Pizza Party

Strong sales within the frozen and refrigerated pizza segment, particularly on the store brand side, are giving retailers a reason to celebrate.

When the Great Recession first reared its ugly head a couple of years ago, many cash-strapped consumers said goodbye to frequent restaurant visits, determined to create some culinary magic using their own pots and pans. But a funny thing happened on the way to the kitchen: Many of these folks realized they actually had little or no idea how to cook.

That culinary ineptitude proved to be a boon to several retail food categories, as consumers gravitated toward heat-and-eat, easy-to-assemble and easy-to-prepare meal solutions, explains Bill Patterson, senior consumer analyst for Mintel, a global market intelligence firm. And pizza became a favorite among these convenience-minded offerings.

"Pizza fits very nicely into this arena because it's a universal food, largely speaking, available at a huge range of price points and quality levels, and people are very familiar with it," Patterson says.

In fact, data from The Nielsen Co., New York, show strong dollar and unit sales growth within both the frozen and deli pizza categories during the 52 weeks ending April 17 (see table, p. 34). And private label bested the percentage increases of both total subcategories.

On the deli side, Patterson attributes the rosy performance to retailers' efforts in going after the Friday night pizza takeout market. He also points out that store brands accounted for approximately a quarter of pizza product introductions for 2009.

Winds of change

In its January 2010 "Pizza at Retail — US" report, Mintel notes that the recession is not the only factor behind the recent growth of store brand pizza.

"Product innovation is also a factor, particularly in the frozen and refrigerated segments," the report states.

Brad Sterl, president of Pittsfield, N.H.-based Rustic Crust, agrees that consumers are showing more interest in the store brand side of pizza.

"They're looking for a better quality at a fair price," he says. What's more, the growth in private label pizza is not showing any signs of slowing down, says Chris Dresselhuys, director of marketing for Milwaukee-based Palermo's Pizza. He adds that growth is occurring in all three tiers — which he terms value, mainstream and premium.

"Consumers are opting out of carryout/delivery and opting into the premium frozen pizza category," Dresselhuys explains, noting that the delivery/carryout segment actually posted a decline — its first — in 2009. "Some premium users are shifting down to the mainstream pizza segment, while some mainstream consumers are shifting down to the value segment."

Deliver the goods

Consumers also vary widely when it comes to crust and ingredient preferences.

Ric Alvarez, Ph.D., president and CEO of Holland, Ohio-based Frozen Specialties Inc., sees strong interest in natural, organic and other health-minded pizzas, as well as microwavable options and artisan-style flavors.

Sterl also notes stepped-up interest in better-for-you pizzas — for example, items that boast a whole wheat or multigrain crust, or are topped with vegetables subjected to less processing. Thin is still in when it comes to crust, but retailers should have rising crust and all the other basics covered, Dresselhuys contends.

Size matters, too — not all pizza purchasers, after all, are shopping for a family meal solution.

"Retailers should pay close attention to the demographics and preferences of their customers and work to offer choices that satisfy those needs," Alvarez says. "For example, 6.5-ounce size, lean choices, microwave pizzas for one, etc."

Ivan Manfredi, co-partner and vice president of sales for Italy's Eat Better SRL, says the best opportunities for store brands can be found in exclusive, high-quality "very personalized" pizzas.

"It's necessary to be very flexible and very innovative, with a solid frozen pizza program that can capture an assortment of consumer groups," he says.

Regional preferences also come into play, Dresselhuys says. For example, meat-topped pies sell well in the Midwest, while cheese pizzas do well in the Northeast. And chicken-based and veggie options are popular on the West Coast.

"Retailers need to offer a broad selection across each price segment," he adds. "Store brands need to taste great and be priced so the difference between them and the national brand is apparent. It's not an easy thing to do."

Show it off

Retailers have the opportunity to be a one-stop frozen pizza solution for every one of their customers, Alvarez believes.

"Offer the first and second most popular name brands," he advises, "and then determine what other flavors, sizes and types customers want, bringing in private label to meet those needs."

But don't try to pull the wool over consumers' eyes, Sterl warns, pointing to a situation in which a large retailer replaced a best-selling Rustic Crust branded product with a "copycat" private label of lower quality.

"They took us out and put in a product that visually looked similar, but it wasn't anywhere near the same product," he explains. "If shoppers bought it thinking that the new private label product was the same as our branded product, they would have been disappointed."

Although a wide selection of store brand and national brand frozen pizzas has been shown to enhance overall category sales, it also can confuse and frustrate shoppers. But retailers need to be careful, Dresselhuys says, when it comes to SKU rationalization here.

"You need to make sure you're doing it for your consumer," he says. "Don't give an inordinate amount of space to something that is underperforming. Make it easier to shop; organize by price segment — the majority of consumers will plant themselves in the middle and hunt from there."

Alvarez adds that retailers should reduce duplication within the category, while still making sure proper space is allocated to each usage segment.

Because shoppers typically do not have a lot of time to make a decision at the freezercase (or in the deli), Dresselhuys points to a need for a "very functional description" on own-brand pizza packaging — at-a-glance messaging that spells out exactly what is in the box.

And although sampling can be somewhat expensive, Sterl believes it is still the best way to get a new pizza product into shoppers' mouths.

Retailers can drive category awareness and profitability, meanwhile, by promoting a variety of pizza segments at the same time, Alvarez adds. In addition, they should look for creative ways to remind consumers of the value, quality and convenience of frozen pizza — particularly their store brands. After all, store brands still account for a relatively low share of the total category.

"The goal, and a conservative one at that, should be to set some growth goals based on some simple averages of the frozen segment," he says. "For example, if frozen private label pizza could reach only 15 percent of the $4 billion frozen category, sales would be $600 million."

Do consider adding natural, organic and/or other better-for-you pizzas to your premium store brand lineup.

It's Personal

When Mintel recently asked consumers about the pizza concepts they would most like to see, the global market intelligence firm uncovered a potential opportunity for retailers' in-store delis.

"A third of everyone we spoke to said they wanted more customizable pizzas at the deli counter," explains Bill Patterson, senior consumer analyst for Mintel.

Of particular interest here were pizzas geared toward women (with, for example, fewer carbs, lower fat and additives such as omega-3 fatty acids) and pizzas geared toward men (with, for example, a high-protein crust). A number of respondents also expressed a desire for breakfast-type pizzas, Patterson adds.

Don't try to pull the wool over consumers' eyes by putting a mediocre pizza into a premium package.

Do make the frozen pizza section easier to shop by organizing by price segment.

Don't dedicate too much space to an underperforming product or expose shoppers to unnecessary duplication.

Pizza Segment Performance

Source: The Nielsen Co. Food, drug and mass merchandiser stores, including Walmart, for the 52 weeks ending April 17, 2010 (prepackaged, UPC-coded products only).