Supermarket GROCERY Business: Pizza pie in the sky

Mamma mia! Take a look at what's happening over in frozen pizza! In a move likely to give Papa John's agita, one of the supermarket's oldest categories is undergoing a major revolution that's bringing more restaurant-quality pies to freezer case shelves in an effort to revive sales. Today, Jamaican Jerk chicken, Bacon Cheeseburger, and Spinach Portabella Mushroom are almost as common as double cheese and pepperoni in the freezer case. And since they're at price points several dollars below that of takeout, consumers are asking themselves, "Why call Domino's when I can get a superior product from Dominick's at a fraction of the price?" At least that's the game plan behind the innovation drive.

But despite the advent of rising crusts, the frozen pizza category has been basically flat over the past year. According to ACNielsen, sales of frozen pizza for the 52 weeks ended July 12 were $2.5 billion, an increase of 1.1 percent. During the prior 52-week period sales increased 5.2 percent. For the latest 52 weeks, volume was essentially flat, increasing 0.1 percent to 946.7 million pies. During the previous year volume was up 3.2 percent.

"Currently the category is experiencing modest growth, but Kraft Pizza Company believes we've only begun to tap into the potential of frozen pizza," says John Boswell, v.p., marketing, at Kraft Pizza Company in Glenview, Ill. "With less than 10 percent of overall pizza sales, there's ample opportunity to expand. Therefore, it's imperative that we keep the category interesting for consumers by continuing to innovate with new products in the flavors and styles they're seeking. Not only will this ensure frozen pizza remains an important mealtime solution, but it should lead to new usage occasions for frozen pizza products to penetrate."

"Frozen pizza was a pretty mature, flat category in the mid-'90s," notes Pat Turpin, managing director and head of the Food & Beverage Group at USBX Advisory Services in Santa Monica, Calif. "What really sparked growth in the late '90s was the emergence of the premium category that really didn't exist before. Growth was being driven by product innovation." But now the sales have slowed down.

"The economy has a lot to do with pizza sales," says Brian Nau, v.p., marketing, at Schwan's Consumer Brands North America in Bloomington, Minn. "A lot of different food areas are slowing down as a result of the economy, although pizza still does offer a very good value and meal occasion for the family."

Trading up

Pizza is such a good value that consumers can buy supermarket products that would fetch a premium at a restaurant. "One of the things we're seeing is that people are trading up in terms of quality," Nau says. "In March we introduced Freschetta Brick Oven pizza, which has really struck a chord with consumers and is already our fourth-largest brand." The product features a square, brick oven-fired crust, with unique toppings like Spinach & Portabella Mushroom and Southwestern Chicken, as well as the more usual pepperoni. "Spinach & Portabella is something that they don't have in Pizza Hut, and that's probably the variety that's the lead in getting trial in the marketplace," he says.

"Consumers view pizza as more than just crust, meat, cheese, and tomato sauce," Boswell says. "They've become more adventurous in their pizza selections and want to experiment with unique, nontraditional pizza flavorings and forms."

That's why last month Kraft launched a Jamaican Jerk Pizza under its California Pizza Kitchen brand. "This is an authentic blend of Jamaican jerk-style chicken breast, spicy and sweet sauce, roasted red and yellow peppers, green onions, mozzarella cheese, and applewood smoked bacon," Boswell says. "The CPK restaurants launched Jamaican Jerk in 2002, and it's now one of their top 10 selling items on the menu.

"We partner closely with the CPK restaurants to replicate some of the most popular CPK pizzas, such as Thai Chicken and BBQ Chicken, to ensure the frozen line delivers the unique flavors and tastes associated with the pizzas at the CPK restaurants," Boswell continues.

Other new products from Kraft include DiGiorno Deep Dish, the first national pizza brand to offer a restaurant-style deep-dish pizza; the Tombstone All-American Flavors line, which makes use of sister brands, like the Bacon Cheeseburger pizza made with hamburger, Oscar Mayer bacon, ketchup, cheddar, and American cheese; and Kraft Pizza available in Houston and Los Angeles with bilingual packaging to target Hispanics.

The frozen pizza category is increasingly dominated by the two industry giants—Schwan's with Freschetta, Tony's, and Red Baron brands; and Kraft with DiGiorno, Tombstone, California Pizza Kitchen, and Jack's—the "two gorillas," as Turpin calls them. He expects consolidation to continue in the category, fueled by consolidation on the retail side of the business, resulting in chains receiving large slotting fees from players who want to own a category. "When you walk through a typical chain supermarket and look for the amount of square feet being offered to pizzas and relate that to the number of manufacturers, there's a very small number of manufacturers in that square footage," he says.

But the small and regional players say not to count them out. In an effort to hang onto their slice of market share, they're fighting back by touting their heritage, all-natural ingredients, and overall good value. "It's a little bit tougher to compete sometimes, because a small company like mine doesn't have the wherewithal that some of these larger companies do," says Mike Ryan, president of Provision Foods, Ltd. of Wanaque, N.J., which owns the Tree Tavern frozen pizza brand, along with Side Dish frozen stuffed potatoes.

