Refrigerated pasta is alive and well and living in the refrigerators of many middle- to upper-income shoppers.
As a whole, the category may not recover the booming sales it experienced when it first exploded onto the market, but certain areas can look forward to expansion, industry sources contend.
Convenience and variety will buoy this niche category in the near future, with new "meal solutions" and innovations in filled and low-fat pastas leading the way, sources said.
Private label continues to be the area most likely to expand, while national-brand sales still have not recovered the tremendous growth they once enjoyed. "Refrigerated pasta is still alive," said Pete Marino, frozen/dairy buyer and merchandiser at Genuardi Family Markets, Norristown, Pa. "It is not experiencing the growth that it had three years ago, but we still do well with it."
"The category continues to grow, and as it grows, Safeway plans to support it," said Deborah Lambert, director of public affairs at the Oakland, Calif.-based chain, which is achieving success with its own private-label fresh pasta, "Select."
There are specific areas where growth is possible, however, and the 27-store chain is staying on top of them. Although they only carry national brands at the moment, according to Marino, "We are considering private label."
The premium price tag on refrigerated pasta is a problem for a large number of consumers as well, said Ken Harris, a partner at Cannondale Associates, Evanston, Ill. "The category has flattened because pricing is 20% to 30% more than a box or bag [of dry pasta]," he told SN.
But the fact that this is a niche category is far from catastrophic, Harris added. "OK, maybe [sales for the category have] leveled out, but over five years it went from zero to $350 million," he continued.
"It's never going to be a mainstream item," he said. "The only way they could do that is [reduce the] price, and that in itself destroys its reason for being.
"Our Select pastas are doing very well, and they are also doing well compared to national brands," Lambert told SN. There are 11 pastas and seven sauces in the Select line, she said, with prices that are "comparable" to the national brands.
The number of facings varies from store to store, she said, but "the selection is extensive."
Sauces include marinara, alfredo and clam sauce, and pasta variations include tortellini, meat and chicken, and cheese ravioli, linguini and cappelini.
Select pastas are packaged in a clear, sealed box container "so that the consumer can see the pasta -- that's very important," Lambert said.
Safeway also carries Contadina pasta and, "in some areas, particularly strong regional brands."
Save Mart Supermarkets, Modesto, Calif., also has great hopes for its private label, Sunny Select Pasta.
"We feel that the main growth [in refrigerated pasta] will come from expanding our private label, which currently [has] three varieties and five SKUs," said Sally Sanborn, director of trade and consumer relations. "The category is steady and still growing." A common problem confronting most retailers is inadequate space to accommodate the number of facings they would like to have. "The biggest problem we have is allocation of space -- we have adequate space but not a lot of growth area," Sanborn told SN. Save Mart carries Contadina as well as a regional brand, Mallard's, which Sanborn said is the No. 1 seller in Save Mart stores, and which also manufactures Sunny Select Pasta for the chain.
Wholesaler Spartan Stores, Grand Rapids, Mich., has similar space complaints, according to Brian Dubbink, dairy buyer/merchandiser. "One of the problems we have with being a wholesaler is that the product is pretty much shoved in wherever there's room. We would love to be able to have a 4-foot Italian section, but we can't," he said.
"A lot of our retailers are really old and small and they tell us they don't have room [for refrigerated pasta]."
When price recently became an issue for Spartan, the wholesaler decided to carry only one national brand.
"Of the national brands, we now only carry Contadina," he said. "We no longer carry DiGiorno -- we got out of that at the beginning of the year because of price.
"Sales since we switched have increased," he said, adding that this could be the result of better space allocation for the remaining competitor.
"I think there is still an upside for refrigerated -- it depends on how much they want to turn on the consumer spigot," he said, referring to the possibilities for increased advertising and promotional efforts.
Nestle Refrigerated Food Co., Glendale, Calif., manufacturer of Contadina, is trying to do just that, according to Dawn Caldwell, category director of marketing.
