Thin Is In

Demands for healthier food choices and better value are driving the pizza category.

Despite including all of the major food groups — bread, dairy, meat and veggies — pizza has never been considered a health food.

But you wouldn't know that by the latest products hitting the pizza shelves in grocers' freezer cases. "Healthy offerings are growing at a healthy rate," says Maria Brous, director of media and community relations at Lakeland, Fla.-based Publix Super Markets Inc. "[We're seeing] double-digit increases for this category."

Brous says that includes the grocer's new Publix Organic line of frozen pizzas, along with offerings from Kashi and Amy's Kitchen. "Overall, the frozen pizza category is flat in dollars and units, but we are comparing this year against a prior year that saw 25 percent to 30 percent increases in dollars and units," she notes.

The frozen pizza category, including frozen crust, racked up just over $3 billion in sales for the year ending Aug. 7, in U.S. food stores with at least $2 million in sales, excluding supercenters, according to data from Schaumburg, Ill.-based Nielsen. That's up 2.3 percent over the same period a year earlier; total units sold are up 5 percent over the prior year.

New products this year from Milwaukee-based Palermo's Pizza, maker of branded and private label frozen pizza products, reflect consumer trends for healthier pizza options, as well as authentic flavors.

"Earlier this year, we introduced two new products to our award-winning Primo Thin product line: Primo Thin Garden and Primo Thin Chicken Fajita," says Giacomo Fallucca, Palermo's president and CEO. "Palermo's Primo Thin Garden pizza is perfect for consumers who are seeking healthier pizza options."

Both varieties feature all-natural crusts (multigrain for the Garden), part-skim mozzarella and other cheeses, and various toppings, including fire-roasted peppers and onions. "The Primo Thin Garden variety was recently named to Health Magazine's America's Healthiest Buys list for 2010," Fallucca notes.

"Consumers are seeking products with healthier ingredients," he continues. "These are not always diet pizzas, but rather pizzas that deliver great taste with improved nutritional benefits such as fewer calories and carbohydrates. Consumers tend to opt out of the category around age 45, and as the American population continues to mature, meeting the needs of the baby-boom consumer will become increasingly more important in order to retain them in the category."

Westport, Conn.-based Newman's Own is using the national launch of its Thin & Crispy frozen pizza line to roll out a new brand positioning: "Let the food speak for itself." Ads include "quotes" from the food and its all-natural ingredients; one print ad shows a pizza saying, "My only preservative is your freezer."

Meanwhile, private labels like Target's Archer Farms offer pizzas like those in the Minneapolis-based retailer's Simply Balanced line, including a turkey sausage pizza on a whole wheat crust. Bill Patterson, senior consumer analyst for Chicago-based global market intelligence firm Mintel, notes that store brands accounted for approximately a quarter of pizza product introductions in 2009.

Ric Alvarez, president and CEO of Holland, Ohio-based Frozen Specialties Inc., sees strong interest in natural, organic and other health-minded pizzas, as well as microwavable options and artisan-style flavors.

Brad Sterl, president of Pittsfield, N.H.-based Rustic Crust, also notes stepped-up interest in better-for-you pizzas — for example, items that boast a whole wheat or multigrain crust, or are topped with vegetables subjected to less processing. Thin is still in when it comes to crust, according to Chris Dresselhuys, director of marketing at Palermo's, who adds that retailers also should have rising crust and all the other basics covered.

As good as its word, Palermo's will be launching Hand Tossed Style pizzas this fall, expanding the Palermo's brand family of premium frozen pizzas that includes Naturally Rising and Stone Baked lines as well as Primo Thin. "Each crust type is designed to serve a unique pizza occasion and offers distinctive pizzeria-quality flavors and textures to deliver a great taste experience," Fallucca says.

The traditional segment is highly promoted at Publix, Brous says, especially with the grocer's "Love to Shop Here/Love to Save Here" program, and the previous Essentials campaign.

"The largest segment, premium (which includes DiGiorno, Freschetta and Publix) is also trending flat compared to prior year, so this customer is not trading down to the regular segment — rather, the budget customer (for example, Totino's, Celeste and Tony's) customer is trading up," Brous notes. "French bread pizzas are treading slightly down as well."

Sales of deli pizza are up 7.4 percent, to just under $119 million, according to Nielsen data. Mintel's Patterson attributes this rosy performance to retailers' efforts in going after the Friday night takeout pizza market.

Choice: Blessing and Curse

Fallucca says many retailers have discovered that providing a wider array of brand and flavor variety choices, beyond their current offerings, helps to increase the overall market basket. "Because of this, more retailers have been looking to add brands like Palermo's to their product mix," he says. "We have been employing a lot of value bundling, or pairing center-of-the-plate product with complementary products to enhance consumer value. Some examples of these pizza pairings include promotions with beverage, salad and ice cream products."

This strategy has been a successful one, according to Fallucca. "One such promotion executed in 2010 increased dollar sales for both of the partner brands by more than 30 percent," he recounts.

Retailers have the opportunity to be a one-stop frozen pizza solution for every one of their customers, Alvarez of Frozen Specialties asserts. "Offer the first and second most popular name brands," he advises, "and then determine what other flavors, sizes and types customers want, bringing in private label to meet those needs."

And although sampling can be somewhat expensive, Sterl of Rustic Crust says he believes it's still the best way to get a new pizza product into shoppers' stomachs. Retailers can drive category awareness and profitability, meanwhile, by promoting a variety of pizza segments at the same time, Alvarez adds.

Better at Retail

The national appetite for frozen pizza is growing, Palermo's Fallucca declares. "The greatest amount of real dollar growth has come from the premium category — pizzas that retail for $4 or more — which grew by 6.3 percent, or $68.4 million," he notes. "In the current economy, consumers are forgoing restaurant purchases and opting for premium-segment frozen pizzas. Ultimately, consumers want an at-home pizza experience and can achieve a better price through retail."

The frozen pizza industry is projected to grow at roughly a 4.5 percent annual growth rate through 2014, surpassing $5 billion, Fallucca says. "The hottest pizza trend that will continue to exist is premium frozen pizza that delivers pizzeria taste. We have noticed a trend moving into a greater variety of upscale flavors. Consumers can now enjoy frozen pizza with restaurant-quality toppings," he says. "New products also help drive frozen pizza sales. Again, consumers want choice. Offering different tastes is critical, but providing retailers with products that increase category sales is equally important."

Deli-mentary

When Mintel recently asked consumers about the pizza concepts they would most like to see, the global market intelligence firm uncovered a potential opportunity for retailers' in-store delis.

"A third of everyone we spoke to said they wanted more customizable pizzas at the deli counter," says Bill Patterson, senior consumer analyst for Chicago-based Mintel.

Of particular interest were pizzas geared toward women (for example, pies with fewer carbs, lower fat and additives such as omega-3 fatty acids) and pizzas geared toward men (with, for example, a high-protein crust). Patterson adds that a number of respondents also expressed a desire for breakfast-type pizzas.