Frozen food category surges amid inflation: 'It's a dramatic shift,' says food exec

Consumers continue to grapple with inflation — and it's leading to shifting behaviors at the grocery store.

Saffron Road, which manufactures clean-label frozen food products and better-for-you meals, noticed an uptick in sales over the past few months as more shoppers gravitate toward frozen items amid the current economic environment.

"The last six months, we've been on a tear," Adnan Durrani, Saffron Road CEO, told Yahoo Finance, adding that the brand has seen "record months, every month."

Durrani explained that the frozen food category outgrew fresh by 230% this year — a growth rate the executive had never seen before in his decades-spanning career.

Historically, "fresh usually always outpaces frozen, but what we're seeing now is a dramatic shift."

Why? "Frozen is nature's pause button," Durrani said, emphasizing that frozen products, especially organic and locally sourced food items, "preserve that freshness" over time and allow for longevity with "over a year shelf life."

Throughout the pandemic, which led to severe supply chain backlogs, consumers "were very concerned about the the poor performance of fresh."

"The sell-by dates got shortened because of the supply chain. People were also making fewer trips to the store, so items were sitting on the shelf for quite a while," Durrani said.

We don't see too much in sight in terms of inflation ebbing — it just seems to be getting worse and worse...Adnan Durrani, Saffron Road CEO

New data also underscores the jump in various frozen food items with market research firm Mordor Intelligence reporting that COVID-19 "positively impacted the frozen food market."

According to the report, which cited the American Frozen Food Institute, frozen food products witnessed a 21% increase in 2020 compared to 2019.

Furthermore, a recent study from IRI and 210 Analytics, which examined the impact of rising seafood prices on consumer choice, noted how frozen seafood sales jumped 2.8% year-over-year last month, while sales of fresh seafood sank 11.8% over the same time period.

"Frozen and canned have two advantages over fresh seafood during inflationary times like these," 210 Analytics Principal Anne-Marie Roerink told industry publication, Seafood Source.

"The number-one advantage is shelf-life — whereas fresh seafood needs to be used or frozen within a few days of purchase, frozen and canned seafood have little to no waste."

Roerink went on to explain that another advantage is price perception as consumers generally consider frozen and canned items more price-advantageous options.

Frozen seafood sales jumped 2.8% year-over-year last month despite inflation, new data revealed
Frozen seafood sales jumped 2.8% year-over-year last month despite inflation, new data revealed (Stephen Ehlers via Getty Images)

Saffron Road's Durrani added that "frozen is now considered an ESG value," as well— representing yet another benefit to the overall category.

According to the Natural Resources Defense Council (NRDC), up to 40% of all U.S. food goes uneaten with 87% of food waste coming from fresh vegetables, fruit and bread.

"A lot of folks are really conscious of [food waste] now — looking at their grocery bills, looking at how much they really throw away, looking at what they keep."

"Frozen has become a go-to in terms of reducing that problem," the executive explained.

Inflation 'seems to be getting worse & worse'

The latest Bureau of Labor Statistics' Consumer Price Index (CPI) rose 8.3% in April compared to the same month last year, inching down from March's 8.5% advance.

The cost of food rose 9.4%, with items in the at-home category rising a whopping 10.8% — the highest increase since 1980, according to BLS economist Steve Reed.

Overall in 2022, grocery store prices have risen at least 1.0% month-over-month.

Yet, despite those inflationary pressures, Durrani revealed that Saffron Road (which already retails at a higher price point due to its place in the premium, "better-for-you" category) has outperformed the market with "velocities increasing over the past couple of years, especially the last six months."

"Consumers are making a discerning choice to pay up for 'better-for-you' brands," he continued, adding that the brand upped its pricing twice since the start of the pandemic — once last year (+5%) and again this year (+5%).

"We haven't seen any backlash when it comes to those price increases," he revealed.

(Courtesy: Saffron Road)
(Courtesy: Saffron Road)

Still, the CEO cautioned that there could be "recessionary backlash" and "some kind of price elasticity disruption" in the second half of the year as higher costs weigh on the food system overall.

He also revealed that price hikes have severely impacted the company's margins.

"We hope that some of that starts to stabilize, but we don't see too much in sight in terms of inflation ebbing — it just seems to be getting worse and worse," the executive lamented.

He added it's not just higher prices in food and ingredients, but also packaging, freight, gasoline, and fertilizer costs — although he did note that higher gas prices mean less trips to the grocery store, which, in turn, benefits the frozen category.

Moving forward, the executive predicts that the food sector will see be "a barbell approach" with some consumers relying on price-reduced, private label products while others continue to opt for premium brands.

"It's still a conservative choice," Durrani explained. "You pay a little bit more for a premium brand, but that's still significantly less than eating at a restaurant."

Average menu prices in April were up 7.2% compared to a year ago — the largest 12-month gain since 1981, the National Restaurant Association said.

Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 or email her at [email protected]

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