Frozen pizza hits a growth bump

June 10, 2011

A performance setback for the darling of the frozen foods aisle has brands taking aim at pizza delivery chains.

For the first time in recent memory, a marketing onslaught by quick-serve pizza chains has stifled encroachment by the retail frozen pizza category.  

Dollar sales of frozen pizza fell 4.5% to $4.02 billion in U.S. food, drug and mass merchandiser stores (including Walmart) during the 52 weeks ended April 16, 2011, according to Nielsen data tracking prepackaged, UPC-coded products only. This occurred on a 1.3% equivalized unit volume (EUV) decline (16-ounce basis) during the same period.

This is a sharp reversal for frozen pizza, which has typically earned its high-visibility freezer door position as a convenient, low-priced, heat-and-eat meal solution for households constrained by time and budgets. For example, in the previous 52-week period, frozen pizza dollar sales had risen 7.4% on a 7.1% EUV increase, stated Nielsen.

Frozen pizza dollar sales had grown consistently since long before the recession - up an annual average of 3.8% since 2000, outpacing the concurrent 2.7% annual growth of the food market overall, reported Datamonitor last year. The U.S. is the largest frozen pizza market in the world, representing about 43% of global market value, Euromonitor noted last year.

Moreover, U.S. pizza consumption is at a record high - the average American will eat restaurant pizza 19 times and frozen pizza at home 14 times in 2011, NPD Group told the Chicago Tribune this spring.  Pizza, says Harry Balzer, NPD's chief industry analyst, ranks sixth as a dinner entrée behind sandwiches, chicken, beef, Italian food and pork.

Also, more than 33% of U.S. individuals consume frozen pizza at least once every two weeks, according to a Tyson Foods presentation at the latest National Frozen Pizza Institute conference.   Where does this happen most? Frozen pizza/snacks/hors d'oeuvres penetrate 81.3% of U.S. households (Spectra) and index highest among bustling families with children at 167+ (Nielsen BehaviorScape data).

To capitalize on such positive trends, Nestle acquired Kraft's leadership share in the U.S. frozen pizza category.  But in the time Nestle needed to create its brand management strategy, the quick-serve pizza chains rebounded. Now both Nestle (DiGiorno brand) and Schwan, the #2 market share leader (Red Baron brand) are running advertising campaigns promoting their quality and value against that of the pizza delivery chains (Pizza Hut, Domino's. Papa John's, for example). DiGiorno has long aired these commercials; the new Red Baron effort centers on Web videos that viewers could share.

Since consumers order appetizers 42% of the time and side items 50% of the time when ordering pizza from a restaurant (Technomic Pizza Consumer Trend Report 2010), frozen pizza makers have begun to pair foods within their pizza boxes. Some of the combinations already in the market are chocolate chip cookie dough, breadsticks with marinara dipping sauce, artichoke dip, and boneless chicken in shapes resembling wings.