Frozen pizzas: steamy sales

February 05, 2010

Pizza parlors that ply America with their hot, saucy, cheesy creations have always had an edge on supermarkets.

Pizza parlors that ply America with their hot, saucy, cheesy creations have always had an edge on supermarkets. Whole Foods and Fairway Market are two of a rare breed of food store that dared to encroach on the skilled pizza makers in their neighborhoods.  

Few supermarkets could truly capture the showiness, aromas and pure passion of a 'pizza place' aka social hub - and they knew it, so why try. The competitive moat that kept pizza parlors safe for decades may be getting shallow. Product improvements and powerful marketing from frozen brands make them more competitive.

In their frozens departments, supermarkets are merchandising the many positive aspects of packaged brands and fast-growth private labels. The category benefits today from wider varieties, healthier toppings, downsized portions for singles or dieters, improved quality - and lower prices than the local pizzeria offers.  

Convenience tops every appeal, however. We believe at F3 that frozen pizza ranks as one of the most convenient foods in the entire supermarket. It fills the role of a meal by itself—and it stands out as a value choice in the current economy. Easy to store, easy to heat and eat (especially since housewares manufacturers 'rounded out' their toaster-ovens to fit personal pizza pies) - no wonder Neil Hendry, vice president of consulting, Datamonitor, told the Minneapolis Star-Tribune recently: "Since 2000, sales of frozen pizza in the U.S. have grown an average of 3.8% every year. That's faster than the overall food market, which during the same period grew 2.7% a year."

The sum of these efforts:  Dollar sales of frozen pizzas (prepackaged, UPC-coded products only) rose a significant 8.5% to $4.17 billion in U.S. food, drug and mass merchandiser stores (including Walmart) during the 52 weeks ended December 26, 2009, according to Nielsen data. This occurred on a 5.6% equivalized unit volume gain (16-ounce basis) in the same period.

When the recession was a year younger, the category grew at a lesser rate, 5.4% to $3.84 billion in 2008, on a 1.8% EUV decline, the data showed. As the bad economy persists, the data suggest that people are choosing pizza as a meal more often.

To save even more, consumers are buying private label. It appears that brands control about 90% of the frozen pizza category. But data for the past two years indicate this share could wane. For example, dollar sales of brands grew 4.5% in 2008 and 6.4% in 2009 to reach $3.79 billion. Meanwhile, the dollar sales of private-label frozen pizzas jumped by 18.6% in 2008 and 35.1% in 2009 to attain $379.9 million, reported Nielsen. EUV figures show a dramatic outpacing by private label—which grew by 7.3% in 2008 and 27.1% in 2009 vs. brands' 2.6% decline in 2008 and 3.4% rise in 2009.

The frozen pizza category penetrates more than seven out of 10 U.S. households (71.6%), according to Nielsen Homescan Consumer Facts for the 52 weeks ended June 27, 2009. These households spend an annual average of $43.19 on the category, and they buy it on deal more than one-third of the time (33.6% on deal, and 3.6% with a manufacturer coupon).