ECO 550 ASSIGNMENT 2

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Assignment 2: Operations Decision

Due Week 6 and worth 300 points

Using the regression results and the other computations from Assignment 1, determine the market structure in which the low-calorie frozen, microwavable food company operates.

Use the Internet to research two (2) of the leading competitors in the low-calorie frozen, microwavable food industry, and take note of their pricing strategies, profitability, and their relationships within the industry (worldwide).

Write a six to eight (6-8) page paper in which you:

Outline a plan that will assess the effectiveness of the market structure for the company’s operations. Note: In Assignment 1, the assumption was that the market structure [or selling environment] was perfectly competitive and that the equilibrium price was to be determined by setting QD equal to QS. You are now aware of recent changes in the selling environment that suggest an imperfectly competitive market where your firm now has substantial market power in setting its own “optimal” price.

Given that business operations have changed from the market structure specified in the original scenario in Assignment 1, determine two (2) likely factors that might have caused the change. Predict the primary manner in which this change would likely impact business operations in the new market environment.

Analyze the major short run and long cost functions for the low-calorie, frozen microwaveable food company given the cost functions below. Suggest substantive ways in which the low-calorie food company may use this information in order to make decisions in both the short-run and the long-run.

TC = 160,000,000 + 100Q + 0.0063212Q2

VC = 100Q + 0.0063212Q2

MC= 100 + 0.0126424Q

Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response. (Hint: Your firm’s price must cover average variable costs in the short run and average total costs in the long run to continue operations.)

Suggest one (1) pricing policy that will enable your low-calorie, frozen microwavable food company to maximize profits. Provide a rationale for your suggestion.

(Hints:

In Assignment 1, you determined your firm’s market demand equation. Now you need to find the inverse demand equation. Having found that, find the Total Revenue function for your firm (TR is P x Q). From your firm’s Total Revenue function, then find your Marginal Revenue (MR) function.

Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.)

Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.

(Hints:

Calculate profit in the short run by using the price and output levels you generated in part 5. Optional: You may want to compare this to what profit would have been in Assignment 1 using the cost function provided here.

Calculate profit in the long run by using the output level you generated in part 5 and cost data in part 3 and assuming that the selling environment will likely be very competitive. Determine why this would be a valid assumption.)

Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders. Outline, in brief, a plan to implement your recommendations.

Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.

Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

Analyze short-run and long-run production and cost functions.

Apply macroeconomic concepts to changes in global and national economies and how they affect economic growth, inflation, interest rates, and wage rates.

Evaluate the profit-maximizing price and output level for given operating costs for monopolies and firms in competitive industries.

Use technology and information resources to research issues in managerial economics and globalization.

Write clearly and concisely about managerial economics and globalization using proper writing mechanics.

ASSIGNMENT 2 INSTRUCTIONS

ECO550

From Assignment 1
From Assignment 1, you will use the following information:
Qs = -7909.89 + 79.1P
Qd = 38,650 – 42P
P = 384.48 cents and Q = 22,502 units

Question 1
Outline a plan that will assess the effectiveness of the market structure for the company’s operations. Note: In Assignment 1, the assumption was that the market structure [or selling environment] was perfectly competitive and that the equilibrium price was to be determined by setting Qd equal to Qs. The market structure in the first assignment was competitive. This means that the firm does not have control over the price and it has to charge the equilibrium price. You are now aware of recent changes in the selling environment that suggest an imperfectly competitive market where your firm now has substantial market power in setting its own “optimal” price.

Question 1 Instructions
Since the company has control over the price, it has to decide how much to charge and how much to produce to maximize profit.
The profit-maximizing/loss-minimizing quantity and price can be determined by setting the MR = MC. This involves the following.
Find the total revenue: TR = P x Q
Find the marginal revenue by calculating the derivative of the total revenue function.
Set MR equal to the provided MC function and solve for Q, and then for P.
Based on the results, the company should make a decision to continue producing or shut down.

Question 2
Given that business operations have changed from the market structure specified in the original scenario in Assignment 1, determine two (2) likely factors that might have caused the change. Predict the primary manner in which this change would likely impact business operations in the new market environment.

Question 2 Instructions
Consider the change in the degree of competition.
Review the sections “Industry Performance” and “Competitive Landscape” in the IBISWorld report provided.
Factors that might have caused change could be for example consolidation of the industry, i.e., firms become bigger and have now some control on the price. Also, firms can differentiate their product from the products of their competitors, which again results in more control over the price. Firms’ actions are interdependent and now their decisions are affected not just by the demand and supply conditions, but by what moves their major competitors make. These are just examples. You might come up with other factors.

Question 3
Analyze the major short run and long cost functions for the low-calorie, frozen microwaveable food company given the cost functions below. Suggest substantive ways in which the low-calorie food company may use this information in order to make decisions in both short and the long-run.
TC = 160,000,000 + 100Q + 0.0063212Q2
VC = 100Q + 0.0063212Q2
MC= 100 + 0.0126424Q

Question 3 Instructions
To maximize profit, the firm has to find ways to maximize its total revenue and minimize its cost. You should also consider the difference between short and long run. In the short run, at least one of the costs is fixed. In the long run, all costs can be changes, i.e., all costs are variable. A review of the IBISWorld Industry Report on the frozen food production in the US can also help you answer this question. The cost functions affect the profit. The cost functions are to be used to answer question 4 as well.

Question 3 Instructions
Using the provided cost data for the firm, determine whether the firm is making a profit or a loss by charging the equilibrium price determined in Assignment 1.
Calculate the total revenue.
Calculate the total cost.
Find the difference between TR and TC, which is the profit or the loss.
Review the section “Cost Structure Benchmarks” (p. 22) in the IBISWorld report.

Question 4
Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response.
Hint: Your firm’s price must cover average variable costs in the short run and average total costs in the long run to continue operations.

Question 4 Instructions
Here, you have to find the profit maximizing or loss-minimizing quantity and price. Then, determine whether the company is making a profit. To find the value of Q and P, you should use the marginal rule MR = MC.
MC function is given.
You should calculate MR by using the demand function from Assignment 1: Qd = 38,650 – 42P.
First, inverse the demand function to show the price in terms of quantity: P = 920.238 – 0.0238Q.
Then, find the TR function, which is equal to price times quantity TR = (920.238 – 0.0238Q)*Q = 920.238Q – 0.0238Q2.
Finally, find MR which is the derivative of TR with respect to quantity, i.e., MR = 920.238 – 0.0476Q.

Question 4 Instructions
Next, set MR equal to the MC given in the second assignment and solve for the profit maximizing or loss minimizing Q and P.
When you find the values of Q and P, you can plug in the number for Q into the TR function to find the TR and in the TC function, to find the TC.

Question 4 Instructions
Then, subtract TC from TR to find the total profit.
If you get a negative number, the firm is making a loss.
If the number is positive, the firm is making a profit.
If the firm is making a loss, you should figure out whether the firm should continue to produce at a loss in the short run, or shut down. To answer this question, you should compare the TR with VC, or price with AVC. If the firm is making a loss and the TR is higher than VC or the price is higher than the AVC, then it would be better off producing rather than shutting down because it will be able to cover some of its fixed cost. But if TR is smaller than VC, or if price is smaller than AVC, the firm will be better of shutting down.

Question 5
Suggest one (1) pricing policy that will enable your low-calorie, frozen microwavable food company to maximize profits. Provide a rationale for your suggestion.

Question 5 Instructions
Hints:
In Assignment 1, you determined your firm’s market demand equation. Now you need to find the inverse demand equation. Having found that, find the Total Revenue function for your firm (TR is P x Q). From your firm’s Total Revenue function, then find your Marginal Revenue (MR) function.
Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.
Use the profit-maximizing rule MC = MR to find the price and quantity that maximize profit.

Question 6
Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.

Question 6 Instructions
Hints:
Calculate profit in the short run by using the price and output levels you generated in part 5. Optional: You may want to compare this to what profit would have been in Assignment 1 using the cost function provided here.
Calculate profit in the long run by using the output level you generated in part 5 and cost data in part 3 and assuming that the selling environment will likely be very competitive. Determine why this would be a valid assumption.
You can also review the section “Key Statistics” on p. 38 of the IBISWorld Industry Report Report.

Question 7 Instructions
Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders. Outline, in brief, a plan to implement your recommendations.
Review the sections “Industry Performance” and “Products and Markets” in the IBISWorld report.

QUESTIONS???

P = MR = MC in perfect competition
MR = MC in imperfect competition

WWW.IBISWORLD.COM

Frozen Food Production

in the US November 2013

IBISWorld Industry Report 31141
Frozen Food Production
in the US
November 2013 Hester Jeo

Keeping cool: Revenue will grow marginally as
producers focus on convenience and health

About this Industr

Industry Definition

2 Main Activities

Similar Industries

Additional Resources

4 Industry at a Glanc

Industry Performance

5 Executive Summary

5 Key External Drivers

7 Current Performance

9 Industry Outlook

11 Industry Life Cycle

Products & Markets

Supply Chain

14 Products & Services

15 Demand Determinants

Major Markets

17 International Trade

19 Business Locatio

Competitive Landscape

21 Market Share Concentration

21 Key Success Factors

22 Cost Structure Benchmarks

24 Basis of Competition

25 Barriers to Entry

26 Industry Globalization

Major Companies

27 Nestle SA

28 The Schwan Food Company

29 ConAgra Foods Inc.

30 H.J. Heinz Company

Operating Conditions

33 Capital Intensity

34 Technology & Systems

34 Revenue Volatility

35 Regulation & Policy

36 Industry Assistance

38 Key Statistics
38

Industry Data

Annual Change

Key Ratios

Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | info@ibisworld.com

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013

This industry includes companies
that produce frozen fruits,
vegetables and juices; frozen entrees
and side dishes (excluding seafood);
frozen pizza; frozen whipped

toppings; and frozen waffles,
pancakes and French toast. These
products are then distributed to
grocery wholesalers, retail food
stores and the hospitality industry.

The primary activities of this industry are

Producing frozen fruit and vegetables

Producing frozen fruit and vegetable juice

Producing frozen meals, pizza and whipped toppings

Producing frozen waffles, pancakes and french toas

31122 Margarine & Cooking Oil Processing in the US
These establishments are primarily engaged in wet milling corn and vegetables; crushing oilseeds and tree
nuts; refining and blending vegetable oils; and manufacturing shortening and margarine.

31142 Canned Fruit & Vegetable Processing in the US
These establishments primarily manufacture canned, pickled, and dried fruits, vegetables and specialty
foods.

31152 Ice Cream Production in the US
Establishments in this industry are primarily engaged in manufacturing ice cream, frozen yogurts, frozen
ices, sherbets, frozen tofu and other frozen desserts.

31161 Meat, Beef & Poultry Processing in the US
These establishments are primarily engaged in slaughtering animals and preparing processed meats and
meat byproducts, such as manufacturing frozen specialty foods containing meat, like frozen dinners.

31194 Seasoning, Sauce and Condiment Production in the US
These establishments primarily manufacture dressings and sauces; spices, table salt, seasoning, flavoring
extracts and natural food colorings; and dry mix food preparations.

31199 Baking Mix & Prepared Food Production in the US
These establishments primarily manufacture food, including mixing purchased dried or dehydrated
ingredients for soup mixes and bouillon.

