Putting a premium on pasta

If retailers want to find to their way to the hearts of pasta-eating Americans, they should think premium private-branded products, which could include pasta made in Italy and organic products as well as frozen products made with innovative flavors and ingredients.

“The premium and organic pasta segments offer retailers the opportunity for higher margin, and there is still a lot of market share to be taken from the national brands,” says Pasquale Laudiero, president of Manassas, Va.-based GHIGI Food Industries, which was founded in 1870 in Italy and offers Italian-produced pasta made with 100% Italian ingredients.

Donna Bush, president of Totowa, N.J.-based Agrusa Inc., which offers authentic Italian food products for private brands, says the premium tier allows market players to offer consumers a high-end pasta with qualifying attributes such as artisanship, Italian grains, refined packaging and a story behind the product.

“We’ve been seeing that the mainstream offer is losing ground to the advantage of segments connected to healthier proposals and the rediscovery of products’ roots — features which have very little in common with a simple commodity,” Bush says.

“Therefore, the category is moving towards specialty pastas with high added value.” Laudiero says retailers that offer a well-sourced quality pasta at a competitive price in a nicely designed private label package that is merchandised correctly gives retailers a great opportunity to compete against the national brands in the premium and organic pasta segments.

Paul Vertullo, chief operating officer for Garden City, N.Y.-based Seviroli Foods, which offers a variety of frozen ravioli and other stuffed frozen pastas for private brands, agrees that the trend in the category is high-quality, innovative and premium products.

“The commoditization of this category has not worked and, quite frankly, I don’t see it working,” Vertullo says.

According to data from market researcher Information Services Inc. (IRI), private label sales of pasta (spaghetti/macaroni/pasta) are down 0.6% for the latest 52 weeks ending April 21 when compared to the previous period. Sales of national brands are down 0.9%. But Laudiero notes that premium and organic pasta is growing on average 10-20% annually. He says private brands, which own only 27.8% market share in the category (a slight uptick from the previous year, according to IRI), can capture more market share if retailers introduce more premium products.

In the frozen pasta segment (ravioli, stuffed shells, etc.), private label sales increased 3.1% for the 52 weeks ending April 21 when compared to the previous period, according to IRI, while sales of national brands decreased 3.7%. Sales of private label tortellini/tortelloni were up 12.8% while sales of branded products in the category declined 12.5%.

Laudiero says the “best retailers” of private-branded pasta are not only listing the country of origin on their private brands but they are also telling a story of the quality behind the product.

“Using the country of origin as a story to help differentiate products has been a big help to private brand sales in general,” he adds. “The best retailers in the space are placing a strong focus on sourcing products from reputable producers, getting to know their producers, the quality of the pasta product and how they can differentiate against the national brand equivalents.”

Bush says that being able to state on the product label that a specific reference of pasta is made in Italy communicates to consumers that it conveys hundreds of years of experience and expertise of talented pasta makers “who have brilliantly created and refined over the centuries” the art of producing pasta.

“This is an incredible added value for a private label product, a connotation of traditionality and authenticity within the product itself, which inspires trust and deserves to be fully valued on the label,” Bush adds.

In the frozen pasta segment, added value correlates with innovation, which Vertullo says Seviroli Foods has embraced to stay on-trend. Consider the company’s Ravioli Portobello Mushroom, which it manufactures as a private brand for a leading retailer.

“You have to take some culinary risk, and the key to this product line is innovation and collaboration between our research and development department, product development department and [a retailer’s] category managers,” Vertullo says.

Because Seviroli Foods does most of its business in foodservice, the company is able to keep abreast of flavor trends in the restaurant industry, which it brings to its retail business, Vertullo notes.

“I believe that the next trend [in frozen pasta] will be combinations of filled pasta and sauce in one package as a complete meal,” he adds.

One trend that Laudiero says he has seen building over the last five years is that retailers are spending more time and money on private brand packaging design.

He notes that The Kroger Co.’s Private Selection Italian Spaghetti, which sports a sleek black label and tells a story of the product’s origin, is a fine example of a product that will attract and retain customers.

“We’re seeing retailers focusing on premium cellophane and paper packaging for their pasta offerings,” he adds. “Retailers need to spend time developing a uniform strategy for their private brands across the store.”

Bush says the packaging can be considered “as the ID” of a food product, which she describes as “the first factor that should attract the attention of consumers and encourage them to take that product off the shelf and find out more about it.” Premium packaging is pivotal for a private label pasta program if that pasta has a certain feature that is, or could be, emphasized by a high-end wrapping, she adds.

“So it should be designed to reflect the attributes ofthe product it holds and according to the price range in which the product falls into,” she adds.

Retailers need to have a clear store brand management strategy, Laudiero stresses. For instance, they need to give more thought to merchandising and promotion to help support the store brand and convert customers from national brand equivalent products.

“Some retailers are all over the place with their private brands across different categories,” he adds.

“They should set a clear vision and strategy for the brand first and then execute that strategy uniformly across the different categories. Retailers should start with a focus on the best-selling pasta items and then think of expanding to lower-volume cuts.”

Bush says a phenomenon that is constantly evolving is the use by many retailers of social media to show to consumers how a specific product is made.

Social media, such as Facebook and Instagram, has become “a window on the production plants to discover the secrets of food production,” she adds.

“What was once only seen on television is now available to everyone, both satisfying the curiosity of consumers about the products they buy and increasing the loyalty to a specific retailer or private label brand because [retailers] are willing to openly demonstrate that they have nothing to hide about their products,” Bush says. “These contemporary ideas are usually complemented by more classic experiences, such as of in-store demos.”

Laudiero says if a retailer has done a good job sourcing product, designing packaging and telling a story, an aggressive promotion strategy several times a year can help draw new customers to a private brand.

“And, hopefully, keep them coming back to the private brand,” he adds.