What's Driving Frozen Consumer Buying Behavior

0:00This week on the Nosh Podcast, the team's favorite Halloween treats, news of a multi-million dollar verdict for a confection company, and what are the latest trends in the frozen is a lot of the food. food. Today, the team talks Halloween treats before discussing the closure of one confection producer. And then later, we hear from Sally Lyons Wyatt at Zircana about trends in frozen food. Joining me today, we've got a combo we haven't seen in a while. Reporters, Adrian DeLuca. Good afternoon. Good afternoon. And Lucas Southard. We got the band back together and I'm in person. This is such a special occasion.

0:57We're getting close to Halloween, guys. We were just discussing in our edit meeting what our favorite Halloween costumes were. I want to know what's your favorite Halloween candy. Well, I'll go first because I, as a child, had a very, very strong sweet tooth. I still do, but I've learned to subside my carnal urges for confections. But I would pretty much eat anything. I do have a distaste for candy, like chocolates that have nuts in them, though. So I was never a Snickers guy, like Payday, Thrown Out, Baby Ruth. Wait, where does Reese's? That's different. If it's a creamy nut, I'm all into it.

1:41But just like a chunky peanut in my chocolate, no. And same thing with ice cream. Don't put nuts in my ice cream. Okay. I'm in the same boat as Lucas on that nut chocolate. You never find a non-nut person in their sweet treats. Yeah. Snickers have always freaked me out in whatever else they put in there. Freaked you out? Really? Freaked you out? Yeah. I didn't really like the whole concoction of it. I could take a bite and that was it. But also, I don't think I'm a candy person because you're going to hate the next thing I say, where I pretty much can't stand all gummy, sugar, hard candy. Anything that's not chocolate candy, I also wouldn't eat as a child.

2:20So what's your like sweet treat of choice then? Oh, it's going to be something like healthy. Yeah. It's normally just like a frozen chocolate. Some granola. That's my go to. It's kind of, okay, do love, Michelle's granola is like dessert for me a lot of the time. Does not count. That's not a sweet treat. That's okay. That's granola. Did you guys get the press release about the guy who puts potatoes in his candy bowl and apparently more kids select a potato than candy? No. I did not. Why? Are we talking about like a russet potato or are we talking about like a cooked? No, like an uncooked potato.

2:59I will say I saw a meme about someone who was giving out pierogies in their bucket. So that sounded pretty, maybe terrifying, but also funny. As a parent, I don't know if I would have let my kid take anything that isn't a totally terrible for you sugar treat that's wrapped up completely. I'm hoping the pierogies was just a meme, but you never know. Well, on the potato front, though, I just found my notes. It was a gentleman in Pennsylvania who was offering them a potato or candy. He was giving them baking potatoes, specifically Lucas. And he's known as, this is very creative, the potato man. And apparently he's kept it up.

3:43Potatoes USA sent out a press release saying that that is a hot new trend, is handing out potatoes, and they posted a picture of a child holding painted potatoes instead of jack-o'-lanterns. I'm calling full BS on this press release. It is not a trend. Don't try to make it a trend. No kid wants a potato, except for the novelty of, I got a potato, but actually give me a bunch of candy also. They're calling them potato jack-o'-lanterns or jack-o'-taters. Nope, still calling BS on this. Not a real thing. I have to drop a link in the show notes so other people can experience whatever this is. You know, if you want to learn more, visit potatogoodness.com.

4:25I'm not even kidding. But getting back to the candy side, I'm not sure I liked this as a kid. I was more of like a sweet tart or sour patch kid. But as an adult, I don't know why. In recent years, I've been like really into candy corn, which I think is just chewing flavored wax. I like candy corn. I mean, it's it's the kind of sweet that you have like like a handful and then you're like, I don't feel great afterwards. You can't overdo like a whole bag or something is just too much, but it's the sweetest of the sweet. And it is it is a bit, you know, contentious, I should say, amongst candy eaters.

5:05I was having a discussion with Shauna on our team because she likes the like candy corn shaped pumpkins. And to me, that's too far. Like the ratio of crunchy-ish outer coating to soft inside is too much with the pumpkin. I can't go there. That's just eating a cube of sugar. But to be fair, Shauna just likes just pure sugar. So, I mean, you know. Let's keep on the treats theme. This week, Nosh reported that snacking marshmallow brand Smash Mellow was awarded over$21 million in a trial. The snack brand alleged a vendor it contracted to make a marshmallow production machine never was able to deliver a machine that actually worked at the speed it needed to or even made marshmallows correctly.