Industry Definition

Main Activities

Similar Industries
About this Industry

The major products and services in this industry are

Frozen breakfast

Frozen vegetables and fruits

Prepared food

Other

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013

About this Industry

For additional information on this industry

www.affi.com
American Frozen Food Institute

www.nfraweb.org
National Frozen and Refrigerated Foods Association

www.usda.gov
US Department of Agriculture

Additional Resources

IBISWorld writes over 700 US
industry reports, which are updated
up to four times a year. To see all
reports, go to www.ibisworld.com

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013

ha
ng

−4

−2

2
4

1907 09 11 13 15 17Year

Demand from frozen food wholesaling

SOURCE: WWW.IBISWORLD.COM

%
c
ha
ng
e

−6

−3

0
3
6

1905 07 09 11 13 15 17Year

Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2013

)

56.0%
Prepared food

30.6%
Frozen vegetables and fruits

7.4%
Frozen breakfast

6.0%
Other

SOURCE: WWW.IBISWORLD.COM

Key Statistics
Snapshot

Industry at a Glance
Frozen Food Production in 2013

Industry Structure Life Cycle Stage Mature
Revenue Volatility Medium

Capital Intensity Medium

Industry Assistance Medium

Concentration Level Medium

Regulation Level Heavy

Technology Change Medium

Barriers to Entry Medium

Industry Globalization Medium

Competition Level Medium

Revenue

$28.4bn
Profit

$1.4bn
Exports

$2.0bn
Businesses

523

Annual Growth 13-1

0.4%
Annual Growth 08-13

2.6%

Key External Drivers
Demand from frozen
food wholesaling
Agricultural price index
External competition
for the Frozen Food
Production industry
Per capita disposable
income
Time spent on
leisure and sports
Trade-weighted index
Per capita fruit and
vegetable consumption

Market Share
Nestle SA 18.6%
The Schwan Food
Company 9.1%
ConAgra Foods
Inc. 7.4%
H.J. Heinz
Company 5.7%

p. 2

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 38

SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 5

Key External Drivers Demand from frozen food wholesaling
Wholesalers buy frozen foods from
manufacturers and resell these
products to retailers, such as
supermarkets and grocery stores, where
consumers purchase industry products.
As consumers demand more frozen
foods from retailers, retailers and
wholesalers buy more products from
industry operators, which boosts
revenue. Demand from frozen food

wholesaling is expected to decrease in
2014, representing a potential threat to
the industry.

Agricultural price index
Raw inputs such as fruits, vegetables,
grains, processed meat, oils, sugar and
other commodities make up the primary
cost components for frozen food
producers. When the cost of these inputs
rises, profit becomes tight. Producers

Executive
Summary

The Frozen Food Production industry
benefited from lower disposable income
levels during the recession as
consumers opted for affordable frozen
food products at supermarkets and
grocery stores. Industry revenue spiked
in 2009, but sales declined as the
economy and disposable income levels
recovered. With more money to spend,
consumers purchased more fresh
produce over frozen varieties and dined
out more frequently. Additionally,
growing health concerns caused many
consumers to purchase less frozen

prepared meals, which are often
perceived to be unhealthful. Operators
responded by introducing products with
healthier, more nutritious ingredients.
As a result of product innovation,
revenue is anticipated to grow an
annualized 2.6% to $28.4 billion over
the five years to 2013, including an
increase of 2.0% in 2013.

Despite revenue growth in the past five
years, industry profit suffered primarily
due to rising commodity prices.
Marketing costs also dampened profit
margins as leading producers
aggressively introduced new products to

gain market share. Further complicating
the matter, many producers were unable
to pass on the rising cost of inputs to
downstream markets due to consumers’
sensitivity to prices during the recession.
Consequently, profit fell from 6.1% of
revenue in 2008 to 5.1% in 2013. As
profit margins eroded, many producers
laid off some of their employees and
relied more on machinery and
equipment. Additionally, larger
companies like ConAgra found
acquisitions especially attractive due to
the cost savings that could be achieved
from economies of scale.

Over the next five years, operators
will continue to develop new products
that appeal to health-conscious
consumers and invest in marketing
campaigns to boost the image of frozen
foods. As more Americans return to
work and have less time to prepare
meals from scratch, they will opt for the
convenience of frozen meals. However,
consumers are expected to purchase
more fresh produce as disposable
income levels continue to rise. Rising
income will also allow consumers to
dine out at restaurants more frequently.
Finally, the growing popularity of
imported frozen food products is
anticipated to dampen demand from US
producers. Ultimately, revenue is
expected to rise an annualized 0.4% to
$28.9 billion in the five years to 2018.

Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook |

Life Cycle Stage

Product innovation will benefit firms, but
demand for fresh foods will limit growth

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 6

Industry Performance

Key External Drivers
continued

have the option to pass on rising costs in
the form of higher prices to downstream
buyers, but operators risk lowering
demand. The agricultural price index is
expected to increase throughout 2014.

External competition for the Frozen
Food Production industry
Frozen foods are typically easier to
prepare than their fresh counterparts.
However, consumers may prefer fresh
produce and fresh meat over frozen
alternatives due to their taste and the
perceived health benefits of fresh food.
Industry operators also face competition
from canned food producers and grocery
stores that sell prepared hot food.
External competition for the Frozen Food
Production industry is expected to
increase in 2014.

Per capita disposable income

While higher per capita disposable
income allows consumers to purchase a
greater volume of industry goods and
trade up to premium products, many
consumers also opt for alternative goods,
such as fresh produce and fast food.
Therefore, as income levels rise, demand
for frozen food falls as competitive
products become more popular. In 2014,
per capita disposable income is expected
to rise.

Time spent on leisure and sports
One of the primary benefits of frozen
prepared meals is that they are
convenient and save people time. As
consumers become busier and have less
time to spend on leisure activities,
demand for convenient products like
frozen meals grows. Time spent on
leisure and sports is expected to decline
in 2014, representing an opportunity for
industry operators.

Trade-weighted index
The industry derives a growing proportion
of its revenue from exports, which are
sensitive to fluctuations in exchange rates.
When the value of the dollar falls, domestic
goods become relatively less expensive in
the global market, boosting industry
exports. The trade-weighted index is
expected to increase in 2014.

Per capita fruit and vegetable
consumption
Consumers’ eating habits change as their
understanding of healthy living evolves.
Recent studies show that certain frozen
foods provide the same nutritional content
as fresh ones. Therefore, an increase in
fruit and vegetable consumption benefits
the industry. Per capita fruit and vegetable
consumption is expected to decrease slowly
in 2014.

%
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1806 08 10 12 14 16Year

Per capita disposable income
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Demand from frozen food wholesaling

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 7

Industry Performance

Current
Performance

The Frozen Food Production industry has
performed well over the past five years,
particularly during the recession, when
consumers turned to the frozen aisle of
grocery stores for cost savings. As per
capita disposable income levels eroded in
2009, Americans cut back on dining out
at restaurants and sought ways to trim
their grocery bills. Consequently, more
consumers began to eat at home, pack
lunch and purchase more affordable
products at grocery stores like generic
brands and frozen food. Therefore, the
weak economy created a beneficial
environment for frozen food producers,
as consumers who traditionally did not
purchase frozen products were more
inclined to do so.

Though the industry performed well
during the recession, demand for
industry goods declined when per capita
disposable income levels later increased.
To appeal to a range of consumers and
boost demand, producers introduced
healthier products such as organic,
all-natural and nutrient-enhanced

frozen food. These new products
partially offset declining demand for
this industry’s goods in the years
following the recession. In addition to
product innovation, new packaging
technology has improved the overall
quality of frozen meals. Consequently,
revenue is expected to increase an
annualized 2.6% to $28.4 billion over
the five years to 2013.

Healthy products
fight falling demand

Americans have become more health-
conscious in recent years, shunning trans
fats and additives found in many frozen
meals. Furthermore, sodium intake has
been linked to high blood pressure, which
is responsible for two-thirds of all strokes
and almost half of all heart attacks,
according to a study conducted by the
Harvard School of Public Health.
Consumers have increasingly become
aware of the high sodium content of
frozen prepared meals, resulting in
decreasing demand for industry
products, particularly in 2010.

Major players have responded to
consumers’ growing health concerns by
introducing healthier products and
reformulating their existing products. For
instance, Nestle decreased the sodium
content of Stouffer’s Macaroni and

Cheese in 2010, while ConAgra
introduced 15 new products in 2013 that
align with their focus on heart health.
These health-based innovations, along
with increases in price levels, have
supported revenue growth from 2011 to
2013. This shift in consumer taste is
apparent in the success or failure of
industry products. For example,
ConAgra’s Healthy Choice Cafe Steamers
is the fastest growing new product on the
market. In contrast, the H.J. Heinz
Company discontinued its TGI Friday’s
frozen meal product line in 2012 due to
struggling sales.

Additionally, while the quality of
frozen food products have been long
perceived as inadequate when compared
with fresh food, recent studies conducted
by the US Department of Agriculture and

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1905 07 09 11 13 15 17Year

Industry revenue

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WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 8

Industry Performance

Healthy products
fight falling demand
continued

the UK-based Institute of Food Research
have revealed the nutritional content of
frozen produce is often better than that of
fresh produce. Frozen fruits and
vegetables are harvested when they
become ripe and flash-frozen
immediately, a process which locks in
nutrients. However, fresh fruits and

vegetables are harvested before they
become ripe, which lowers the nutritional
value of fresh produce. Consumer
awareness of the nutritional benefits of
frozen fruits and vegetables and a greater
variety of healthy prepared meals are
anticipated to help boost revenue by
2.0% in 2013.

Profit and industry
contraction

Profit margins for frozen food producers
primarily depend on the price of inputs,
such as vegetables and meat. The
agricultural price index, which measures
the prices received by farmers for all US
agricultural products, is expected to rise
an annualized 6.9% in the five years to
2013. Consumers were particularly
sensitive to prices during the recession,
preventing companies from raising their
product prices despite rising commodity
costs. For instance, the price of
vegetables rose 7.8% while the price of
red meat spiked 18.8% in 2010. As a
result, industry profit fell from an
estimated 6.1% of revenue in 2008 to
2.4% in 2010. To cut costs and expand
profit margins, operators invested in
more machinery and equipment to
automate processes and boost production
efficiencies. Automation has consequently
reduced the need for manufacturing
workers. However, operators have
increased emphasis on product
innovation and marketing, leading to an
increase in the number of administrative
employees, whose salaries are higher

than that of production workers. As a
result, the number of employees grew an
annualized 0.3% to 90,464 over the five
years to 2013, whereas wages grew at a
faster annualized 1.3% to $3.5 billion in
the same period.

Similar to the number of employees,
the number of enterprises is anticipated
to grow at a moderate average annual
rate of 0.7% to 523 in the five years to
2013. This low growth rate is largely the
result of consolidation as large
companies have acquired smaller
companies to gain market share and
expand their product portfolios. For
example, major player ConAgra
purchased PF Chang’s frozen meals from
Unilever in August 2012 as part of an
aggressive acquisition strategy.

Increasing trade Industry exports remain relatively low,
primarily due to the large size of the
domestic market, which accounts for
about 93.1% of industry revenue.
However, exports have increased at a
faster rate than the industry as a whole,
with an anticipated annualized growth
rate of 4.0% to about $2.0 billion over

the five years to 2013. South Korea has
driven the increase of exports since 2012
due to the passage of a free trade
agreement with the United States.

