09Apr2011

Delivery Chills Frozen Pizza

Fueled by the recession and an influx of higher-quality, premium options that more closely approximate restaurant fare, frozen pizza expanded a whopping 26% across channels from 2004 to 2009, according to a January 2010 study by Chicago-based Mintel International.

Over the past year, however, growth slowed as the economic recovery began to take hold and quick serve restaurants (QSRs) worked overtime to woo back consumers lost to frozen. This year, it appears their efforts are starting to pay off. In fact, reports Chicago-based market research firm SymphonyIRI Group, frozen pizza dollar sales in supermarkets fell 4.9% to $742.8 million during the 12 weeks ended Feb. 20. Units dropped by 7.2% and volume sold with merchandising support slipped 0.4 points to 59.3%.

‘ROOT OF ALL EVIL?’
Spouting slogans like “Inspired pizza comes from an oven, not a freezer,” and “Frozen pizza is the root of all evil,” delivery giants like Domino’s “have taken an active and aggressive stance against frozen pizza manufacturers,” reports Mary Brown, senior director of the Freschetta business team at Bloomington, Minn.-based Schwan’s Consumer Brands North America (www.freschetta.com). The smear campaign, coupled with rock-bottom prices, represent a serious threat to frozen pizza’s growth, Brown says.

But frozen pizza manufacturers are fighting back. Some are courting delivery customers with make-athome options that include popular delivery add-ons like bread sticks and pasta. The latest example comes from category leader DiGiorno (www.digiorno. com), which recently debuted Pizza & Boneless Wyngz and Pizza & Cookies.

A new advertising and social media campaign in support of Schwan’s Red Baron brand (www.redbaron. com) will highlight the hidden costs — hefty up-charges for additional toppings, delivery fees, tips, etc. — associated with delivery, “which can turn a $5 or $6 pizza into a $14 or $15 pizza pretty fast,” Brown reports. Scheduled to begin later this month, the campaign will also underscore differences in product quality, including many chains’ use of “pizza cheese” while frozen brands like Red Baron contain only 100% real cheese.

For their part, retailers are using their store brands to battle delivery products. Rochester, N.Y.-based Wegman’s is freezing prices on many of its top-selling store brand products, including Wegman’s Bake & Rise Pizza, guaranteed to sell for just $3.99 through the remainder of 2011. And Malvern, Pa.-based Acme, a Supervalu chain, recently advertised its premium private label Culinary Circle frozen pizza at two for $9.

CREATING MEALS
Retailers can also build sales simply by merchandising frozen pizza with complementary products that together create an entire meal. For example, says Peter Cokinos, senior vp of sales and marketing at Elk Grove Village, Ill.-based Little Lady Foods (www.littleladyfoods. com), “Soda displays built near freezer cases and bundled with pizza would create the same pairing currently offered by many pizzerias.” Even if products can’t be merchandised together, adds Brad Sterl, founder and president of Pittsfield, N.H.-based Rustic Crust (www. rusticcrust.com), they can still be cross-promoted. For example, his company is looking to partner with a bagged salad manufacturer for crosspromotion deals, and Spartanburg, S.C.-based Spartan Foods of America (www.mysticpizza.com), purveyor of the Mystic Pizza brand, is seeking a partner in the wine industry, according to Tom Baliker, founder and CEO.

But pizza isn’t just for mealtimes. During the first week of March Madness, many Safeway banners featured DiGiorno’s Pizza & Wyngz at $5.99, plus two other new frozen snack foods from Nestlé in a section of its weekly flier titled “Game Day Party 3-Pointer: 3 new ways to score big points at your next party.” And Reading, Pa.-based Redner’s Markets had a coupon for a free Red Baron pizza with the purchase of three 12-packs of Pepsi and two bags of Doritos or Tostitos. Many other retailers, including A&P-owned Superfresh, Montvale, N.J., which included three different brands in a “Pizza Party Headquarters” section of its weekly flier, offered multiples pricing during the same week.

To compete with pizzerias, Red Baron introduced frozen slices more than a year ago. The concept caught on among those who prefer slices to “personal size” mini pizzas, leading to the recent introduction of a similar product under Schwan’s Freschetta label. Freschetta By-the-Slice comes with a patented susceptor tray designed to deliver oven-baked taste from the microwave.

PIZZERIA-TYPE CRUST
Another manufacturer going after the pizzeria customer is Milwaukee, Wis.-based Palermo’s (www. palermospizza.com). It recently introduced hand-tossed style frozen pizzas that boast a “unique, pizzeria- type” crust, reports CEO and president Giacomo Falluca. Available in six flavors, the new addition to the “middle-thickness” segment, which has been largely ignored by manufacturers focusing on the rapidly expanding thin and ultra-thin sector, is more like what you can find at your local pizza parlor, he explains.

New products featuring high-end toppings and sauces in unique combinations are helping draw consumers back to the freezer case. According to Brown, “Many people are leaving frozen pizza (i.e. becoming light or lapsed users) because they no longer want only cheese, pepperoni and meats. Instead, they’re spending their money in restaurants where they can get toppings like chicken, shitake mushrooms and feta cheese.”

To help meet this demand, Schwan’s recently rolled out a Freschetta line under the Simply…Inspired sub-brand with flavors like Hawaiian Style, Farmers Market Veggie, Harvest Supreme, Southern BBQ Chicken and Rustic Pepperoni Pomodoro. Freschetta isn’t alone. Mystic Pizza plans to add two distinctive new flavors to its lineup, which already includes both Mediterranean and Buffalo Chicken varieties, later this year.

Other manufacturers are carving out a niche in the better-for-you segment, an area where many local pizza parlors fall short. Rustic Crust, for example, recently introduced its first vegan pizza.

SymphonyIRI figures suggest that increasingly confident consumers are willing to shell out more money for higher-end frozen pizzas. In fact, both category leader DiGiorno and number-three brand Red Baron, two of only three top 10 brands to post dollar sales gains over the past 12 weeks, sell for more than the category average ($3.04 per unit). And the three top 10 brands with the lowest average price per unit, including private label, all registered dollar sales losses.

CUT ‘ME-TOO’S’
To find room for new flavors, Brown suggests cutting duplicate items. During one recent store visit, “We found ten pepperoni and cheese pizzas all from one brand,” she reports, noting that rationalizing SKUs in cases like this would help bring back “flavor seekers” who left the frozen category in search of better selection. Sterl believes it makes sense to merchandise premium items together so they can be found more easily by shoppers seeking them. It would also cut down on sticker shock if pizzas costing, say, $12, weren’t merchandised next to belly fillers.

A special area could also be set aside for products ready in 15 minutes or less, adds Cokinos, citing another of frozen pizza’s advantages over delivery.

In terms of promotion, Sterl prefers programs that promote trial — sampling, high-value coupons, BOGO offers, etc. — over simple TPRs. Particularly with premium items that cost a little more, he explains, it’s important to prove to consumers that the product is, indeed, worth the price. He adds, “The frozen pizza category is always on deal. But you don’t build a lot of loyalty that way.”