One of the originators of the frozen pizza concept, Tree Tavern traces its roots to the Tree Tavern, a tavern/pizzeria in Paterson, N.J. that began marketing frozen pizzas in 1955. The brand is distributed only in the Northeast, primarily in the metropolitan New York and Philadelphia markets. "We still maintain our heritage," Ryan says. "It's a really great-tasting Italian-style pizza with all-natural ingredients and no artificial preservatives, colors, or anything like that."

Rarely advertised, Tree Tavern has nonetheless developed a cult following. "We're not trying to break any consumers' banks. It's a good value price," Ryan says. "We feature it once in a while, but it's not a feature-driven product, in a category that's quite driven by promotions. We try to maintain a nice, even business depending on consumers who are loyal to our brand. I think that may be unique to the category."

Home Run Inn is another venerable brand, tracing its roots back to 1947. The brand has grown from its Midwest base, where it's direct store delivered in Illinois, northwest Indiana, and southern Wisconsin through the company-owned Power Play Distributors; to Philadelphia, where it's sold in Acme Markets; and the Southeast, where it can be found in Harris Teeter.

"Our newest product is called Perrino's and is an authen- tic Chicago-style deep-dish pizza that comes in cheese, sausage, and pepperoni varieties," says Angela Ginex, frozen food marketing manager at Home Run Inn in Woodridge, Ill. "They're all-natural with no preservatives and no hydrogenated oils, just like with our regular Home Run Inn brand."

Getting shelf space hasn't been a problem for Home Run Inn, Ginex says. "Stores recognize us as a quality product, and because we're a quality product we have strong customer loyalty." Home Run Inn is looking to make that loyalty even stronger by conducting in-store demonstrations of Perrino's in Acme and other stores. "We're very focused on our in-store demos because what better way is there to sell a product than to have somebody sample it right there and see how great it is, and then be able to purchase it?" she says.

The private label factor

Celeste is another iconic brand dating back to the 1930s, when Italian immigrant Celeste Lizio started selling pizzas in her Chicago restaurant. The brand was bought by Quaker Oats in 1969 and is strongest in the Northeast, Southeast, and along the West Coast. "Celeste focuses on the single-serve frozen pizza subset and is the largest brand in this category, with about a 23 percent market share," says a spokesman for St. Louis-based Aurora Foods, which acquired Celeste in 1996.

Today Celeste products include small seven-inch pizzas and, for larger appetites, large 12-inch pizzas. Celeste Fresh Baked Rising Crust pizza was introduced in 1997, offering a restaurant-quality pizza at a considerable value compared with takeout.

Private label is an even greater value compared with takeout, and that's where Continental Food Products comes in. Founded in 1978 by Elias Betzios, the original founder of the Ellio's brand, and his sons, Continental does private label for "most of the supermarkets in the Northeast," according to Steven Betzios, general manager of the Flushing, N.Y.-based firm.

"Private label is becoming a bigger factor in the freezer case," he says. "Although you do have the brand-loyal consumers, there are also the price-oriented consumers."

About 10 years ago Continental introduced the Betzios brand of pizza. Unlike traditional round pizzas, Betzios comes in rectangular slices, packed nine to a box, in three break-apart rows of three. "This is the original recipe that made Ellio's famous," Betzios says. "After my dad sold Ellio's it went through a series of different owners, and they changed the size of the product, the quality, and ingredients, so we came back and did the original family recipe."

Vegetarian offerings are another niche. Morningstar Farms offers a vegetarian supreme pizza that's rapidly gaining in popularity. "Consumers have given it high marks, often saying that they can't believe it's a healthful pizza," says Christine Ervin, a spokesperson for The Kellogg Co. in Battle Creek, Mich. "Our product is popular throughout the year, but summer, back-to-school, and colder weather are among the seasonal highlights."

Spooky promotion

Advertising is important to generate sales increases. "Partnering with retailers, we can increase sales by featuring and displaying frozen pizza regularly," says Kraft's Boswell. "Using point-of-purchase signage draws consumers to the category and is a great way to integrate our equity building advertising and promotion efforts. By partnering, we believe we can continue to grow the frozen pizza category."

Kraft's current promotions include the "Cool Pizza. Cool Places" in-store promotion running in September and October; the DiGiorno Dare, in which consumers receive a $2 check if they don't agree that DiGiorno tastes as good or better than delivery pizza; a Jack's on-pack instant-win promotion; and the ever-popular Tombstone "The Official Pizza of Halloween" promotion.

"Our retail partners have come to expect a spike in sales at Halloween, and we reinforce that message with compelling in-store point-of-sale materials. This year's creative features graveyard-inspired imagery and encourages shoppers to 'bury their hunger' and 'put their cravings to rest' with Tombstone pizza," Boswell says.

That should not only increase category sales, but panic the pepperoni out of the Domino's delivery boy and Papa John's, too.
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