During the same period, imports of
frozen foods are expected to increase at
an average annual rate of 3.6% to $3.0
billion, accounting for an estimated

Increasing input costs
could not be passed onto
consumers, lowering
profit margins

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 9

Industry Performance

The Frozen Food Production industry is
expected to grow marginally over the
next five years as rising disposable
income levels allow consumers to dine
out more and choose fresh produce
over frozen foods. Technological
developments in freezing, packaging
and sorting, combined with aggressive
marketing for new products, will be
imperative to maintaining growth.
Consumers’ growing demand for
healthful food and convenience are
expected to drive producers to innovate
and introduce new products that satisfy
the changing needs of consumers.
Manufacturers will focus on offering a
greater variety of attractive prepared
meals, including skillet and oven meal
kits, restaurant-quality pizza, handheld
entrees and ethnic dishes. As a result of
product innovation, IBISWorld
forecasts revenue to increase an
annualized 0.4% to $28.9 billion over
the five years to 2018. In 2014, revenue
is forecast to decrease 0.8% due to

heightened competition from fresh
produce and restaurants.

Upstream supply and
downstream demand conditions
will also affect the industry’s future
performance. The domestic price of
vegetables is expected to rise in the
five years to 2018, while
consumption will continue to fall.
Downstream demand from
supermarkets, grocery stores and
convenience stores is expected to
strengthen as consumer spending
recovers, with revenue from
supermarkets and grocery stores
projected to steadily increase in the
five years to 2018.

Increasing trade
continued

10.2% of domestic demand. The growth
in imports is partly attributed to an
appreciating dollar since 2012, which
made imports more affordable for
domestic consumers. The growing

popularity of ethnic cuisines has also
spurred demand for imported frozen food
products. However, growing imports
have intensified the level of competition
in the domestic market.

Food consumption
trends

The growing importance of health and
nutrition will drive consumers to make
better-informed decisions when
purchasing food at different retail
channels. Increasing health-
consciousness will benefit producers of
frozen fruits and vegetables; scientific
research will demonstrate that frozen
produce is more nutrient-dense than
fresh produce. As industry operators
use the results of this research to
promote the nutritional benefits of their
products, sales of frozen vegetables and

fruits are expected to grow. In
particular, organic frozen produce is
anticipated to grow rapidly, in line with
overall organic food sales.

At the same time, growing health-
consciousness will cause some
consumers to purchase less frozen
prepared meals in coming years.
Producers are anticipated to aggressively
introduce new products made with fresh,
nutritious ingredients that contain less
fat and sodium than conventional frozen
meals. While new products will help slow

Industry
Outlook

Downstream demand is
expected to strengthen
as consumer spending
recovers

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013

Industry Performance

Food consumption
trends
continued

the decline of this product category,
frozen prepared meals will also face
greater competition from substitute
products at grocery stores and
restaurants. As disposable income levels
rise, Americans will dine out more often
at full-service and fast-food restaurants.
In addition to dining out more often, a

growing selection of refrigerated and
hot-prepared meals at grocery stores are
also expected to increase the level of
competition that industry operators face.
Due to a competitive environment, the
number of enterprises is forecast to grow
minimally at an average annual rate of
0.1% to 526 in the five years to 2018.

International trade IBISWorld forecasts exports to grow
rapidly as the industry’s major producers
further expand their marketing and
distribution efforts abroad. Demand from
the leading markets, Japan and Canada,
is expected to increase as evolving food
trends in these countries create a
favorable market for frozen food.
Additionally, the free trade agreement
that was passed in 2012 with South Korea
will most likely increase demand for US
frozen food products in that country. As
such, exports are projected to increase an
annualized 9.1% to $3.0 billion in the five
years to 2013.

Growth in the value of imports is also
forecast to grow, albeit at a slower rate
than exports. Despite US manufacturers’
strong domestic position, imports from
Canada and Mexico are expected to

increase due to low trade barriers
established by the North American Free
Trade Agreement. Countries including
China, Chile, Peru and Costa Rica have
recently emerged as popular sources of
imports due to a growing demand for
frozen produce that are sourced from
these countries. As such, imports are
anticipated to grow 6.5% to $4.1 billion in
the five years to 2018. The growth of
imports will cause the level of
competition in this industry to increase
in the upcoming years.

Profit expansion The Frozen Food Production industry’s
profitability is expected to improve over
the next five years, with profit estimated
to account for 5.4% of revenue in 2018,
up from 5.1% in 2013. The cost of key
inputs, including vegetables and meat,
are anticipated to stabilize in the next
five-year period. Stable input costs will
allow producers to maintain the prices
they charge their downstream markets,
which will help them maintain demand.
Lower wage costs will also help producers
maintain their profit margins as the

industry relies more on automation and
less on low-skilled labor. As such, the
number of employees is anticipated to
decrease at an average annual rate of
0.4% to 88,651 over the five years to
2018. Consequently, wages will fall an
annualized 0.3% in the same period.
However, as consumers demand greater
variety from frozen food producers,
spending on research and development
for product innovation is anticipated to
grow, which will partially offset the gains
achieved from production efficiencies.

Demand from the leading
markets, Japan and
Canada, is expected to
increase

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 11

Industry Performance
IVA is expected to grow slower than
GDP during the 10 years to 2018
Frozen food is an almost ubiquitous staple of
American diets, nearly reaching market saturation
The industry faces consolidation
through mergers and acquisitions

Life Cycle Stage
SOURCE: WWW.IBISWORLD.COM

10
5
0

-5

-10

%
G

ro
w

th
in

s
ha

re
o

f
ec

on
om

% Growth in number of

establishments

-10 -5 0 5 10 15 20

Decline
Shrinking economic
importance

Quality Growth
High growth in economic
importance; weaker companies
close down; developed
technology and markets

Maturity
Company
consolidation;
level of economic
importance stable

Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
technology change

Key Features of a Mature Industry

Revenue grows at same pace as economy
Company numbers stabilize; M&A stage
Established technology & processes
Total market acceptance of product & brand
Rationalization of low margin products & brands

Margarine &
Cooking Oil
Processing

Grocery Wholesaling
Soybean Farming

Canned Fruit & Vegetable Processing
Frozen Food Wholesaling

Frozen Food Production

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 12

Industry Performance

Industry Life Cycle The Frozen Food Production industry is
in the mature stage of its life cycle. Over
the 10 years to 2018, industry value
added (IVA), which measures an
industry’s contribution to the economy, is
forecast to increase at an annualized rate
of 0.2%. In comparison, GDP is projected
to grow 2.1% per year on average over the
same period. IVA fluctuated drastically
during and after the recession, mirroring
fluctuations in the profitability of
industry operators. While this industry
has underperformed the economy over
the past five years, new product
introductions and acquisition activity
categorize the industry as mature.

Although the industry is considered
mature, companies have been developing
new products to adjust to consumer
trends. Health-conscious consumers have
become wary of frozen meals because of
their high sodium content and

questionable nutritional value. Industry
operators have responded by introducing
healthier products. Producers also geared
innovation toward improving taste and
quality to make products comparable
with restaurant and homemade meals.
Furthermore, industry operators are
expanding into new international
markets to sustain growth.

In the five years to 2013, larger firms
have acquired smaller firms to expand
their product portfolio and gain market
share, a trend that will persist through
2018. For example, in 2010 major
player Nestle acquired Kraft’s frozen
pizza business, which added brands
such as DiGiorno, Tombstone and
California Pizza Kitchen to the
company’s product portfolio. As the
industry consolidates, competition
among the leading producers of frozen
food is expected to intensify.

This industry
is Mature

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 13

Products & Markets

Supply Chain | Products & Services | Demand Determinants
Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

42441 Grocery Wholesaling in the US
Grocery wholesalers make up the largest source of immediate sales for frozen food processors.

42442 Frozen Food Wholesaling in the US
Frozen food wholesalers purchase products from industry operators to resell to downstream
markets.

44511 Supermarkets & Grocery Stores in the US
Some large supermarket chains have the purchasing power to buy directly from the
manufacturer.

44512 Convenience Stores in the US
Convenience stores are a modest source of immediate sales for frozen food processors.

62421 Community Food Services in the US
Community food services make up a relatively minor market, but this segment does purchase
some food from manufacturers.

72231 Food Service Contractors in the US
Food service contractors buy frozen food to prepare meals. They are becoming an increasingly
important market for frozen food producers.

KEY SELLING INDUSTRIES

11111 Soybean Farming in the US
Soybeans are a key ingredient for making some frozen foods (includes soybeans purchased
from farming co-operatives).

11112 Oilseed Farming in the US
Oilseed farmers (including oilseeds purchased from co-operatives) supply oilseeds to use in
preparing food.

11115 Corn Farming in the US
Corn is a key raw material required for processing some products.

11116 Rice Farming in the US
Rice is a raw material required in some frozen food meals.

11117 Wheat, Barley & Sorghum Farming in the US
Wheat is a key ingredient for making some frozen foods, which is purchased from farming
co-operatives.

11120 Vegetable Farming in the US
Vegetables are a key raw material purchased from farming cooperatives.

31121 Flour Milling in the US
Processors of flour are a crucial supplier to makers of products such as frozen pancakes and
waffles.

31122 Margarine & Cooking Oil Processing in the US
Starches, fats and oils are crucial ingredients to some frozen meals.

31131 Sugar Processing in the US
Sugar is a crucial ingredient to make some products, such as frozen waffles and pancakes.

Supply Chain

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 14

Products & Markets

Prepared Food
Frozen prepared food is estimated to
account for 56.0% of industry revenue,
making it the largest product segment of
this industry. This broad segment
includes a variety of meat and specialty
selections that can be prepared on the
stove, in the oven, or in the microwave.
One of the most popular frozen food
products is pizza, which accounts for an
estimated 15.7% of revenue. Frozen
entrees’ share of the industry has
declined in recent years, primarily driven
by single-serve meals. Growing health
consciousness has driven the decline of
this product segment as frozen prepared
foods are perceived to be unhealthy and
highly processed by many Americans.
Furthermore, many consumers have
shifted away from frozen foods in favor
of fresh alternatives. However, from
2008 to 2010, low-income consumers
purchased frozen dinners over pricier
alternatives such as dining out at
restaurants and cooking at home. That
trend has largely waned since 2011, due
to the recovery of employment and
disposable income levels. Producers have
recently introduced healthier, organic
and gluten-free options that appeal to
health-conscious consumers and help
improve consumers’ perceptions of

frozen foods. But the growth of these
products has not been enough to
offset the decline of the overall
product segment.

Frozen Vegetables and Fruits
Frozen vegetables and fruits are expected
to account for about 30.6% of this
industry’s revenue, with vegetables
accounting for the majority of sales.
Frozen produce is particularly appealing
because it has an extended shelf-life and is
easier to prepare than fresh produce.
Frozen vegetables are also cheaper than
fresh varieties, a characteristic that
enticed many price-conscious consumers
to the freezer aisle of grocery stores during
the recession. More recently, researchers
at the UK-based Institute of Food
Research have discovered that the
nutritional quality of frozen vegetables are
comparable to that of fresh vegetables.
The results of these studies and
promotional campaigns implemented by
the leading producers of frozen food have
helped boost this product segment’s share
of industry revenue.

Frozen Breakfast
Breakfast food accounts for an estimated
7.4% of industry revenue. Some of the
leading breakfast food items include

Products & Services Products and services segmentation (2013)

Total $28.4bn

56.0%
Prepared food30.6%Frozen vegetables and fruits

7.4%
Frozen breakfast
6.0%
Other
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 15

Products & Markets

Products & Services
continued

waffles, pancakes and french toast.
Producers have introduced new items in
recent years including breakfast
sandwiches, burritos and omelettes to
appeal to consumers who are too busy to
cook breakfast in the morning. Healthier
alternatives with less carbohydrates, sugar
and fat have also been introduced to satisfy
the needs of health-conscious consumers.
Furthermore, product innovations have
helped this segment maintain its share of
revenue in recent years.

