Speaking at the British Frozen Food Federation (BFFF) conference, Roger Martin-Fagg, an economist at Ashridge Business School, warned that household income was struggling to match rising living costs and this would cause real spending to fall. He predicted a double-dip recession as the economy returned to negative growth.
Consumer confidence tended to be hit in straitened times, which leads them to buy more frozen foods, said Ed Garner, communications director for Kantar Worldpanel. Frozen food is often considered better value.
"Frozen food experienced a golden period in the last recession," said Garner. "Frozen, prepared food [for example, ready meals and desserts] got a substantial kick up and started this year very positively. We could be entering a positive period for frozen food because consumer confidence is going down."
Frozen success story: premium own label
Sales of frozen premium own-label products had grown since September 2010, with Asda set to capitalise on this with relaunches of Asda Extra Special products planned for later this year, Garner reported. By contrast, budget own-label sales had declined, he added.
"Wage awards need to be 78% to raise the economy," said Martin-Fagg. "They are really around 1.8%, so real incomes are falling by 3%. Real spending will also fall by around 3%. In 2011 real incomes will fall by about 1.5%, I expect."
People were also saving rather than spending, he added. "As the UK savings ratio goes up, the amount you spend in the high street goes down. This will make it tougher than last year, particularly if you are in what I would call consumption retail.
"There will definitely be a double dip. Gross domestic product will shrink in the next financial quarter and the third quarter. It may recover a bit in the fourth quarter. This year will be a tough year, next year will be only a little better and the next year only a little better after that."