-By D. Gail Fleenor

Being a popular dairy or frozen category was no guarantee for continued soaring growth in 2009. Even booming categories like yogurt and pizza weren't immune to recessionary effects, which stunted sales growth. Some consumers chose to eat at home, which benefited a few categories; others eliminated foods they felt weren't necessary to their diets or shifted to private label options. Reports say the recession is finally waning. What will 2010 hold for the frozen and dairy departments?

Look Back First

To see where the frozen and dairy categories may head this year, it helps to look back first. In frozen, while unit sales overall for the year ending Nov. 28, 2009, vs. the same period in 2008 were flat (The Nielsen Company, total U.S. food stores with $2 million and over in sales, excluding supercenters), several categories showed healthy increases. Frozen desserts rose 8.3 percent, breaded vegetables were up 6.9 percent, Italian frozen entrees increased by 6.8 percent, and frozen fish jumped 6.5 percent. Frozen categories that dipped over the same period include frozen bagels, down 19.6 percent; frozen dinners, down 9.5 percent; and total frozen juices/drinks, down 7.8 percent.

In the dairy department, overall sales by unit were up slightly over this period (1.6 percent). According to Nielsen data, shredded/grated cheese unit sales were up 6.6 percent, while total yogurt unit sales gained 3.1 percent. Although household staples milk and eggs were both down slightly or flat in unit sales, flavored milk unit sales rose 8.2 percent.

The characteristics of the typical frozen and dairy shopper may bode well for future sales. This shopper, according to Nielsen Homescan Consumer Facts data for mid-year 2009, is a female head of household between the ages of 35 and 54. She has an income of $40,000 or over, and a large household of three or more. This shopper has two characteristics that are important to sales growth in frozen and dairy: her household indexes high for kids 18 or under, in particular between the ages of 6 and 17, and she most often works outside the home. Convenience and healthy foods for her family are at the top of her list, and her children and teens often help steer purchases.

Looking Forward
To forecast the future in frozen foods and dairy, Progressive Grocer consulted industry experts, consultants and trade associations, and discovered these top trends:
Convenience continues to be the No. 1 trend in frozen foods. Manufacturers will continue to introduce innovative package designs for faster and easier preparation, primarily for the microwave. Steam technology, which shook up the frozen vegetable category a few years back, remains popular. Advances in personal-size pizza packaging from Schwan's and Kraft allow a "fresh from the microwave" pizza with browned and/or plumped-up crusts in only a few minutes. Single-serve pouches and two-serving bags continue the convenience theme, according to "Frozen Foods in the U.S., 2nd Edition, April 2009," which is published by New York-based market research firm Packaged Facts.

For some consumers, convenience means portability, hence the popularity of hand-held entrées. For others, it translates into easier eating without a mess and fast cleanup. Since almost half of American consumers spend 30 minutes or less cooking dinner (The NPD Group's annual Food For Thought Survey), convenience should continue to be the biggest influence on new frozen items and packaging.

Children and teenagers will be the focus of many new frozen products, due to the largest baby boom in U.S. history, according to Packaged Facts' frozen food report. This year, 21.1 million of this country’s 84.2 million children will be under the age of 5, with an additional 20.9 million ages 5 to 9, 20.4 million ages 10 to 14 and 21.8 million ages 15 to 19, according to the U.S. Census Bureau. This growth should directly affect the frozen food category, as families with children look to frozen foods for easy meal and snack preparation. In many two-working-parents and single-parent households, teens and older children already prepare snacks and meals for themselves and younger siblings, the report says. Favorites such as pizza, stuffed sandwiches, hamburgers, burritos and snack-size items will appeal to this growing group of kids and teens that want frozen products with easy preparation and cleanup.

Frozen pizza should continue in popularity, but supermarkets may be vulnerable to other retail channels in this category. While frozen pizza sales grew over the past few years, most sales growth was in drug stores (up 41.4 percent from 2006 to 2008) and other channels (up 35.6 percent) compared with growth of 6.5 percent in food stores, according to Mintel, a Chicago-based market research firm. With new flavor and crust innovations, frozen pizza should continue to be a popular menu choice, especially for families with children.

Ethnic frozen food selections will continue to increase as shoppers seek new and different flavors. Frozen dishes are an easy way to sample ethnic specialties for many. According to Mintel, ethnic foods will be one of the primary growth drivers in frozen foods in the future. Traditional brands like Hot Pockets, Lean Cuisine and Healthy Choice Café Steamers have introduced additional ethnic dishes and flavors to catch this sales trend. Mintel notes that ethnic foods also have "high appeal for wellness-oriented customers."

Sodium reduction in frozen foods will be the latest item on the health-seeking shopper's list, according to the National Frozen & Refrigerated Foods Association. Just as Campbell's lowered sodium in its soups and then advertised the change to the masses, frozen food manufacturers will tackle an issue that has been a sore spot for years: too much salt in frozen foods.

Healthy, natural and organic frozen selections will continue to increase. Better-for-you and premium frozen foods should continue to show growth, and are key drivers in the frozen category, according to Mintel. More gluten-free products will also hit the shelves. The shift toward natural/organic foods is here to stay for many consumers, and sales should build as the recession fades, Mintel says. In fact, the research company expects the natural/organic frozen category to grow faster than the overall natural/organic market.

Simplicity and naturalness in ingredients are the latest trends in ice cream, according to "Ice Cream and Frozen Desserts in the U.S., Jan. 2010" from Packaged Facts. Offerings like Häagen-Dazs Five and Breyers All Natural Original boast a limited number of ingredients. Some ice creams, like Ben & Jerry’s, now tout Fair Trade ingredients, while others promote the use of ingredients identified as "single source." Ingredients from local producers will also be hot in ice cream as the trend toward natural and simplicity expands.

Private label will continue its upward climb in both frozen and dairy. In the frozen pizza category, according to Mintel, "private label is emerging as a leader, in terms of both the number of new product introductions as well as embracing cutting-edge industry trends."

Private label holds a 43 percent share in the frozen vegetable category, according to Packaged Facts' category analysis in its frozen foods report. Shoppers have flocked to private label frozen products during the recession. According to Mintel, sales of private label frozen foods and entrees increased 7.6 percent between April 2008 and 2009. The burden in the near future may be on national brands to regain customers lost during hard times.

Yogurt will continue to be the sales growth driver and new product innovator in dairy. Consumption continues to grow as consumers become aware of health benefits. While the recession slowed sales, small premium yogurt brands and private label continued to grow. The hottest trend in yogurt, according to Mintel, is natural and organic. Additional trends in this category include functional yogurt with probiotics, high protein and fiber, as well as Greek-style, indulgent dessert-style, and kid-targeted products.