Other
Other items that are produced by
frozen food manufacturers include

frozen juice concentrates and dessert
toppings like frozen whipped cream.
These products are estimated to
account for about 6.0% of industry
revenue in 2013, representing a
decline from five years ago. Frozen
juice concentrate used to be a staple in
American households, but this product
segment has declined as growing
health consciousness led many
consumers to be wary of consuming
beverages with added sugar. The sale
of frozen dessert toppings has also
declined in recent years as consumers
have scaled back on their consumption
of sugary foods.

Demand
Determinants

Consumers purchase frozen food for the
convenience that many products offer.
For instance, frozen vegetables are
usually washed, cut and ready to use,
making it easier for consumers to cook
with than fresh vegetables. Additionally,
the primary benefit of frozen meals is
that they take almost no time to prepare.
Aside from convenience, frozen foods are
usually cheaper than fresh alternatives
and provide cost savings for consumers
who are on a budget. Lower disposable
income levels during the recession made
frozen food items more appealing to
many consumers. However,
unemployment has declined thereafter
and disposable income levels have
improved, causing demand for frozen
food items, particularly the prepared food
product segment, to decline.

Over the past five years, the lifestyles
and attitudes of consumers and their
consumption patterns have evolved.
Renewed public interest in health has
caused manufacturers to adapt their
product lines to include more wholesome
ingredients. Additionally, the

introduction of more natural and organic
options has helped boost the image of
frozen food products and has appealed to
consumers who seek premium products.
The emphasis on health has stimulated
an increase in the addition of fresh fruit
and vegetables in frozen meals, along
with developments in technology that
have improved the quality, freshness and
durability of frozen food products.
Furthermore, product innovation has
helped decelerate the decline of frozen
prepared meals.

Competition from substitute
products, including fresh and canned
food, has intensified recently.
Producers within these industries have
also addressed consumers’ need for
convenience and nutrition by offering
more all-natural and organic products,
precooked and marinated meat
products and single-serving varieties of
packaged fruit and vegetables. As
demand for these substitute products
continue to increase as the economy
recovers, demand for this industry’s
goods will decline.

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 16

Products & Markets
Major Markets

Grocery wholesalers
The majority of industry sales is derived
from grocery and frozen food wholesalers
which are expected to account for about
69.1% of the market in 2013. They, in
turn, supply supermarkets, convenience
stores and other retail channels with
frozen food products in bulk. This market
is the most important link in the supply
chain because relationships with
wholesalers largely affect the products
that are eventually stocked by retailers.

Wholesalers’ share of the market is
shrinking as major retailers are
increasingly using online ordering
systems to purchase goods directly
from manufacturers. This trend will
prove particularly beneficial to
retailers due to the cost savings that
arise from bypassing the cost
incurred from wholesalers. The
ability to purchase directly from a
manufacturer also allows for more
favorable terms of trading, as
retailers may be able to negotiate
certain conditions that were not
possible with wholesalers. This
should effectively translate into lower
retail prices, and thereby, boost
demand from retail channels.

Retailers
Large supermarket chains, convenience
stores and other major retailers are
forecast to account for about 15.0% of the
market in 2013 and serve as the single
most important point of purchase for
consumers. Only supermarkets with
sufficient purchasing power can buy
directly from manufacturers. However,
with the advent of online ordering
systems, more retailers have begun to
bypass wholesalers and purchase directly
from manufacturers. Therefore, this
segment’s share of industry revenue has
grown over the past five years.

Food service establishments
Restaurants, hotels, schools, hospitals
and other catering institutions also buy a
significant portion of the output
generated by this industry. In 2013, this
segment is expected to account for 9.0%
of revenue. Although many consumers
cut back on dining out during the
recession, many food service
establishments have switched from using
fresh to frozen ingredients in recent
years. For example, more fast food
restaurants are using frozen baked goods
rather than room temperature bread and

Major market segmentation (2013)

Total $28.4bn

69.1%
Grocery wholesalers

15.0%
Retailers

9.0%
Food service

establishments

6.9%
Exports

SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 17

Products & Markets

International Trade Imports
The domestic market accounts for the
majority of demand for frozen food
products in 2013, accounting for an
estimated 89.8% of industry demand. In
the five years to 2013, imports are
expected to increase at an average annual
rate of 3.6% to $3.0 billion, comprising
about 10.2% of domestic demand.
Imports increased to meet higher
demand during the recession. Foreign
producers are also able to take advantage
of lower input costs and favorable trading
conditions. Additionally, an appreciating
dollar has made imported products more
attractive since 2012.

Canada is expected to account for
38.5% of imports in 2013, while Mexico
is anticipated to account for an
additional 25.9% of imports. Canada and
Mexico benefit from the North American
Trade Agreement (NAFTA) that is
established with the United States, which
reduces trade barriers and makes trade
easier among these countries. In
addition, the close proximity of these
countries makes trade more attractive
because transportation and distribution

costs are relatively low. The next largest
source of imports is Brazil which
accounts for about 4.6% of imports in
2013. Brazil is the largest global
producer of frozen orange juice
concentrate and a significant exporter of
processed fruits and vegetables.

Exports
Exports are anticipated to grow an
annualized 4.0% to $2.0 billion over the
five years to 2013, accounting for an

rolls to save on distribution costs.
Therefore, this segment’s share of
industry revenue has remained relatively
steady in the past five years.

Exports
Although small, the contribution of exports
in this industry has steadily increased, from
comprising 6.4% of revenue in 2008 to an
estimated 6.9% in 2013. Exports have
historically been minimal in this industry
because producers usually localize
manufacturing operations to minimize
supply and transportation costs. Canada
and Mexico are the second and fourth
largest recipients of US exports,
respectively, due to their proximity to the
United States and the North American Free

Trade Agreement, which lowers or
eliminates tariffs for industry goods.
However, Japan has been the leading
export destination for frozen food products
for over a decade, with a fast-paced lifestyle
driving the demand for this industry’s
goods. The demand for frozen food in
Japan has increased since 2010, as more
Japanese consumers have shifted from
dining out at restaurants to cooking at
home. Furthermore, American frozen
meals that are made with noodles and
bread are trending in Japan. This industry
has also benefited from the passage of a
free trade agreement with South Korea
in 2012, which has boosted exports to
this country, making it the third largest
export destination.

Major Markets
continued

$
m

ill
io

5000

−5000

−

2500

0
2500
1905 07 09 11 13 15 17Year

Exports Imports Balance

Industry trade balance

SOURCE: WWW.IBISWORLD.COM

Level & Trend
Exports in the
industry are
Medium and
Increasing

Imports in the
industry are
Medium and
Increasing

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 18

Products & Markets

International Trade
continued

estimated 6.9% of revenue. Exports grew
rapidly because of a weak dollar in 2010
and 2011, which made domestic goods
relatively less expensive and more
attractive in foreign markets. Rising
disposable income levels and increasing
acceptance of western food in developing
countries also facilitated export growth.

Japan is expected to be the main
destination for US frozen foods in 2013,
accounting for an estimated 26.0% of
total exports. Fresh produce in Japan is
relatively expensive, and the rising price
of fresh fruits and vegetables has caused
the Japanese to demand cheaper
alternatives at grocery stores.

Additionally, frozen foods have
historically been popular in Japan, and a
growing tendency to cook at home has
boosted demand in recent years. Canada
and Mexico are the second and fourth
largest export destinations, respectively.
These two countries benefit from their
close proximity to the United States and
participation in NAFTA. Finally, South
Korea is the fourth largest export
destination for this industry’s goods. The
Frozen Food Production industry
benefited from the passage of a free trade
agreement with South Korea in 2012,
which boosted exports to this country by
42.9% that year.

Imports From…

Total $3.0bn

39%
Canada

26%
Other

26%
Mexico

5%
Brazil

5%
Chile

Exports To…

Total $2.0bn

42%
Other

26%
Japan

18%
Canada

7%
South Korea

7%
Mexico

Year: 2013
SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA

SOURCE: USITC

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 19

Products & Markets

Business Locations 2013

MO
3.0

West

West
West

Rocky
Mountains Plains

Southwest

Southeast

New
England

0.2

MA
2.5

0.5

NJ
2.8

DE
0.5

NH
0.2

CT
0.9

MD
0.8

0.0

1
5
3
7
2
6
4

8 9

Additional States (as marked on map)

AZ
0.2

CA
15.9

NV
0.5

OR
4.4

WA
6.1

MT
0.2

0.3

MN
3.1

IA
1.4

OH
3.6

VA
1.1

FL
3.7

KS
0.8

CO
1.2

UT
1.2

ID
2.3

TX
5.5

OK
0.8

NC
0.9

AK
0.0

WY
0.0

TN
1.4

KY
0.9

GA
1.6

IL
5.9

ME
1.7

ND
0.9

WI
4.7 MI

4.5
PA
3.7

WV
0.2

SD
0.3

NM
0.3

AR
1.6

MS
0.3

AL
0.2

SC
0.6

LA
0.9

HI
0.3

IN
1.4

NY
4.2 5

6
7

3
21

4
9
SOURCE: WWW.IBISWORLD.COM

Mid-
Atlantic

Establishments

(%)

Less than 3%
3% to less than 10%
10% to less than 20%
20% or more

Great
Lakes

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 20

Products & Markets

Business Locations The geographic spread of frozen food
production establishments is strategically
dispersed in close proximity to sources of
key inputs, such as establishments that
are engaged in fruit and vegetable
processing. Furthermore, it is also
important for producers to remain within
serviceable distance to large city markets
and big population centers.

The West is home to the largest
number of industry establishments,
accounting for an estimated 27.1% in
2013. California has more manufacturing
facilities than any other state, with about
15.9% of all industry establishments.
Furthermore, the leading frozen food
producer, Nestle, is located in Glendale,
CA. A large and affluent consumer base,
combined with well-established
infrastructure and easy access to large
population centers make it ideal for
frozen food facilities to be located in this
region. Also, the abundance of fruit and
vegetable growers, pickers, driers and
processors in the West, particularly
California, reduces transportation and
production costs. The state’s close
proximity to key export destinations
such as Japan and South Korea also
make it a favorable location for this
industry’s establishments.

The Great Lakes region is estimated to
house 20.1% of all frozen food
manufacturing facilities. Illinois and
Wisconsin dominate the region,
accounting for 5.9% and 4.7% of total
industry establishments, respectively.
Michigan and Ohio also account for a
significant portion of regional
establishments, due to the presence of
favorable fruit and vegetable growing
conditions. The region is also

conveniently located within logistical
distance to the Plains region, which is a
major producer of key inputs, such as
flour and processed meats.

The Mid-Atlantic is estimated to
account for 12.0% of total industry
establishments. The region is home
to some of the country’s biggest and
most affluent cities, such as New
York and Philadelphia, which make
it very attractive for food producers.
The Southeast region is estimated
to account for about 13.4% of
establishments. These are mainly
located in Florida, North Carolina,
Georgia and Arkansas, as the region
has easy access to key raw materials
such as starch and sugar, while
large markets, such as Miami and
Atlanta, can also be serviced by
these producers.

