Annie’s dealing with pizza ‘price/value issue’

by Eric Schroeder
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BOSTON — Acknowledging the company “didn’t quite get (it) right,” pizza nonetheless remains a category that natural foods company Annie’s Inc. is confident in long term, said John Foraker, chief executive officer of the Berkeley, Calif.-based company.

“In the natural channel, it’s doing well and continues to grow, and we’re seeing very strong repeat or we’re building a loyal audience there,” Mr. Foraker told analysts at the RBC Capital Markets Consumer and Retail Conference held March 13 in Boston. “The fundamental thing we got wrong on pizza is, we have a very high-quality product that consumers like. Once they’ve tried, their repeat rates are north of 70%.”

The problem, Mr. Foraker said, is an issue of trial. Annie’s pizza products are packaged in a box that’s only slightly larger than most of its competitors, but the actual pizzas are twice as big. At a price point of $8.99 to $9.99, Annie’s pizzas are attempting to compete in a category where less than 2% of total sales are done at a price point over $7.99.

“So we have a little bit of a price/value issue we have to get consumers over,” he said. “In the natural channels, it’s less of a hurdle to get them over, because they know the brand better, they try it. In mainstream grocery, our distribution levels are right about where they were pre-recall. We’ve been holding that back a little bit now, because we’re working on some changes in some communication and some other changes in that product.”

He chose not to elaborate on the changes, saying more details will be coming shortly.

“We do think that we have a really clear path forward there and we’re excited about our ability to compete in that category,” he said. “I’ve been with Annie’s since 1998, and we’ve innovated really outside of mac and cheese since 2002. And sometimes, you don’t quite get it right in the beginning and that’s true on some of our past categories that are big businesses for us now. So you have to learn, you have to do some consumer issues, talk to your consumers and tweak it, and so that’s what we’re doing now. But I’m confident we’re going to build a nice pizza business, I really am.”

Annie’s rolled out its family-sized, certified-organic frozen pizza in January 2012, but the company was forced to recall a number of pizza products the following year, in January 2013, after its contract pizza crust manufacturer identified small metal fragments in the pizza dough during a manufacturing run and in some finished pizza crust made on that same day. The source of the fragments was traced to a third-party supplier that Annie’s used to source whole wheat flour.
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