% +38% +36.0%

American Frozen Food Institute www.affi.org

June 8, 2020 Update

Retail Market Insights

What’s next?

Frozen foods have generated double-digit gains for 12 out of the last 12 weeks and are holding steady at highly elevated levels compared with last year’s sales. The next sales report will cover the first week of June. Many states will have officially started summer vacation, which caused a different demand landscape in prior years versus the months that students are in school. Additionally, sales may have been affected by shortened store hours due to local and state-wide curfews. Meanwhile, the relaxation of the stay-at-home executive orders continue. In most states, consumers are able to resume shopping, dining and working out of home. Given the limited seating for in-restaurant dining and significant levels of economic pressure, it is likely that demand for frozen foods at retail will continue to track well above 2019 levels for the foreseeable future.

Please recognize and thank the entire food supply chain for all they do to keep supply flowing during these unprecedented times. These sales surges are only possible thanks to the heroic work of the entire food supply chain. 210 Analytics, IRI and AFFI will continue to provide weekly updates as sales trends develop.