0
10
20

So
ut

hw
es

W
es

G
re

at
L

ak
es

M
id

-A
tl

an
ti

N
ew

E
ng

la
nd

Pl
ai

R
oc

ky
M

ou
nt

ai
ns

So
ut

he
as

Establishments
Population

Distribution of establishments vs. population

SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 21

Key Success Factors Product differentiation
Successful firms are able to
differentiate their products and brands
to gain market share.

Ability to adapt to change
Firms must be able to anticipate and
respond to changes in consumer
preferences and input costs in a
timely manner.

Ability to pass on cost increases
Given the volatility of commodity
and energy prices, successful firms
are able to pass on unexpected cost
increases to downstream markets
to maintain profitability.

Supply contracts in place for key inputs
Firms generally have reliable contracts
with suppliers of commodities, such as

flour, corn, wheat, potatoes and sugar, to
considerably reduce supply volatility.
Guaranteed supplies at fixed prices
minimize supply costs and aid
production planning.

Economies of scale and scope
The scale and breadth of production
largely determine marginal costs and
affect the volume that a producer is able
to supply, which is a key determinant of
market share.

Effective quality control
Successful producers in this industry
implement effective quality controls to
ensure that their products are safe to
consume. Tainted frozen food products
can lead to food-borne illnesses and
significantly damage a company’s image
and trustworthiness.

Market Share
Concentration

The US Frozen Food Production
industry is moderately concentrated,
with the top four players estimated to
account for 40.8% of industry revenue
in 2013. Although the leading four firms
account for a substantial share of
revenue, only about 11.7% of firms
employ more than 500 workers.
Concentration increased slightly from
39.7% of revenue in 2008 as a result of
increased growth for some major
players, along with some merger and
acquisition activity. Industry
concentration shot up in 2010 mainly
because of Nestle’s acquisition of Kraft’s
frozen pizza business. In the five years
leading to 2018, industry concentration
is expected to increase as the leading
frozen food producers continue to grow

through advanced technology,
acquisitions and their ability to bypass
wholesalers and sell directly to retailers.

Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization

Enterprises by employment size
(2013)
No. of
employees

No. of
enterprises

Share
(%)

1 to 4 94 19.0
5 to 9 58 11.7
10 to 19 73 14.8
20 to 99 129 26.2
100 to 499 82 16.6
500+ 58 11.7
Total 494 100.0

SOURCE: US CENSUS BUREAU COUNTY BUSINESS PATTERNS

Level
Concentration in this
industry is Medium

IBISWorld identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 22

Competitive Landscape

Cost Structure
Benchmarks

Cost structures vary depending on the
size of the manufacturer, scale of
production and level of technological
investments. Over the past five years, the
Frozen Food Production industry has
consolidated, which has increased the
market share concentration of the leading
producers. Typically, the larger the firm,
the lower the unit cost of production
because they are able to achieve cost
savings from economies of scale.

Profit
Profit, or earnings before interest and
taxes, is estimated to account for 5.1% of
revenue in 2013, down from 6.1% in
2008. Profit margins have fluctuated over
the past five years, primarily due to
fluctuations in the cost of inputs. The
agricultural price index, which represents
the prices of all agricultural products,
rose an annualized 6.2% in the five years
to 2013. Skyrocketing input costs lowered
the profitability of firms from 2009 to
2011. Although consumers turned to
frozen food as an affordable alternative to
dining out during this time period, many
firms were unable to pass on cost
increases in the form of higher prices,
causing profit to fall to 2.4% of revenue in
2010. Furthermore, producers invested
more in product innovation and
marketing to combat negative
perceptions of frozen food products,
which also negatively impacted profit
margins. However, as disposable income
levels began to recover in the years
following the recession, allowing
consumers and retail customers to spend
more on this industry’s goods,
profitability has recovered. Many
producers have also achieved cost savings
by implementing various initiatives to
reduce transportation costs, decrease
downtime at manufacturing facilities and
improve efficiency at all levels of the
production and distribution processes.

Purchases
Purchases account for about 55.1% of
revenue in 2013, constituting the largest
portion of costs for the Frozen Food
Production industry. Purchases of
vegetables, meat, oil, salt and other
ingredients are necessary to produce
frozen meals. This segment’s share of
revenue grew over the past five years due
to rising commodity costs. For example,
the price of vegetables is expected to
grow an annualized 2.8% in the five years
to 2013 while the price of red meat is
anticipated to increase 6.9%. Producers
also purchase a significant amount of
plastic to create safe packaging materials
that can withstand both cold and hot
temperatures. Many industry operators
have mitigated the rising cost of plastic
by reducing the size of their products,
while an increasing number of producers
are using a combination of plastic and
paperboard to decrease the cost of inputs.

Wages
Wages account for about 12.4% of
revenue in 2013, down from 13.2% of
revenue in 2008. This decrease is
primarily a reflection of operators
trying to contain costs in the face of
eroding profit margins. Producers have
consequently begun to rely more on
machinery and equipment to automate
processes and improve operating
efficiencies, which reduces the need for
manual labor. However, major
companies have also expanded their
research and development teams as
consumers have demanded more
innovative products in recent years.
These professionals require higher
wages than employees involved in the
production and distribution of
products. Therefore, the number of
employees is expected to rise at an
average annual rate of 0.3% in the five
years to 2013.

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 23

Competitive Landscape

Cost Structure
Benchmarks
continued

Other
Other expenses account for about 18.2%
of revenue in 2013. This includes
administrative, legal, research and
development, marketing and overhead
expenses. This segment’s share of
revenue has remained stable over the
past five years. Depreciation is
anticipated to account for 3.4% of
revenue in 2013, which represents an
increase from 2008. Operators have
become more dependent on machinery
to automate processes and to improve
operating efficiencies. Furthermore, as
firms increasingly rely on equipment

and machines, depreciation as a share
of revenue will increase in the
upcoming years.

Marketing accounts for about 3.0% of
revenue in 2013. Well-known industry
players such as Nestle, Schwan and
ConAgra devote a larger share of revenue
to marketing to drive brand recognition.
Over the past five years, spending on
marketing campaigns has increased and
focus more on the healthfulness of frozen
food products. Marketing expenses
include expensive media advertisements,
point-of-purchase displays and related
promotional costs.

Sector vs. Industry Costs

■ Profi t
■ Wages
■ Purchases
■ Depreciation
■ Marketing
■ Rent & Utilities
■ Other

Average Costs of
all Industries in
sector (2013)

Industry Costs
(2013)

0
20

Pe
rc

en
ta

ge
o

f
re

ve
nu

100

6.9

16.4
3.0 1.4

2.6

59.3

10.5
5.1

18.2

2.8 3.0
3.4

55.1

12.4

SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 24

Competitive Landscape

Basis of Competition The US Frozen Food Production industry
is characterized by a medium level of
competition, primarily due to the
prevalence of small- to medium-sized
producers that serve a diverse
marketplace. Competition in this
industry is principally based on product
price, quality and differentiation. A
producer’s relationship with both
upstream and downstream markets is
also important because these
relationships can determine the cost of
inputs or the price that producers charge
their downstream customers.

Internal competition
Price is one of the most important
determinants of competition. The price
sensitivity of consumers varies among
product segments. Although the market
has many well-established brand names,
consumers become more sensitive to
price levels during economic downturns.
Furthermore, the growing popularity of
inexpensive private label brands
intensified price-based competition
during the recession.

The perceived quality of a particular
product or brand largely determines
the price consumers are willing to pay.
The quality of frozen foods is especially
important because factors such as
freshness and taste impact demand.
Developments in packaging technology
and the use of fresher ingredients
vastly improved the quality of frozen
foods in recent years. However, tainted
products that cause food-borne
illnesses can permanently damage the
image of a brand and even the industry
as a whole. Therefore, it has become
even more important for frozen food
producers to elevate the perceived
quality of their products.

The ability to be innovative and
differentiate a product and brand also
forms a key basis of competition.
Considering the limited opportunities for
growth within the industry, it is

imperative for manufacturers to
distinguish themselves in order to
maintain market share and stimulate
demand. Changing consumer tastes and
dietary trends have instigated the
innovation of products, packaging and
marketing. For instance, the recent
success of single-serve frozen meals is
reflective of the importance of responding
to lifestyle changes.

Developing and maintaining strong
relationships with upstream and
downstream suppliers is also critical to
remain competitive in this industry.
Guaranteed access to high-quality inputs
and ingredients at a reasonable price
allow producers to maintain the price
they charge their downstream markets.
Also, the ability to secure optimal shelf
space in retail channels has
conventionally set market leaders apart
from their competitors. The most
recognizable and strategically placed
brands have the highest potential to
maximize sales at the retail level.
Furthermore, manufacturers have
expanded their distribution networks to
include convenience stores and
drugstores as competition in this industry
has intensified.

External competition
The Frozen Food Production industry
faces external competition from
producers of fresh food and restaurants.
Consumers often substitute frozen food
for fresh groceries. When the price for
fresh produce, meat and grains increases
at retail stores, consumers turn to frozen
ingredients and frozen prepared meals as
more affordable alternatives. Although
fresh produce has historically been
perceived to be more nutritious than
frozen produce, a recent study conducted
by the UK-based Institute of Food
Research has revealed that the
nutritional content of frozen vegetables is
higher than that of fresh vegetables.
While these claims are expected to

Level & Trend
Competition in
this industry is
Medium and the
trend is Steady

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 25

Competitive Landscape

Basis of Competition
continued

decrease the level of external competition
that producers face, many consumers still
believe that fresh ingredients are better
than frozen varieties.

In addition to fresh groceries, frozen
food producers face stiff competition
from fast food restaurants and retail
channels that offer prepared food. Frozen
meals offer consumers convenience and
good taste at a low cost. However, fast
food and prepared meals also offer these

qualities and can be more convenient
than frozen meals. To combat the
growing competition from different retail
channels and restaurants, frozen food
producers have diversified their prepared
meal offerings to include healthier
options such as gluten-free and organic
food. IBISWorld expects external
competition to increase in the next five
years as disposable income levels rise,
allowing consumers to dine out more.

Barriers to Entry The barriers to entry in the Frozen
Food Production industry are
moderate, although the level of initial
capital investment required is
significant. Capital investments include
expenses relating to the construction or
purchase of a processing facility, plant
equipment, warehousing and
distribution. Prospective entrants must
be able to secure enough capital to
make these initial investments in
addition to overhead expenses. Also,
the industry exhibits a moderate level
of market share concentration, with the
top four companies accounting for a
little over 40.0% of industry revenue.
IBISWorld anticipates the level of
concentration to increase as firms
consolidate, which will increase the
barriers to entry in the future.

One of the biggest threats facing
potential new entrants is the extremely
well-entrenched position of the
industry’s major players. These
companies enjoy a high degree of
brand and customer loyalty and have
considerable resources to invest in
advertising and promotions to grow
their market share. Furthermore, the
major players enjoy favorable
contracts with key downstream buyers,
such as grocery stores and

supermarkets, which may be difficult
for new entrants to secure. Although
this is not a barrier to entry, it may
impede new entrants from obtaining
contracts with major retailers.

All the industry’s major producers
have extensive product portfolios
with well-known brands. Large
advertising budgets allow these
companies to aggressively promote
their products through a range of
media outlets that are inaccessible to
new entrants. Nevertheless, some
new entrants have established
themselves within the low priced,
non-branded segment of the industry.
Other smaller players have managed
to carve out regional market niches,
thereby reducing direct competition
from the major companies.

