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Going Private Label
As commodity costs continue to challenge necessary price points, private-label options will continue to attract consumer attention. Mintel notes that private label, while still small, has experienced dollar share growth of 12.4%, increasing its market share by 1.5% to reach 13% in 2011.
This growth speaks to the increased culinary sophistication of private-label foods, like pizza. Mintel notes that private label continues to be seen as comparable to branded products by 41% of consumers. The firm also notes that private label has a key opportunity among consumers between the ages of 18 and 34, since close to half of them feel that private-label foods taste the same as branded products. This group, compared to other demographics, is likely more driven by price, in addition to overall quality.
While frozen pizza saw a bit of revenue growth during the most-recent recession, overall—in the big picture—the category has continued to slip. In fact, Chicago-based Mintel’s July 2012 report, “Pizza at Retail—U.S.,” forecasts that retail frozen-pizza sales will continue to drop through 2016. This is due in part to an increasing percentage of consumers who are paying more for the “affordable indulgence” of carry-out or delivered pizza as the economy has begun to improve. There is also a prevailing consumer perception that “fresh” foods are more nutritionally sound than frozen options.
Nevertheless, frozen pizza is a primary retail sales vehicle. The Mintel report notes that, based on a consumer survey, 70% of adults ages 18 to 24—a primary market here—had eaten frozen pizza in the past month compared to 65% of the total respondents. While aging demographics represent the highest rate of population growth, their frozen-pizza consumption percentages drop a bit: 63% of those ages 45 to 54 had eaten frozen pizza in the last month, 62% for ages 55 to 64, and 53% for those ages 65 and older. Nutritional factors will drive more appeal with these consumer segments.
Also, the Sept. 2012 report, “The Pizza Market in the U.S.: Foodservice and Retail,” Packaged Facts, Rockville, Md., states that 4 in 10 people overall note that healthier pizza options would entice them to eat pizza more often.
In order to better appeal to older consumers who tend to deal with more health-related conditions—as well as an overall consumer base more focused on nutrition—retailers need to offer more new, incrementally healthier, options, including those formulated to be lower in sodium and fat.
THE CLAIM GAME
Mintel notes that frozen pizzas touting personal health claims, including those like allergen-free, gluten-free and low-fat, have been gaining strength over the past year.
Gluten-free pizzas, in particular, are on the radar in a big way. “Gluten-free foods in the U.S. market are expected to outpace the growth of non-gluten-free foods,” says Amy Lotker, executive VP of marketing, Better 4 U Foods, Delray Beach, Fla. “According to the 2012 report titled ‘Gluten Free Foods and Beverages in the U.S.’ (Packaged Facts, Oct. 2012), the compounded annual growth rate for gluten-free products rose 28% over the previous four years. Gluten-free sales are expected to hit $4.2 billion by the end of 2012, and increase by almost 60%, to $6.6 billion, by 2017. Based on SymphonyIRI data for the 24 weeks ending Oct. 7, 2012, total pizza sales were down year-over-year by 3.7%, while gluten-free pizzas were up by 86%.” Better 4 U Foods specializes in all-natural, low-fat, low-sodium and reduced-calorie—along with some gluten-free and dairy-free—health-oriented frozen pizzas.
Mintel notes that “no additives/preservatives” has emerged as an attractive attribute in frozen pizza. According to Mintel research, 36% of consumers consider such an attribute important when purchasing frozen and refrigerated pizza. Also, 43% of consumers place value on “all-natural ingredients” when purchasing frozen and refrigerated pizza.
Fat is often a notoriously high negative in pizza. “The most dramatic way we reduce fat while increasing flavor is by increasing the levels of our all natural toppings,” says Lotker. “This allows us to actually reduce fat and, by the way, sodium, while improving flavor.”
A key piece in this puzzle is changing consumer demographics. “Consumers today are very educated,” says Lotker. “They understand that eating healthy is a major contributor to taking care of yourself and your family, by preventing illness and allowing your body to work more efficiently.
“We definitely see that there are positive trends in the types of health-oriented pizzas that are coming into the marketplace,” continues Lotker, noting that healthy pizzas are outpacing the growth of traditional pizzas by 21%, based on data from SymphonyIRI, Chicago, for the 24 weeks ending Oct. 7, 2012.
Also, in its Sept. 2012 report, Packaged Facts notes that, in light of consumer food-consumption patterns trending toward healthier options, pizza manufacturers need to “enhance the overall healthfulness” of their products, “at least incrementally.”
While a small handful of major food manufacturers clearly dominate the frozen-pizza game—with The Schwann Food Company and Nestlé pulling in nearly 70% of the market in 2012, per IBISWorld, Santa Monica, Calif.—they have been losing market share to smaller, “boutique” companies.
Packaged Facts notes that while sales of the top 12 frozen-pizza manufacturers declined by 3.1% as of the year ending July 8, 2012, companies like Newman’s Own and Amy’s Kitchen saw 37% and 10% growth, respectively.
Part of the reason for this increase in sales from such smaller companies is their willingness to gamble on nutrition-forward products. Amy’s Kitchen offers products that are “Light in Sodium,” along with gluten-free options sporting a rice crust. It also manufactures a new “Light & Lean” line that includes a reduced-fat, lower-calorie Italian Vegetable Pizza, as well as a similar cheese-only option. Amy’s Kitchen products also tend to highlight use of organic ingredients on product packaging, upping the “healthy halo” ante and appealing to organic-oriented consumers.
While indulgence will undoubtedly continue to factor into a solid percentage of frozen-pizza sales, moving forward, retailers should balance such products with a wider range of nutrition-forward options in the freezer case.