5:57and because of that, Smash Mellow couldn't keep up with orders or achieve the margin it needed to continue on and ultimately had to shut down the Marshmallow business entirely. Though I think it still exists in name, they just currently are not selling anything. What was like the main issue, you know, aside from this production, that they couldn't work out without that equipment, Carol? Like how did this get to this point? Well, because they were trying to use better for you ingredients, they were avoiding using corn syrup, which is an ingredient in most marshmallows. So they're a little stickier.

6:37As I understand, it's harder to produce them. Also, apparently their top or one of their top performing SKUs was a cinnamon churro marshmallow, which required the marshmallow to be coated on all six sides or else I would assume it stuck together. And again, apparently marshmallows are not often coated on all six sides and it just couldn't do that correctly. It was shooting like cinnamon and sugar into the air, which is a workplace hazard. It was just problems all along. So they were never able to scale the business beyond kind of making them by hand in bakeries, which doesn't work out well when you have like Target as one of your retail accounts.

7:24Yeah, and marshmallows are very hard to make without the proper equipment. I remember talking to a Nosh Pitch Slam contestant, Mojave Marshmallows. Did I get the name right? I think so. Mojave Mallows. Mojave mallows. And she was talking about how they're still making all theirs by hand, but they use all organic ingredients. And it's just like the process of making marshmallows, yeah, with more natural and organic ingredients makes it really hard if you don't have specialty equipment, which most don't. And that's why the marshmallow market is still relatively small. It's, you know. And dominated by some big players.

8:09I actually this is reminding me I had seen a new brand at Expo East this year that was also looking to do this snacking marshmallow concept. But theirs was more positioned around being like a s'mores snack. So it was covered in chocolate and then rolled around in graham crackers. But it was also it was a better for you product. But I'm from that conversation remembering they were a co-manufacturer first. So they might have some some of the capabilities already there. Yeah, apparently this case has been going on since like 2018. So it was moving through the courts very slowly. But when it finally - Like a marshmallow maybe?

8:51Like a marshmallow. Come on. Jeff isn't here. Somebody's got to do it. It was a sticky situation for the producer. Yeah, here we go. But yeah, once it finally, the trial started, it lasted six weeks. So it was pretty quick once it finally got to trial. and the manufacturer was found to be in breach of contract. I talked to founder John Sebastiani of Sonoma Brands. You know, I think they're still figuring out what comes next, but they had launched a line of treats, marshmallow treats and gummies, but without the core marshmallow line, those just aren't enough at this time to support the business.

9:32So we'll see what happens. They don't have the money yet. That sounds like a whole nother rigmarole to actually get that in your hands. Adrienne, you've also been following some supply chain news with Phonio brand Yo Lele. What happened there? So Yo Lele has split from Woodland Foods, who previously supplied, sold, distributed all of its Phonio products. Woodland's a specialty ingredient platform, so you can find a lot of different things and source a lot of different ingredients through them. This had been part of a planned shift in their strategy. So Yo Lele is looking to build out more of its CPG brand, but also become an ingredient supplier for Fonio, as well as other native West African grains.

10:19So their original goal was to basically build a market around a lot of these forgotten grains that are native to West Africa. A lot of them come with regenerative benefits and then, you know, would help support the farmers they're working with in Senegal. So this allows them to expand into potentially new ingredients, build up new product lines. They had also originally wanted to go into food service when they launched in 2018, but with the pandemic, that shuttered thing. So that's how they ended up with a Phonio chip line. They also launched a beer and some spice rubs. But I think they're really looking to just expand out in this broader concept of supporting West African foods and the farmers that grow them.

11:02So did they just focus on phonio now or were they like you said, they were initially trying to do other ancient African grains? Are they still thinking that might happen or is it all phonio all the time now? Right now it's phonio, but I think the long term plan, that's why they're starting to build up this ingredient arm with phonio as their first product. I know sorghum and millets were the other two they were looking to focus on. so I would believe that's still in the plans down the line. And you can bet if they go into sorghum or millet, Adrian will be on top of that news. Yeah, toss a little like teff or something on top of that and it's just right in your wheelhouse.