Barriers to Entry checklist Level
Competition Medium
Concentration Medium
Life Cycle Stage Mature
Capital Intensity Medium
Technology Change Medium
Regulation & Policy Heavy
Industry Assistance Medium

SOURCE: WWW.IBISWORLD.COM

Level & Trend
Barriers to Entry
in this industry
are Medium and
Increasing

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 26

Competitive Landscape

Industry
Globalization

The Frozen Food Production industry
exhibits a medium level of
globalization. The level of
globalization within an industry is
determined using a number of factors,
including the level of foreign
ownership and trade that the industry
engages in. Out of the leading
producers in this industry, only Nestle
SA is a foreign-owned company, but
all of the remaining producers operate
across the globe. For example, the
H.J. Heinz Company operates
manufacturing facilities on six
continents and markets its products in
more than 200 countries.

The industry is also globalized through
its involvement in international trade.
Imports’ share of domestic demand and
exports’ share of revenue are moderate
and have steadily increased in the past
five years. Exports are expected to grow
an annualized 4.0% to $2.0 billion over
the five years to 2013 and account for
about 6.9% of revenue. Imports also
performed strongly in the same period,
increasing 3.6% per year on average to
$3.0 billion. Canada and Mexico are the
largest sources of imports, largely due to
their participation in the North American
Free Trade Agreement, which reduces
trade barriers in this region.

Level & Trend
Globalization in
this industry is
Medium and the
trend is Increasing

SOURCE: WWW.IBISWORLD.COM

Trade Globalization Going Global: Frozen Food Production 2000-
2013

Ex
po

rt
s/

Re
ve

nu
e

Ex
po
rt
s/
Re
ve
nu
e

200

100
50
0
200

150

100
50
0

Imports/Domestic Demand Imports/Domestic Demand
0 040 4080 80120 120160 160

International trade is a
major determinant of
an industry’s level of
globalization.

Exports offer growth
opportunities for fi rms.
However there are legal,
economic and political risks
associated with dealing in
foreign countries.

Import competition can
bring a greater risk for
companies as foreign
producers satisfy domestic
demand that local fi rms
would otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocalFrozen Food Production 2000
2013

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 27

Player Performance Founded in 1905, Swiss multinational
company Nestle SA is the world’s largest
food and beverage producer. The
company employs more than 330,000
workers worldwide who manufacture a
range of chocolate, confectionery,
beverage, dairy and pet food products
sold in more than 80 countries. The
company earned revenue of $98.3 billion
in 2012. Nestle participates in the Frozen
Food Production industry through its
prepared dishes and cooking aids
segment, which is estimated to constitute
about 14.5% of the company’s total
revenue. Despite the company’s
expansive presence around the globe, the
United States accounts for 25.7% of its
total revenue. Nestle USA is
headquartered in Glendale, CA.

Over the past five years, the company
has expanded its market share in this
industry, mainly through acquisitions.
For example, in January 2010, Nestle
scored a major acquisition in the Frozen
Food Production industry by taking over
Kraft’s North American frozen pizza
business for $3.7 billion. The acquisition
added popular frozen pizza brands,
Tombstone and California Pizza Kitchen,
to its portfolio. With this purchase,
Nestle drastically improved its market
share in the industry.

The company has also altered the
ingredients of its products to address
consumer health concerns, namely by
reducing the sodium content in many of
its popular prepared frozen foods. For
example, in 2010, sodium levels for
Stouffer’s Macaroni and Cheese

decreased from 920 milligrams per
serving to 820 milligrams per serving. In
addition, Nestle removed trans fats from
the majority of its snack and frozen
foods, including its Stouffer’s and Lean
Cuisine product lines.

Financial performance
Nestle’s frozen foods segment performed
well during the recession because these
products served as inexpensive meals for
families on a tight budget. Sales of frozen
pizzas, such as DiGiorno, Stouffer’s and
Lean Cuisine, grew. Furthermore,
family-pack and value-pack products
performed especially well in 2010.
However, as the economy began to
recover, competition from quick-serve
restaurants and grocery stores’ fresh food
sections have weighed down on Nestle.
The company’s nutritional frozen food
segment, which includes Lean Cuisine,
Jenny Craig and other popular brands,
has declined over the past two years.
Nestle is pushing back with new
additions under the Lean Cuisine brand,
including Honestly Good, which are
entrees containing whole grains and no
preservatives. Also, the company has
agreed to partner with competitors,
ConAgra and H.J. Heinz, to launch a
$50.0-million advertising campaign to
refresh the image of frozen food in 2013.

Revenue for Nestle’s US-prepared
dishes and cooking aids segment
rebounded from its 2008 low, rising an
annualized 2.5% to an estimated $5.3
billion over the five years to 2013. In
2011, the company began reporting

Major Companies
Nestle SA | The Schwan Food Company
ConAgra Foods Inc. | H.J. Heinz Company | Other Companies

59.2%
Other

Nestle SA 18.6%

The Schwan Food Company 9.1%

ConAgra Foods Inc. 7.4%

H.J. Heinz Company 5.7%

SOURCE: WWW.IBISWORLD.COM

Major players
(Market share)

Nestle SA
Market share: 18.6%
Industry Brand Names
Nestle USA
Stouffer’s
Lean Cuisine
Hot Pockets
Lean Pockets
DiGiorno
Tombstone
California Pizza Kitchen
Jack’s Pizza

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 28

Major Companies

Player Performance Founded in 1952, Schwan Food
Company is one of America’s largest
frozen food producers. The private
company employs more than 18,000
people and delivers frozen food to 2.5
million consumers in the 48
contiguous US states. With brands
such as Red Baron, Freschetta and
Tony’s, Schwan is well known for its

frozen pizzas, which make up about
30.0% of its revenue. Schwan
produces about 350 frozen foods in
total, from entrees to vegetables,
which are sold in supermarkets and
grocery stores. Schwan is also one of
the largest frozen food suppliers for
public schools and sells its products to
hospitals and restaurants. Schwan’s

Player Performance
continued

revenue earnings as net sales,
removing trade figures. The company
shows a large revenue decline in 2011
because of this change, although
demand did not change significantly.

In addition, Nestle’s revenue is
reported in Swiss francs, which
experienced significant volatility in
recent years, causing US industry-
specific revenue to fluctuate.

Nestle SA (US industry-relevant segment) – fi nancial performance

Year
Revenue

($ million) (% change)

Operating Income

($ million) (% change)

2008 4,659.0 -13.6 653.9 1.7

2009 4,850.7 4.1 643.4 -1.6

2010 6,471.6 33.4 710.8 10.5

2011* 5,117.6 -20.9 643.5 -9.5

2012** 5,158.3 0.8 635.7 -1.2

2013** 5,261.5 2.0 648.4 2.0

*Company changed their accounting standards for reporting revenue; **Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD

The Schwan Food Company (industry-relevant segments) – fi nancial
performance*

Year
Revenue

($ million) (% change)
Employees

(People) (% change)

2008 2,530.0 -3.4 20,000 -4.8

2009 2,380.0 -5.9 19,500 -2.5

2010 2,450.0 2.9 19,000 -2.6

2011 2,520.0 2.9 18,000 -5.3

2012 2,530.0 0.4 18,500 2.8

2013 2,580.6 2.0 18,870 2.0

*Estimates
SOURCE: IBISWORLD

The Schwan Food
Company
Market share: 9.1%
Industry Brand Names
Red Baron
Tony’s
Freschetta
Asian Sensations
Wolfgang Puck

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 29

Major Companies

Player Performance ConAgra Foods was founded in 1919 in
Omaha, NE. One of North America’s
leading packaged food companies,
ConAgra serves grocery retailers,
restaurants and other food service
establishments. The company employs
more than 36,000 people in four
reporting segments including consumer
foods, commercial foods, Ralcorp food
group and Ralcorp frozen bakery
products. The consumer foods segment is
the company’s industry-relevant
segment, with popular brands including
Healthy Choice, Marie Callender’s and
Banquet. During fiscal 2013 (year-end
May), the company earned $15.5 billion
in total revenue.

The company achieved substantial
growth in recent years through
acquisitions and aggressive brand and
product development. For example, in
2011, ConAgra acquired American Pie
LLC, a manufacturer of frozen fruit pies,
frozen cobblers and frozen pie crusts
under the Marie Callender’s and Claim
Jumper brands. These acquisitions

expanded the company’s product offering
and brand collection, which benefited
revenue growth. The company also
purchased Unilever’s North American
frozen meal business for $265.0 million
in 2012, adding PF Chang’s and Bertolli
frozen meals to its portfolio. The
company also purchased Odom’s
Tennessee Pride, which features sausages
and a line of frozen breakfast meals.

In addition to acquisitions, ConAgra is
expanding its business through product
innovations. New products, such as
Marie Callender’s Fresh Flavor Steamer
Entrees were introduced in 2010 to cater
to consumers’ renewed interest in
healthful eating. New product
introductions have helped boost the
company’s revenue growth. ConAgra has
also invested in technological
advancements that have improved the
quality of their products. For instance,
the company recently enhanced Marie
Callender’s multi-serve meals with
MicroRite technology, which the
company claims to offer the taste and

Player Performance
continued

manufacturing facility in Salina, KS is
the world’s largest frozen pizza
manufacturing plant.

Financial performance
Due to lower demand for its products
during the recession, Schwan Foods had
to lay off employees several times over
the five years to 2013. In 2011, the
company laid off 60 workers at its
Marshall, MN headquarters and shut
down its operations in Louisiana. Sources
within the company cited the state’s long
distance from its headquarters as a main
factor. Straggling sales in this particular
state did not satisfy the high cost of
distributing products. However, demand
from restaurants increased in 2012 as the
economy improved and more Americans
visited restaurants, a trend that is

expected to continue in 2013.
Over the past five years, increasing

fuel, energy and raw material costs have
posed a challenge for the company. To
boost revenue, the company focused on
expanding its business through product
innovation. For example, the company
introduced more than 200 new products
in 2011, including Bon Appetit entrees,
Freschetta Simply Inspired Pizza and
Schwan’s Fully Cooked Ribs with BBQ
Sauce. New products introduced in the
past five years are estimated to account
for about 18.0% of sales. As a privately
owned company, Schwan does not
release public financial records;
however, IBISWorld estimates
that revenue has increased an
annualized 0.4% in the five years to
2013, to $2.6 billion.

ConAgra Foods Inc.
Market share: 7.4%
Industry Brand Names
Healthy Choice
Alexia
Marie Callender’s
Kid Cuisine
Banquet
Claim Jumper

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 30

Major Companies

Player Performance The H.J. Heinz Company was founded in
1869 in Sharpsburg, PA. The global food
manufacturer is best known for its
ketchup, but other principal products
include condiments, sauces, frozen foods,
beans, processed foods and pasta meals.
Heinz services customers in more than
200 countries on six continents. Heinz’s
North American operations are split into
two segments, the North American
consumer products segment and the US
foodservice segment, both of which
produce frozen food products. Company-
wide revenue for fiscal 2013 (year-end
April) reached $11.5 billion.

The North American consumer
products segment produces frozen
snacks, condiments, vegetables and
meals under brand names like Smart
Ones and Ore-Ida. Ore-Ida products
make up more than 50.0% of the market
share for frozen potatoes. The US
foodservice segment produces branded
and customized products to various
commercial and noncommercial food
distributors and retailers. IBISWorld
estimates that frozen food products
account for 15.0% of company revenue.
In one of the largest food acquisitions in
history, investment firms Berkshire

Player Performance
continued

quality of oven-baked food but with the
convenience of microwave cooking.

