Opportunity by the slice
Oct. 1, 2014
by Ryan Atkinson
To say that pizza isn’t going anywhere is fairly indisputable. America loves its pizza. In fact, it might not rank too far behind some pretty pertinent elements of everyday life if you ask those in the industry.
“I keep referring back to the stat that never changes: 98% of all Americans eat pizza,” said David Foran, director of Little Lady Foods, Elk Grove Village, IL. “That’s a pretty wide range. Pizza is kind of like water; we’ve got to have it.”
Jon Wiersum is vice-president of brand marketing for Schwan’s Consumer Brands, Inc., Bloomington, MN. Schwan’s has seen an uptick in sales with its Freschetta brand, up 30% from last year.
“The category overall is showing signs of recovery across the US and growth opportunities within our consumer base,” Mr. Wiersum said. “Pizza is a highly penetrated category at 70% overall … and we’re telling people about our products with increased consumer spending to get them back into the frozen pizza aisle. It appears to be working.”
But that doesn’t mean everything is coming up roses. “If you look at pizza in general, as far as performing at the retail level, the outlook isn’t great,” said Justin Ring, sales manager for Nation Pizza, Schaumburg, IL. “It’s forecasted to be flat at best.”
In fact, sales are as flat as pizza crust itself. IRI, a Chicago-based market research firm, reported sales of frozen pizza rose a paltry 0.47% to $4.4 billion for the 52 weeks ended Aug. 10. Category leader DiGiorno, owned by Nestle USA, Glendale, CA, saw sales tumble more than 6% while private label sales rose nearly 5%, according to IRI.
With market penetration so high, it’s not surprising that the overall retail market for pizza — including frozen and refrigerated, commonly called “take and bake” — has remained stagnant over the years. In a June report, researchers at Chicago-based Mintel noted annual retail sales of pizza have hovered around the $5.5 billion mark from 2009 through 2014, and the outlook is for more of the same. In fact, Mintel projected that retail sales will remain unchanged or slightly down through 2019.
To boost their share of the market, those in the pizza world know how important it is to not only identify the latest trends but also figure out just how to capitalize on them.
Boomers lead the way
For starters, it helps to find out who is buying the most pizza. Mr. Wiersum said that title belongs to baby boomers.
“Boomers still make up most of the households that purchase pizza,” he said. “They make up about 47% of the households and 44% of pizza consumption, slightly under indexing. Schwan’s is looking at ways to be even more relevant with this segment.”
You won’t get an argument from Laura Gilarski, creative marketing director for Little Lady Foods. She noted those over the age of 65, along with the 30-to-45 age group, are the ones most interested in pizza right now. Getting even more detailed, she said those groups are looking for specialty pizzas.
“Those of us near the end of the baby boom generation are excited about all the options in pizza, and I think the younger generation is too,” Ms. Gilarski said. “The demand for quality pizzas, not just ‘belly fillers,’ is going to continue to grow.”
Quality pizza is basically what it sounds like: higher-end ingredients, naturally rising crusts and fresh toppings. As fresh as possible, at least, when you’re talking frozen pizzas.
“We’re looking to see how to give ‘fresher ingredients,’ ” Mr. Ring said. “You can capitalize on more premium ingredients or local toppings. Depending on the brand, we will look at the toppings and how we make them premium. Even with pizza being an indulgent item, there are a lot of consumers getting more educated on their labels, so ‘premium’ can also mean cleaner ingredients. They’re paying attention to what they’re feeding themselves.”
Schwan’s is targeting those who are more conscious about ingredients with the naturally rising crust of its Freschetta’s brand, Red Baron’s classic crust and the new Pizzeria style crust from its Tony’s brand. In addition, Mr. Wiersum said, Schwan’s Freschetta pizzas have gone with only premium ingredients, including olive oil, sea salt, sauces made from ripe tomatoes and the exclusion of any cheese fillers.
“We are redoubling our efforts to deliver the best pizzas across our brands … made with the highest quality ingredients,” he said. “We are seeing a trend in clean-label ingredients as consumers look for more transparency in their food.”
Millennials playing a role
As important as the boomers are in the pizza industry, millennials — those who reached adulthood during the early 2000s to today — may hold the key that could bolster sales above the projected flat line.
As the economy begins to right itself, Mintel noted that more and more consumers — including younger ones — are finding their way back into restaurants.
“That makes a lot of sense to us,” Mr. Ring said. “I recall when the economy turned downward, it actually helped our category. People went back to the grocery stores and were spending more money there. Pizza was certainly recession-proof, if not the opposite. The expendable money is out there a little bit more, so people are going back to the pizzerias.”
That puts pressure on pizza producers to offer restaurant-quality pizza at the retail level. According to the Mintel report, the 18-to-34 age group is the most likely to eat store-bought frozen pizza. The report cautions that population growth among consumers ages 18 to 34 is not expected to be significant in the next five years, so brands must find a way to up the consumption frequency.
“Millennials like to entertain and eat in groups,” Mr. Ring said. “They’re smart and educated and like to go out to eat a lot.”
Millennials are known for being curious, and educated, about food. The challenge for pizza processors is in figuring out how to parlay millennials’ food-driven intellect into sales growth.
Specialty pizzas are creating these kinds of opportunities, as brands launch creative marketing campaigns that align with the interests of millennials.