11:46Why not? I told you, I've been watching them for years. What Adrian hands out when she trick-or-treats? Little bags of phonio. Little bags of phonio. Why did Adrian's house get egged? But moving from phonio to frozen, Lucas, tell us a little bit about what we're going to hear this week in our featured interview. It might be the first time anyone's ever used that turn of phrase, moving from phonio to frozen. I try, Lucas. I try. I talked to Sally Lyons-Wyatt, who's the executive vice president and practice leader of Client Insights at Sarkana, to take the temperature of the frozen department and learn a little bit about what she's seen in terms of consumer trends, the impacts of inflation on frozen food sales, what categories are winning, which ones could be the way in for more consumer adoption of frozen foods.

12:43And one of the most interesting things I found was that some of the biggest frozen food buyers are also some of the consumers that are eating out the most in food service, which seemed like a strange connection. Well, that seems pretty cool, Lucas. Had to fit one last pun in there. Let's hear from Sally. Hi, Sally. Welcome to the Nosh Podcast. Thank you so much, Lucas. I'm excited to be here. Yeah, we're excited to have you. Maybe a good place to start would just be, were there kind of two or three maybe key takeaways or some of the most interesting takeaways you found when you started to dig into some of the data you compiled from the frozen department?

13:30There were. And I think the first one is when we have been looking and analyzing what consumers were gravitating towards and what was winning, it really kind of spurred this tagline that I've been now putting out there, which is speed to table. Because consumers are looking for solutions that have minimal prep, you know, one or two items, and frozen fits into that perfectly. And when you combine that with some of the appliances that are out there, like air fryers, then you can get quality, yummy, flavorful food to the table fast and avoid having to go out of home into food service where you're going to pay multiple times what you would to be able to prep it at your home.

14:18But with frozen, you don't have all the additional steps of maybe doing a meal from scratch, if that makes sense. So that's number one. I think sustainability is still alive and well. And it's interesting. We do a study with New York's Stern School of Business, and it's around sustainability. And we have seen for multiple years now that products that market that they are sustainable do better than those that don't. The third is more around the need to excite consumers is so needed because we live in a world right now that there's a lot of not fun and not good news out there. But when you think about what you can do with Frozen and being able to excite and delight consumers with innovation or with different flavors, different cuisines, maybe even talking to them with TikTok and being able to give them some really fun and exciting ways to delight their day, then I think Frozen does deliver against that.

15:30So those would be the three that I thought were worth mentioning. I like the turn of phrase that you've coined, speed to table, because I think it's very illustrative of what kind of what frozen a lot of times in my mind has always been about, which is pulled from the freezer, stick it in the oven or in the microwave or air fryer these days. And you've got a meal or you've got part of a meal that makes it that much easier to get food to the table. How can natural brands maybe message better to consumers or really make them stand out in the frozen aisle where it can sometimes be you can get a little lost?

16:10For sure. And thank you for sharing that question with me, because I think it is a great place for natural products to partake in that. And part of it is doing it on the package, right? So what you mentioned, I think putting something as far as how quick it is with an air fryer or other quick prep appliances, I think on the package there is important. And I think the communications though, the interesting thing to me, I was at a conference this week and they asked me about nostalgia. This has nothing to do with Frozen, but I just want to go here because it is in line with what you asked me. And they said, how do you think we'll do with these nostalgic brands?

16:56And I said, well, the problem is you know that it's nostalgic, but you have a whole generation that doesn't know anything about it. And I think keeping that kind of frame of reference, when you think about natural and frozen and the speed to table, don't assume the consumer knows and therefore tell them about it. Do it within social digital, do it on retailer sites with their retailer marketing, do it within the other social channels, whether it be a TikTok or an Instagram, or find a way to cut through and get into some of the other medians that Genoff are using. Any way that you can get to these different generations and tell them about the speed to table, the quality of the ingredients, the sustainability, and finding a way to get that message to them in a fun and engaging way, you'll win.

17:53And so Natural Foods has a great opportunity to do it because of the quality, again of the ingredients and the messaging from the specific retailers. So I think it's prime for that speed to table for sure. Because I think oftentimes natural or organic brands are sometimes unfairly pigeonholed into they aren't fast, you know, they aren't a speed to table type product. Whereas in frozen, I don't see why they can't be. And they, and there are plenty out there that are representative of a speed to table type product that still fit into a natural, you know, the natural category. For sure. Because frozen, I mean, that's what it's known for being convenient, right?