Financial performance
Revenue grew over the past five years
thanks to high consumer demand in
convenience and affordability of frozen
foods during the recession and ConAgra’s
aggressive acquisition strategies.
However, revenue declined in 2010 as
lower vegetable oil costs were passed
onto consumers in the form of lower
prices. Additionally, declining sales of
Banquet products also hurt the

company’s revenue in 2010. On the other
hand, sales of the company’s stronger
brands, such as Healthy Choice and
Marie Callender’s, grew largely due to
brand loyalty and innovation.
Furthermore, new products that appeal
to health-conscious consumers have
contributed to revenue growth. For
example, Healthy Choice’s Cafe Steamers
is the fastest growing new product in
frozen foods. As a result, industry-
specific revenue is expected to increase
an annualized 3.8% to $2.1 billion in the
five years to 2013.

ConAgra Foods Inc. (industry-relevant segment) – fi nancial
performance**

Year*
Revenue

($ million) (% change)
Operating Income

($ million) (% change)

2008 1,730.0 n/a 190.9 n/a

2009 1,877.0 8.5 219.9 15.2

2010 1,826.2 -2.7 255.3 16.1

2011 1,840.5 0.8 263.1 3.1

2012 1,926.7 4.7 259.1 -1.5

2013 2,086.1 8.3 242.3 -6.5

*Year-end May, **Estimates
SOURCE: ANNUAL REPORT

H.J. Heinz Company
Market share: 5.7%
Industry Brand Names
Weight Watchers
SmartOnes
Hot Bites
Bagel Bites
Boston Market
HomeStyle Meals
Ore-Ida

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 31

Major Companies

Other Companies Kellogg Company
Estimated market share: 3.9%
The Kellogg Company, founded in 1906
and incorporated in Delaware in 1922, is
the world’s largest producer of breakfast
cereals and one of the largest producers
of convenience food products. Kellogg
services consumers in more than 180
countries, with manufacturing facilities
located in 17 countries across four
continents. Within the Frozen Food
Production industry, Kellogg competes
through several brands and products:
MorningStar Farms (which includes
frozen pizzas, patties, pies and burgers),

Natural Touch, Kellogg’s Eggo waffles,
Worthington and Loma Linda. Revenue
for frozen products grew particularly well
during the recession because many
people with low disposable income
favored frozen foods over more expensive
alternatives. Consequently, revenue grew
over the past five years to an estimated
$1.1 billion in 2013.

McCain Foods Limited
Estimated market share: 3.0%
Established in 1957 in New Brunswick,
Canada, McCain Foods is the world’s
largest producer of French fries and

Player Performance
continued

Hathaway Inc. and 3G Capital finalized
their purchase of Heinz in 2013.
Subsequently, the investment firms made
the company private.

Financial performance
Over the past five years, the North
American Consumer Product segment
grew primarily as a result of new product
introductions and increased sales of its
core products, such as Smart Ones frozen
entrees, Ore-Ida frozen potatoes and TGI
Fridays frozen meals. However, in 2012,
Heinz streamlined its frozen product line

and discontinued its TGI Friday’s and
Boston Market premium frozen meals.
Industry-relevant revenue grew in the
five years to 2013 at an average annual
rate of 1.3% to $1.6 billion. Heinz
attributes its revenue decline in 2012 to
lower sales volumes due to competitor
promotional activity coupled with higher
product prices in response to
heightening input costs. Revenue in 2013
is expected to fall 1.8% due to the
discontinuation of TGI Friday’s frozen
entrees and lowered sales of TGI Friday’s
appetizer frozen products.

HJ Heinz Company (US industry-relevant segments) – fi nancial
performance**

Year*
Revenue
($ million) (% change)
Operating Income
($ million) (% change)

2008 1,505.8 1.6 339.2 0.7

2009 1,568.0 4.1 362.4 6.8

2010 1,596.3 1.8 385.7 6.4

2011 1,632.9 2.3 416.4 8.0

2012 1,620.8 -0.7 406.0 -2.5

2013 1,603.0 -1.1 397.3 -2.1

*Year-end April, **Estimates
SOURCE: ANNUAL REPORT

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 32

Major Companies

Other Companies
continued

other oven-ready frozen food products.
The company employs more than
20,000 workers and operates 57
production facilities across 12
countries. While the company primarily
produces frozen potato products, it also
produces frozen green vegetables,
desserts, pizzas, juices, beverages, oven
meals and entrees. Limited financial
information is available due to the
private nature of the company.
IBISWorld estimates McCain will
generate about $850.0 million
industry-specific revenue in 2013.

JR Simplot Company
Estimated market share: 1.9%
The JR Simplot Company, founded in
1923 in Boise, ID, is now one of

America’s largest privately held
agribusiness corporations. The
company employs more than 10,200
people worldwide and has
manufacturing operations in Australia,
Canada, China, Europe, Korea, Mexico
and Guatemala. Since the 1960s, the
company has been the principal
provider of French fries to fast food
giants including McDonald’s, Burger
King, KFC and Wendy’s. Simplot also
sells its potato products to private-
label brands. In addition to frozen
potatoes, the company produces and
sells a range of frozen fruit and
vegetables under the RoastWorks and
Simplot Classic labels. IBISWorld
estimates the company will generate
about $550.0 million in 2013.

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 33

Capital Intensity The Frozen Food Production industry
exhibits a moderate level of capital
intensity. Using wages as a proxy for labor
and depreciation as a proxy for capital,
IBISWorld estimates that for every dollar
spent on labor in the industry, $0.27 will be
spent on capital in 2013. This figure
represents an increase from $0.20 in 2008.
Capital expenditure in this industry is used
for machinery that is used to automate the
cooking, processing, packaging and
freezing procedures used in production.
Also, the cost to purchase and maintain
freezers, preservative and packaging
equipment is fairly high, representing a
large portion of the industry’s depreciation
costs. Furthermore, depreciation is
anticipated to account for 3.4% of industry
revenue in 2013.

However, employees are still
required to operate machinery and
complete other roles that must be

Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success

SOURCE: WWW.IBISWORLD.COM

La
bo

r
In

te
ns

iv
e

Capital Intensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services,
Health and Education. Firms
benefi t from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.

Traditional Service Economy

Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore fi rms
must use new technology
or improve staff training to
increase revenue growth.

Old Economy

Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand fi rms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.

Investment Economy

Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
fi rms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.

Margarine & Cooking Oil Processing

Grocery
Wholesaling

Canned Fruit
& Vegetable
Processing

Frozen Food
Wholesaling

Ice Cream Production
Frozen Food Production

Capital intensity

0.5
0.0

0.1

0.2
0.3

0.4

SOURCE: WWW.IBISWORLD.COM
Dotted line shows a high level of capital intensity

Capital units per labor unit

Frozen Food
Production

ManufacturingEconomy

Level
The level of capital
intensity is Medium

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 34

Operating Conditions

Technology
& Systems

Operators in the Frozen Food Production
industry use a variety of technologies to
manufacture frozen food products. Fruit,
vegetable and meat products can be
processed in many different ways,
depending on the type of raw material
used and the end product desired. The
techniques most frequently used in this
industry are blanching and flash freezing.
Blanching halts the aging of fruits and
vegetables, while flash freezing rapidly
freezes food products. The aim for both
of these processes is to lengthen the shelf
life of the product. There are often
secondary objectives as well, such as
making the product more convenient;
improving the packaging, presentation
and taste of a product; and producing an
entirely new product.

The three types of freezing equipment
that are used by industry operators
include tunnel freezers, spiral freezers
and carton freezers. These freezers use
homogeneous cold air flow to process the
food in a minimal amount of time to
preserve the color, taste and shape of
food. Producers also use advanced
packaging equipment and materials that
preserve the quality of food and prevent
contamination. Technology for quick

freezing equipment has not changed
significantly over the past five years, but
developments have been made to
increase the efficiency of freezing, while
using less electricity. Furthermore,
technological developments also focus on
product quality control. The American
Frozen Food Institute (AFFI) held their
18th Annual Distribution and Logistics
Conference to discuss and develop
technologies for a more efficient supply
chain and to protect products from
Listeria monocytogenes, which is a
bacteria that causes food borne illnesses.

Food freezing can either be done
mechanically or cryogenically.
Mechanical food freezing has been the
standard method used by producers in
this industry for decades. More recently,
the invention of cryogenic freezing has
become popular due to the lower setup
costs involved when compared with
mechanical freezing. Additionally,
cryogenic freezing equipment requires
less maintenance and cleaning than
mechanical freezing equipment.
Cryogenic freezing has also improved the
quality of frozen foods because the rapid
process reduces dehydration loss, which
preserves the texture and flavor of food.

Capital Intensity
continued

performed manually. Consequently,
wages are expected to account for
12.4% of revenue, which represents a
decline from 13.2% in 2008. Wages as a
share of revenue has declined as

employers have become more efficient
by cutting down on the number of
employees per facility. As a result,
capital intensity has slightly risen over
the five years to 2013.

Level
The level of
Technology Change
is Medium

Revenue Volatility The Frozen Food Production industry
exhibits a medium level of revenue
volatility. Revenue volatility for this
industry is mainly a function of the
fluctuations in the cost of raw materials,
energy and oil prices, disposable income
levels and changes in downstream
demand. Commodities like flour, fruit,

vegetables and processed meats
represent primary inputs for producers.
Therefore, a significant rise in the price
of these major inputs can lower the
profitability of industry operators.
Rising input costs can also cause some
producers to raise the price they charge
their downstream markets, which would

Level
The level of
Volatility is Medium

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 35

Operating Conditions

Revenue Volatility
continued

consequently lower the demand for
their products. Additionally, while a rise
in disposable income levels usually
cause consumers to purchase a greater
volume of goods, demand for this
industry’s goods declines as consumers
opt for fresh produce or choose to dine
out at restaurants.

Consumer tastes, which can often
change quickly, also increase revenue
volatility. The growth of organic, all-
natural and nutritious food has prompted
industry producers to offer a greater

variety of products. The industry’s timely
response to changing consumer tastes
boosted revenue growth for some
producers. Research and studies
conducted by medical professionals can
also cause demand for frozen food
products to fluctuate. For instance,
scientists around the world have recently
discovered how frozen vegetables are
equally or even more nutritious than
fresh vegetables. Such scientific
discoveries can cause demand to spike or
remain stable.

Regulation & Policy The Frozen Food Production
industry faces a great deal of public
policy aimed at protecting
consumers’ health and well-being.
Various federal, state and local
governments have passed more laws
and regulations pertaining to the
ingredients and methods used by
manufacturers of food products. The
government’s involvement in the
food sector has risen in recent years
due to the growing prevalence of
health complications among
Americans, including obesity,
diabetes and heart disease.

Food and Drug Administration
The Food and Drug Administration’s
(FDA) mission is to promote and protect
the public health by ensuring that safe
and effective products reach the market
in a timely manner. The FDA governs the
food processing industry via the Federal
Food, Drug, and Cosmetic Act (FD&C)
and the Fair Packaging and Labeling Act.
The Nutrition Labeling and Education
Act, which amended the FD&C, requires
most foods to bear nutrition labeling and
requires labels to be accurate and
truthful. The FDA also instituted the
Food Ingredient Safety Program that

Level & Trend
The level of
Regulation is
Heavy and the
trend is Steady

SOURCE: WWW.IBISWORLD.COM

Volatility vs Growth

Re
ve

nu
e

vo
la

ti
lit

y*
(%

)

1000

100
10
1
0.1

Five year annualized revenue growth (%)
–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale

Frozen Food Production

A higher level of revenue
volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.

