Category Review: Pizza
Any Way You Slice It
July 18, 2012
When it comes to private label pizza, expect to see more than just pepperoni and cheese.
Retail pizza sales in the U.S. declined for the first time in several years — and private label sales even more so — in 2010 as consumers felt the recession beginning to ease and returned from private label to brands, or from retail pizza to take-out.
But recent figures show great improvement in private label in 2011 and early 2012.
Figures from a June 2011 report, Pizza at Retail, by Mintel International Group Ltd., Chicago show that total retail pizza sales rose 22 percent from 2005-09, then fell off 1.1 percent in 2010. Private label sales rose 17.1 percent in the depths of the recession from 2008-10, but dropped 12 percent from June 2010-June 2011 as consumer sentiments about the economy improved, Mintel notes.
The breakdown across three subcategories measured by Mintel is similar: Frozen pizza grew 22 percent from 2005-09, but fell 0.9 percent in 2010-11; refrigerated rose 14 percent from 2005-09, but went down 2.8 percent in 2010-11; and other products declined 2.1 percent in 2010-11.
Most dramatically, private label refrigerated sales fell 31 percent in 2010-11.
But sales have picked up more recently: For the 52 weeks that ended April 15, total frozen pizza sales fell 1.4 percent to $3.1 billion, while refrigerated pizza sales rose 3.5 percent to $247 million, and pizza mixes, kits and sauce rose 0.3 percent to $99.1 million, according to SymphonyIRI Group, Chicago.
On the private label side, SymphonyIRI Group’s figures showed significant growth during the year that ended April 15: Frozen pizza sales spiked 13.7 percent to $335.7 million, refrigerated rose 10.2 percent to $102.4 million, and other products went up 6.5 percent to $12.9 million.
Although more than 90 percent of adults say they eat pizza regularly, that figure is higher among younger adults under 45, higher-income families, and households with children, which ate an average of five frozen pizzas in the previous month.
New trends that Mintel highlight in its report include breakfast pizzas, ethnically infused pizza such as Cajun or Chinese hot and sour, and customizable pizza from the deli counter, where consumers create their own toppings from a salad-bar-like set-up before taking the pizza home to heat-and-eat.
DEMOGRAPHIC AND COMPETITIVE CHALLENGES
Those new flavor profiles are key to growing the category, both in private label and overall, as the baby boomers age out of the families-with-children demographic, pizza marketers say.
“The category has always had difficulty with households that become empty nests,” says Chris Dresselhuys, director of marketing for Palermo’s Pizza in Milwaukee. “It’s not that they quit entirely, but their use diminishes significantly.”
Although the “big four” of cheese, pepperoni, supreme and multi-meat continue to garner the largest dollar volume, “more sophisticated flavors are starting to catch on,” Dresselhuys says, mentioning vegetable, chicken fajita, and bacon — the latter of which sometimes is part of multi-meat combos.
Palermo’s has introduced restaurant-style flatbreads sized for two adults with some “non-pizza” ingredients such as steak and bleu cheese.
Such a pairing “sends a signal, very correctly, that it is a different kind of product,” Dresselhuys says.
“Much like what we’ve seen in the beer category, where it’s those niche brands that offer a more developed, more complex flavor profile — those are the [topping flavors] that are really beginning to capture people’s attention.”
Peter Bozzo, vice president of sales and new business development at Molinaro’s Fine Italian Foods in Mississauga, Ontario, mentions international and regional flavors such as Indian butter chicken, pulled pork with sweet chipotle sauce, and Mexican chorizo sausage.
“These are some of the things that help us differentiate ourselves from the national brands,” he says. “You’re still going to have your core such as pepperoni, and cheese, but in order to sustain your shelf space, you’ve got to do something a little different. The consumer is looking for new and unique things.”
Richelieu Foods Inc. in Randolph, Mass., recently introduced a new line of organic pizzas and also sees natural and gluten-free products growing, “although off a small base,” says Robbie Jamieson, president and CEO.
In addition to the demographic challenge, Dresselhuys points to aggressive price promotion from national brands and delivery carry-out operators that lost share during the recession to private label.
“Papa John’s, Pizza Hut, Domino’s — they’re all trying to get into that $5.99 to $6.99 range for their medium pizza, which, in terms of price points, pretty squarely targets the premium end of our category,” he says.
Palermo’s works closely with its retail partners to reach a common understanding of its target customers and how to approach them, Dresselhuys says.
“We’ve seen a fair number of retailers that have recently undergone package redesign, really elevating and focusing on the appetite appeal of the pizza category — looking to understand the various different shopping segments within the category and making sure they have a top-line offering for each,” he says.
Molinaro’s endeavors to bring retailers “a good quality product, from A to Zed,” as well as “great service,” Bozzo says.
“It’s an entire program,” he says. “You have to have very attractive graphics, you have to have the right product and the right price, you have to have regular promotions and you have to feature the right mix of products.”
Richelieu builds “long-term focused strategic working relationships” with customers, its CEO says.
“Well-managed private label programs can drive differentiation, increase traffic and build brand equity and customer loyalty,” Jamieson says.
Dresselhuys predicts that the largest national retail brands will see market share diminish, although they will still remain dominant, while “craft” and private label will continue to grow, holding at least some of the market share they gained during the 2008-10 period.
“The recession really allowed a lot of consumers to seek new alternatives within the category,” he says. “That event in our nation’s history prompted people to explore these options, and they discovered there are some wonderful options out there under their local store’s brand.”
Bozzo also foresees private label growth.
“National brands realize that private label is growing, and they’re using the price strategy to offset that,” he says.
Jamieson adds that private label is splitting into “super-premium and value segments of the category growing at the expense of the premium and mid-price segments.
“There are several factors that will continue to favor private label expansion,” he says, “increasing retailer support, narrowing innovation and quality gap versus the national brands, increasing penetration in new channels and a broadening consumer demographic base.”
Eye On The National Brands
DiGiorno pizza added two new product lines in June — Pizza Dipping Strips and Italian Style Favorites pizza. The Pizza Dipping Strips come in three varieties: Pepperoni; Three Meat and Four Cheese and the Italian Style Favorites also come in three varieties: Meatball Marinara; Chicken Parmesan and Meat Trio.
Red Baron also expanded its frozen pizza offerings with a new line — Baron’s Best. The pizzas are offered in hand tossed and pan crust styles and come in four varieties: four cheese; pepperoni; four meat and supreme.
Jumping on the healthy bandwagon, Freschetta announced earlier this year that the sauce used on its Brick Oven pizza varieties will now feature sea salt and olive oil.