18:34But convenience back in the day, if you will, it might've been heat up your oven, put it in the oven, you know what I mean? Like now it's like, just take it out, put it in and boom, you're done. And those messages apply to natural organic very, very well because they have the one up message, which is you're doing it with even better ingredients. You're treating your family to a very good meal faster than even you could if you got and you went out to food service. We're giving you time. We're giving you quality. We're giving you great taste and we're delivering it with convenience. One assumption that I've seen a lot and reported is that as inflation has ticked up, people are shopping more in frozen.

19:23I'm wondering if we can dig into that. According to your data, the frozen department is up 7 % in the last year, which isn't bad. But dollar growth is slower than the rest of food and beverage and brick and mortar unit sales was declining. So can you kind of explain how this is playing out and why this is interesting? Because a lot of times you'd think prices go up, people are going to go for the quick and easy. And it seems like it's more complicated than that. It is more complicated. I think there's a few things that kind of drive this. Consumers have gravitated a bit to more fresh versus frozen over the past four or five years.

20:08And so we've seen that. And so frozen has not been the recipient at times. But where Frozen has done quite well is when the consumers want to get products into their home, get it into their freezer and have it available. And we saw that. We saw that in COVID. Everybody was stocking up. I stocked up. I've got to believe you probably stocked up, too. And so but we have still there's a lot that you then eat through. So part of what's happened with Frozen is you still have some folks that tend to go to their freezer and grab some things. then it's time to restock but maybe they're not restocking as much as they did before because they're not needing to get into the freezer as much as they did before so that's one it's just that restockability of the freezer may not be to the same levels that it was for the past several years what might be the one of the drivers of that's mobility people are more mobile than they were we've got more people working you know three to four days a week in an office versus what it was even a year ago.

21:08And so that's played into this. And so you can kind of see that that would put an impact, if you will, on frozen foods and the trend. The other piece that is continuing to come back is the assortment. So back when we had supply issues, it was just get whatever you can into the coffer, literally, and make sure that you can get something on the shelf. So you would see a lot of pepperoni pizza, if you will, and not as many of the other varieties because of the supply. It was get the top seller out. So what we also haven't done is see the assortment get all the way to where it was before COVID. So you've got that going on that can impact because if you can't find your favorite item that you want or what you were looking for, you might not buy into Frozen like you did.

22:06What is playing in Frozen's favor is the compounded impact that we're all under. And what I mean by that is there are the macroeconomic trends. you've got we've all eaten through a lot of our savings which means that maybe we're now going to be putting things on credit cards some people are having to do student loan repayments you have snap consumers that no longer have the additional stimuli that they can pull into and so you've got some folks that are having to get really creative with how they feed their family that fits really nicely with frozen because frozen can feed any size family across any demographic any life stage any lifestyle in such a meaningful way that it has a tailwind if the industry can just wrap around it and do the things they need to do to get people to go walk down the aisle or click through the websites.

23:00Has pricing played a big role in that? I'm trying to remember if the, if pricing was in line with, you know, refrigerated or shelf stable or, you know, other departments throughout the grocery store? Price definitely is a factor for all categories in the store. And yes, you are correct. There are some categories that well outplace the norm. Some of this is crop related and weather for those crops, particularly when you think about potatoes and onions. I think they had a 34 % price change in what we were doing the latest 52 weeks ending in August. Same with frozen prepared vegetables. They saw a pretty high price increase.

23:47But yet on the flip side, there's some categories that really have been in single digits like the meat. So frozen meat, frozen refrigerated poultry, you know, they were in the five and six percent range, which is far lower than the rest of food and bed. So there's a range within that totaled 11%, 11 % compared to some of the other categories was not outrageously high. However, it does play a role into what some consumers can afford. It's the same across departments, but frozen specifically, you know, you run into that, how much it costs us to fix a particular meal from retail versus food service and retail wins every time, every time, even with this price increase, Because you got to remember, food service have raised their prices too.