When a fi rm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 36

Operating Conditions

Industry Assistance The Frozen Food Production industry
receives a moderate level of assistance
from import tariffs. Tariffs imposed on
processed frozen food products varies
depending on the inputs used for the
final product. For example, fruit juices
and vegetable juices such as frozen
orange juice incur an import tariff of
7.85 cents per liter, whereas imports of
frozen string beans incur a tariff of 4.90
cents per kilogram.

The industry also receives indirect
assistance from associations, such as the
American Frozen Food Institute (AFFI).
The AFFI is the national trade association
representing the frozen food industry
supply chain, including manufacturers,
distributors, suppliers and packagers.
The AFFI offers various assistance
programs to frozen food producers such
as research and development, technical
assistance, and public and trade
relations. The AFFI also advocates for
trade agreements that allow the United
States to export more products. For

example, the association was a critical
voice in passing the free trade agreement
with South Korea, which went into effect
in March 2012. The association also
provides workshops for industry
operators to help improve the quality of
their products or educate them about
new food handling techniques.

The National Frozen and
Refrigerated Foods Association
(NFRA) works closely with the
AFFI. The NFRA represents the
interests across every segment of
the Frozen and Refrigerated Foods
industry including manufacturers,

Regulation & Policy
continued

governs and evaluates ingredient and
nutrition claims made by manufacturers.

The United States and its consumers are
demanding more stringent rules relating to
food labeling, advertising, packaging and
other nutritional claims. Failure to abide by
these laws can seriously impair a
producer’s credibility, result in expensive
product recalls, and make producers liable
to civil or criminal penalties. Pending
enforcement of new FDA regulations has
created new opportunities for food
manufacturers to differentiate themselves
from competitors. Producers that respond
proactively to regulations can boost their
company image and earn credibility and
trust among consumers.

Environmental Protection Agency
The Environmental Protection Agency
(EPA) and state governments enforce

environmental laws pertaining to
producers of frozen food. Various
federal environmental regulations and
statutes, such as the Clean Water Act
(CWA), Clean Air Act and Pollution
Prevention Act (PPA) changed the way
processing facilities handle their
products and dispose waste to reduce
pollution. The CWA’s increasingly
rigorous regulations for discharging
wastewater are the primary regulatory
drivers for the food processing
industry. Unless located in remote
areas, most food processing facilities
pretreat and discharge wastewater
directly to a publicly owned treatment
plant. When a facility discharges waste
to the environment, they are required
to have a National Pollutant Discharge
Elimination System permit as
mandated by the CWA.

Level & Trend
The level of Industry
Assistance is
Medium and the
trend is Steady

Key Tariffs
Goods Low Rate High Rate

Meat products (cents/kg) 0.7 17.6
Vegetables (percent/kg) 3.2 11.2
Juice (cents/kg) 1 7.9

SOURCE: USITC

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 37

Operating Conditions

distributors, retailers, wholesalers,
suppliers and sales agents. The
association provides assistance

with marketing, promotion,
research and development and new
product innovation.

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 38

Key Statistics
Revenue

($m)

Industry
Value Added

($m)
Establish-

ments Enterprises Employment
Exports

($m)
Imports

($m)
Wages
($m)

Domestic
Demand

Agricultural
Price Index

2004 22,042.0 4,789.8 697 532 88,022 979.8 1,708.5 3,290.9 22,770.7 118.6
2005 23,710.9 5,199.0 681 526 89,873 1,010.6 1,885.1 3,420.6 24,585.4 114.4
2006 24,321.4 5,190.7 670 528 90,231 1,184.0 2,026.8 3,561.1 25,164.2 115.0
2007 25,041.2 5,510.8 655 513 86,553 1,378.3 2,506.7 3,332.2 26,169.6 136.0
2008 25,000.0 5,502.0 644 505 89,181 1,602.9 2,511.8 3,302.0 25,908.9 149.2
2009 26,428.2 5,322.0 642 502 85,607 1,427.4 2,202.0 3,287.0 27,202.8 130.8
2010 26,421.9 4,759.3 664 521 89,075 1,574.6 2,324.3 3,464.7 27,171.6 141.1
2011 26,967.2 5,408.7 665 522 89,183 1,866.2 2,726.4 3,467.1 27,827.4 178.2
2012 27,804.1 6,320.0 671 527 90,186 1,917.0 2,759.1 3,511.8 28,646.2 191.2
2013 28,361.2 5,934.3 667 523 90,464 1,950.4 2,998.6 3,523.6 29,409.4 201.3
2014 28,134.3 5,832.9 666 523 89,907 2,102.3 3,221.9 3,497.8 29,253.9 211.7
2015 28,893.9 6,138.5 670 525 89,098 2,332.8 3,493.6 3,480.3 30,054.7 207.4
2016 29,153.9 5,946.6 675 529 89,454 2,529.8 3,693.8 3,497.7 30,317.9 220.8
2017 28,833.3 5,873.4 671 527 89,186 2,842.3 3,986.9 3,480.2 29,977.9 219.4
2018 28,948.6 6,020.7 669 526 88,651 3,021.4 4,111.1 3,473.3 30,038.3 231.9
Sector Rank 58/411 64/411 119/411 121/411 35/411 101/381 114/381 57/411 65/381 N/A
Economy Rank 308/1312 388/1312 851/1311 836/1311 367/1312 120/440 125/441 391/1312 76/440 N/A

IVA/

Revenue
(%)

Imports/
Demand

(%)

Exports/
Revenue

(%)

Revenue per
Employee

($’000)
Wages/Revenue

(%)
Employees

per Est.
Average Wage

($)

Share of the
Economy

(%)
2004 21.73 7.50 4.45 250.41 14.93 126.29 37,387.24 0.04
2005 21.93 7.67 4.26 263.83 14.43 131.97 38,060.37 0.04
2006 21.34 8.05 4.87 269.55 14.64 134.67 39,466.48 0.04
2007 22.01 9.58 5.50 289.32 13.31 132.14 38,498.95 0.04
2008 22.01 9.69 6.41 280.33 13.21 138.48 37,025.82 0.04
2009 20.14 8.09 5.40 308.72 12.44 133.34 38,396.39 0.04
2010 18.01 8.55 5.96 296.63 13.11 134.15 38,896.44 0.04
2011 20.06 9.80 6.92 302.38 12.86 134.11 38,876.24 0.04
2012 22.73 9.63 6.89 308.30 12.63 134.41 38,939.52 0.05
2013 20.92 10.20 6.88 313.51 12.42 135.63 38,950.30 0.04
2014 20.73 11.01 7.47 312.93 12.43 135.00 38,904.65 0.04
2015 21.24 11.62 8.07 324.29 12.05 132.98 39,061.48 0.04
2016 20.40 12.18 8.68 325.91 12.00 132.52 39,100.54 0.04
2017 20.37 13.30 9.86 323.29 12.07 132.92 39,021.82 0.04
2018 20.80 13.69 10.44 326.55 12.00 132.51 39,179.48 0.04
Sector Rank 297/411 275/381 297/381 262/411 235/411 34/411 352/411 64/411
Economy Rank 992/1312 302/440 337/440 567/1312 901/1312 64/1311 879/1312 388/1312

Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.

Revenue
(%)
Industry
Value Added
(%)

Establish-
ments

(%)
Enterprises

(%)
Employment

(%)
Exports

(%)
Imports

(%)
Wages

(%)

Domestic
Demand

(%)
Agricultural
Price Index

(%)
2005 7.6 8.5 -2.3 -1.1 2.1 3.1 10.3 3.9 8.0 -3.5
2006 2.6 -0.2 -1.6 0.4 0.4 17.2 7.5 4.1 2.4 0.5
2007 3.0 6.2 -2.2 -2.8 -4.1 16.4 23.7 -6.4 4.0 18.3
2008 -0.2 -0.2 -1.7 -1.6 3.0 16.3 0.2 -0.9 -1.0 9.7
2009 5.7 -3.3 -0.3 -0.6 -4.0 -10.9 -12.3 -0.5 5.0 -12.3
2010 0.0 -10.6 3.4 3.8 4.1 10.3 5.6 5.4 -0.1 7.9
2011 2.1 13.6 0.2 0.2 0.1 18.5 17.3 0.1 2.4 26.3
2012 3.1 16.8 0.9 1.0 1.1 2.7 1.2 1.3 2.9 7.3
2013 2.0 -6.1 -0.6 -0.8 0.3 1.7 8.7 0.3 2.7 5.3
2014 -0.8 -1.7 -0.1 0.0 -0.6 7.8 7.4 -0.7 -0.5 5.2
2015 2.7 5.2 0.6 0.4 -0.9 11.0 8.4 -0.5 2.7 -2.0
2016 0.9 -3.1 0.7 0.8 0.4 8.4 5.7 0.5 0.9 6.5
2017 -1.1 -1.2 -0.6 -0.4 -0.3 12.4 7.9 -0.5 -1.1 -0.6

2018 0.4 2.5 -0.3 -0.2 -0.6 6.3 3.1 -0.2 0.2 5.7
Sector Rank 237/411 389/411 285/411 277/411 231/411 236/381 70/381 256/411 190/381 N/A
Economy Rank 802/1312 1272/1312 1008/1311 989/1311 924/1312 271/440 86/441 951/1312 215/440 N/A

Annual Change
Key Ratios
Industry Data
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 39

Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that
new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.

CAPITAL INTENSITY Compares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.

CONSTANT PRICES The dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
“real” growth or decline in industry metrics. The inflation
adjustments in IBISWorld’s reports are made using the
US Bureau of Economic Analysis’ implicit GDP price
deflator.

DOMESTIC DEMAND Spending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and
keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.

ESTABLISHMENT The smallest type of accounting unit
within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.

EXPORTS Total value of industry goods and services sold
by US companies to customers abroad.

IMPORTS Total value of industry goods and services
brought in from foreign countries to be sold in the
United States.

INDUSTRY CONCENTRATION An indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.

INDUSTRY REVENUE The total sales of industry goods
and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industry’s contribution to GDP, or
profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.

LIFE CYCLE All industries go through periods of growth,
maturity and decline. IBISWorld determines an
industry’s life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industry’s products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with
no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.

PROFIT IBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.

Industry Jargon

IBISWorld Glossary

COUNTER-CURRENT EXTRACTION (CCE) By allowing
producers to separate multiple liquids with differing
proportions, this process that can increase yields by up
to 60% when compared to conventional forms of
processing.

FLASH FREEZING A freezing technique in which water
contained inside a food source is subjected to
temperatures well below its freezing point.

PROBIOTICS Dietary supplements of live
microorganisms that are thought to be healthy for the
host organism.

WWW.IBISWORLD.COM Frozen Food Production in the US November 2013 40

Jargon & Glossary

VOLATILITY The level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.

WAGES The gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.

IBISWorld Glossary
continued

Disclaimer

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agreements with IBISWorld. IBISWorld makes no representation to any
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all liability (save for liability which cannot be lawfully disclaimed) for loss or
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Copyright in this publication is owned by IBISWorld Inc. The publication is
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contained within it for other than the purchasers own purposes. In the event
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it will be sourced to: IBISWorld Inc.

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