“We’re talking about gourmet, artisan, organic, all-natural, creative flavor profiles and things like that,” Ms. Gilarksi said. “Ethnic or culturally inspired ingredients are something else that is trending. That’s what we’re seeing as very strong right now for the new foodie generation.”
Whatever the answer is, Mr. Ring said it could be huge for the industry.
“Those who can figure out the millennials and execute a retail strategy are setting themselves up for success,” he said. “Nobody has identified that yet, at least not from a national retailer’s standpoint.”
Flat can be good
Unlike the predicted flat sales that some reports predict for pizza, alternatives to the conventional cracker-style pizza crusts can be a good thing for the industry.
“We’re seeing a trend in artisan ingredients and flatbreads,” said Colleen McCarty, communications specialist for The Bama Companies, Tulsa, OK. “People are more interested in personal customization, so companies are looking at smaller flatbreads that an individual can order, which might be different from what other family members order.”
And while frozen brands can be negatively impacted by a consumer’s choice to visit a restaurant, producers can also put in the freezer what is finding success in the dining room.
“You’ve always seen the restaurant brands in the freezer case, and you’ll continue to see that as time goes on,” Mr. Foran said. “If you go into, for example, a Chili’s, you’ll find it has a long, rectangle crust topped onsite. That’s what’s trending: something flat that you can top. You feel like you’re eating fewer carbs.”
Whether it’s accurate or not, the assumption is that flatbread pizzas contain fewer calories and are healthier. Flatout FlatBreads, Saline, MI, offers six “whatever you want” pizzas that cook in six minutes, all of which contain less than 150 Cal per serving. Schwan’s takes the flat game into foodservice with Big Daddy’s Artisan Flatbreads with varieties like its pesto chicken blend of Italian flavors on flatbread.
“It’s a portion-control thing, and we are trying to find a diet that works for everybody,” Mr. Foran said. “I think people are just looking at it like less is more. You can eat a smaller portion, or if you think you’re eating cleaner pizza — it just feels better and looks better.”
Flatbread crusts also lend themselves to opportunities in different dayparts. “They have the flexibility to be enjoyed any time of day,” Ms. Gilarski said. “You’ll see that in retail and foodservice, whether it’s breakfast pizza, an appetizer type of pizza or even a dessert pizza with flavor-infused crust.”
Still a family favorite
While many pizza demands reflect the same trends encountered by the baking industry as a whole (clean-label, gluten-free, etc.), the fact that pizza is a household staple is still key. The convenience and overall popularity of this product lends itself to continuing as a mealtime favorite for families.
The Mintel report noted that households with children represent an opportunity for store-bought pizzas to tap the brakes on slipping sales. It points out that the presence of children is a strong indicator for consumption thanks to kids’ love of pizza and parents’ love of its convenience.
Red Baron, part of the Schwan’s family, recently introduced its Deep Dish Minis as an easy-to-share pizza with big flavor. It features eight 2.5-in. pizzas per package, which offers single-serving snacks or full-family meals.
“We know that families are busy and want to get a meal on the table, so we worked with minis to have that option at the end of the day,” Mr. Wiersum said. “We’ve also seen a big increase in sales of our Red Baron Singles as an option for both smaller families and individuals.”
The only downside to focusing on families when it comes to sales is the fact that the percentage of households with children is in decline. Thus, companies have to look for ways to increase penetration and consumption frequency among this group.
Can’t ignore health
The health factor is one that no food manufacturer can ignore these days, no matter what size household is eating your products. “I think younger families are the largest group of consumers in retail pizza,” Mr. Ring said. “But it’s not the only thing you can focus on.”
Even with pizza, more consumers are looking for ways to eat the foods they love while minimizing guilt. “I think as a society here in the US, we’re starting to watch a lot more what we’re putting in our bellies,” Mr. Foran said.
A big part of that mindset, of course, is gluten-free. Earlier this year, Freschetta unveiled its first foray into the gluten-free market. The pizzas, which come in cheese and pepperoni, are Celiac Sprue Association Certified.
“As awareness of our consumers’ special dietary needs grows, so does the effort to expand our offerings to meet those needs,” Mr. Wiersum said.
But while those health-minded consumers are of importance, they still aren’t a major focus.
“We are seeing that, and you can’t ignore that, but I still believe that pizza is an indulgent item,” Mr. Ring said. “Overall, it’s not a huge portion of consumers; however, if there is growth anywhere in the pizza category, it’s with gluten-free or natural or organic. There is definitely a growing portion of consumers looking for cleaner, overall natural labels. But I do think that, for the most part, people want to eat pizza because it tastes good.”
It all boils down to a pair of options, Ms. McCarty said. Echoing Mr. Ring’s thoughts, she pointed out that people want to keep an eye on their food, but they want to eat for pleasure as well.
“There are essentially two directions: making pizza healthier for everyday consumers and then making pizza more decadent and outlandish for the cheat/weekend/party types,” she said. “This is where you see things like the new three-cheese stuffed-crust pizza. Also the dessert pizzas like the ultimate chocolate chip cookies or the chocolate lava cakes are going in this direction.”
That could be a ticket for the fast track away from flat sales: quality pizzas that let consumers watch their waist and the tasty gut-fillers that allow them to eat like a kid again.
“It all comes back to the fact that everyone loves pizza, and there are ways to push a product to even more success,” Mr. Foran said. “It’s always going to be in demand.”