24:37So even with that, it's still more economical to buy into frozen. But again, not everybody may know that and we'd have to help inform and help teach. Now, you brought up food service, which I think one of the more important aspects that I found, and I've seen this in more than one Sarkana presentation, is the fact that heavy frozen entree buyers account for nearly 60 % of frozen entree sales, but also make up 36 % more restaurant trips than the average consumer. which is, it seemed like it was largely in like the lunch and dinner meal sets. This is really interesting to me. So the consumers that are buying the most out of the frozen aisle are also the ones that are eating more in restaurants.

25:30How do you kind of, how do you weigh those two differing facts? You had a very similar reaction to those numbers as I did when I first saw them. And I think part of what you have to think through is that these are, when you think about frozen entree buyers, so these are all around that meal, that lunch, that dinner, and it speaks to variety. These folks are looking for variety. And when you think of it in that way, then you can start to say, okay, fine. So they get a lot of the variety from frozen. They're 60 % of frozen sales, but maybe they're not getting every single meal from the frozen department.

26:10They're going to restaurants to kind of fill in, if you will, for some other lunch and dinner occasions that maybe they just want to have out of home. And I think that's where the key is, is really on that variety. So then you can say, OK, fine, that makes more sense. So variety is kind of what drives this. And you might be thinking to yourself, OK, well, then why do they even need to go out and get it? Why can't they get more of it in the store? But I think that goes back to where we started with speed to table. Sometimes maybe they don't have it in the house. They'd have to go to the store to get it.

26:47So then you get into how can we have the heavy frozen entree buyers maybe even buy one more package so they can make one less trip. So thinking about it in that way is how you can use this information to strategize on promotions or events that you would intrigue consumers and especially go after those heavy frozen entree buyers because they're the ones you want, but entice them to buy just one more and make one less trip to restaurants. What are some strategies that you think would work to entice them to get one more entree or one more frozen product in their basket? Well, there's the obvious, the multiple purchase, right?

27:29So buy two, get one, but that has to work if the numbers work. So I do realize there's margin goals and there's things like that. So if the multiples work, that's the one of the easiest. but then events and being able to showcase if you do a particular cuisine night or cuisine event then what is the what are the three things that maybe they need to have to have the best event where maybe they would have bought one or two before and really provide them with a menu of options that are going to make their their cuisine night even more special so you don't necessarily have to promote from a discount perspective, but you're promoting from an occasion perspective.

28:17And I think that twist gives you a little bit more of a chance, not saying they will. Obviously, promotions really do help. But if you can't afford to do the promotion, then I think the occasion and really having in on that menu and have that menu have one more item that maybe typically wouldn't be bought. You brought up, you know, ice cream or frozen novelties that sometimes when wallets get tight, when basket sizes go down, that actually some of these kind of comfort foods, especially like sweet treats, as I like to call them, sales do better because people, you know, maybe aren't eating out as much as they'd like.

28:54And they're not doing some of the, maybe they're not going on the vacations they want, but at least they can still have their ice cream. Is that reflected in some of the data you're seen? And how can maybe brands lean into that to bring more consumers to the frozen aisle? Part of what's interesting about frozen is that multiple buying. So one of the facts in here was 60 % of frozen buyers purchase 10 plus frozen subcategories. So think of it as the ice cream might purchase a novelty plus a entree, right? So this is one department where buying multiple is kind of part of the norm. And we found different connections within Frozen.

29:34And part of what I think is kind of cool is that ice cream sherbet is the one that kind of attracts so many shoppers. It brings in 79 % of the overall buyers for Frozen Foods. So it is a destination category. And it's just that fun, shoppable area in the store that can attract shoppers in. So ice cream is definitely one where I think it's almost like a treasure hunt and where you can go in and you want to see that. So it's one that I tell retailers, use frozen as one of your destinations. Yes, use fresh. Everybody's using fresh. Totally fine. Definitely think that's smart. But why not throw in some frozen in there too, because of the convenience, because of the quality, because of the flavors, because of all the things that we've been talking about through this.

30:25And then that speed to table, it really will help. So it's almost like ice cream can be like a gateway drug for getting more people into the frozen aisle. Well said. Before I let you go, I'd love to hear if you have any, you know, kind of suggestions or, Especially with natural organic brands, is there an opportunity that some of those manufacturers haven't fully tapped into yet or that they are just scratching the surface in the frozen aisle where they could do better and maybe increase their market share? Sure. I do think, especially for natural organic, it's getting the message out is number one.