New players search for traction in pizza market

by Eric Schroeder
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Same faces, different places.

Sixteen years ago, DiGiorno, a Kraft Foods Inc. brand, was the top selling brand with dollar sales of nearly $260 million, followed by another Kraft brand, Tombstone, with sales of approximately $253 million. Rounding out the top five back in 1998, according to data from Information Resources, Inc., were Red Baron (Schwan Food Co.), Tony’s (Schwan Food Co.) and Totinos (Pillsbury Co.).

The past decade and a half has seen ownership of some of the brands change, but little in the way of movement in the rankings. DiGiorno, now owned by Nestle USA, Inc., remains the No. 1 frozen pizza brand, with dollar sales of $1,981,983,000 in the 52 weeks ended May 18, according to I.R.I., a Chicago-based market research firm. Tombstone, also now owned by Nestle, has fallen to No. 4, as sales only have moved up marginally, to $308,442,200. Red Baron and Totinos both remain in the top 5, at No. 2 and No. 3, respectively. Only Tony’s has taken a step back, falling to No. 11 on the I.R.I. list. Freschetta, a Schwan brand introduced late in 2006, now ranks No. 5 with sales of $185,516,300.

The lack of movement may be fitting for a category whose performance was virtually flat over the past year. In the 52 weeks ended May 18, dollar sales in the frozen pizza category totaled $4,353,651,000, up 0.24% from the same period a year ago, while unit sales slipped 0.49% to 1,374,488,000. But signs suggest that two companies on the periphery of the category — Annie’s, Inc. and Dr. Oetker — may be poised to shake the segment out of its slumber.

Annie’s ‘price/value issue’

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, John Foraker, chief executive officer of the Berkeley, Calif.-based company, told analysts at the RBC Capital Markets Consumer and Retail Conference held March 13 in Boston.

“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 said. “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.

New player to U.S. market

Dr. Oetker Canada, a maker of frozen pizza, dessert and dry baking products for both retail and food service, has opened a new frozen pizza production facility in London, Ont. The plant, which has been in operation since mid-March, will serve as a production hub for the company’s North American pizza operations.

“Canada is an excellent market for Dr. Oetker,” said Christian von Twickel, executive vice-president at Dr. Oetker Canada. “Canadians are particularly receptive to our type of innovative and high-quality products, and we are excited to have opened our first North American frozen pizza plant in London, Ont. We are confident in the local workforce, the Ontario agri-food sector and the North American market and we are honored to be part of the London community.”

The London facility houses the company’s pizza lines, which include such brands as Ristorante, a thin-crust gourmet pizza; Casa di Mama, its Italian homemade style pizza; and Panebello, its bakery crust pizza. The company said the facility will produce up to 50 million frozen pizzas every year for both the Canadian and U.S. markets, and will source millions of pounds of raw ingredients from Ontario farmers and food processors.

Founded in 1960, Dr. Oetker Canada operates in over than 39 countries. The company’s Canadian operation includes manufacturing and R.&D. plants located in Mississauga and now in London, Ont., that produce more than 190 products. In addition to pizza, the company makes desserts mixes and baking ingredients (Shirriff and Dr. Oetker branded). In 2013, sales for Dr. Oetker were over $3 billion worldwide.
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