Following a lull in aggressive advertising caused by a decline in profits in 1993, "we reinvested a significant percentage of marketing money back into advertising in newspapers, national cable TV, and other vehicles." The company budgeted $10 million for an advertising plan that began in 1994 and will continue throughout this year.
"Category sales were down 4% in 1993 and came back to a 1% increase in 1994," Caldwell said. "We are up 6% year-to-date."
Nestle retains the No. 1 market share in the category, according to Information Resources Inc., Chicago.
For the first quarter ended March 26, Contadina's sales were up 1.4% over a year ago, totaling $102.8 million. Kraft Foods' DiGiorno is in the second position, with sales totaling $39.2 million, down 7.7% from last year. Private label climbed to third place, with sales of $15.5 million, up 17.3% over 1994.
Caldwell said refrigerated pasta is positioned to benefit from consumer trends for convenience, freshness, quality and ease of preparation.
Contadina's target consumers earn $60,000-plus, are well-educated and primarily women, although there has been "good development" among single men in particular, she said.
"What we've really learned about this type of consumer is it is difficult to reach [the person] with daily food ads," she said. "So it is important to get impact at the point of sale. We try to encourage retailers to support us with point-of-sale materials."
Contadina is aware of the premium placed on space allocation: "More important than giving us price reductions [is] giving us good merchandising visibility in the store."
Not only the amount but also the location is a primary concern, Caldwell said.
"Some [retailers] actually get us secondary merchandising space. Maybe in the meat department or in the salad section where the precut salads are displayed."
Most often, however, retailers seem to place refrigerated products either in the dairy or the deli section, depending on the customer profile of the particular store.
Safeway, for example, displays the product in both sections, whereas Save Mart only carries it in the dairy section. Wholesaler Spartan would like to place it in multiple sections, "but right now it is only viable in dairy," says Dubbink. "When merchandised in dairy, [retailer] margins can range from 30% to 35%," said Caldwell. "In deli it can go anywhere from 30% to 45%." In the future, wherever refrigerated pasta is positioned in stores, emphasis will be placed on the consumer's desire for optimum convenience, says Cannondale's Harris.
"[The category] will go to meal solutions," he said. "Pasta will come prepackaged, you'll get 'the whole enchilada' in one package, including sauce, pasta and cheese.
"[It's] a whole concept sale -- the idea is you're selling the meal, not the components. There's a lot of primary heat on this concept.
"The problem is that with category management, the concept of cross-merchandising is getting pushed to the background."
However, partnerships between the manufacturer and retailer should not be given short shrift, said Patricia Shafer, director of corporate affairs at Kraft, Glenview, Ill., maker of DiGiorno.
"Shelf presence is critical for this product, and [we've been most successful] in those situations where we have been able to work with the retail trade on shelf presence and price management."
Tremendous opportunity is there for the taking in the category overall, Shafer said.
"Look at Europe, where Italy and France have a very high household penetration [of this product]," she said, citing other products such as yogurt, which have followed European trends to success.
Another area for growth, Harris predicts, is taste innovation.
"I think the key is innovation down the road; unique taste experiences. If you go to the Italian-American catalog of pasta, they haven't begun to exhaust the possibilities."
Harris cited seafood fillings or oven-ready lasagna as examples.
"It's going to be contents, forms and shapes. It's not going to be the ingredients of the pasta itself."
Save Mart's Sanborn agreed: "Growth will be in new flavors that manufacturers are working on that can bring new sales and growth to the department, such as sun-dried tomatoes, lemon pepper and in filled pastas such as tortellini and ravioli.
And there are still battles of regional acceptance to be won, according to Tony Giannini, vice president of sales and marketing at Monterey Pasta Co., Salinas, Calif.
"The category hasn't fully matured; there are still some regions that are warming up to fresh pasta, [such as] the Midwest," he told SN.
Giannini said he thinks demographics and consumer needs paint a rosy picture for the future of the category.
DiGiorno's Shafer concurred: "The universal view is that the category is doing quite well, at 3% growth rate per year," she said.
"[Refrigerated pasta] serves demographic needs," agreed Giannini. "It's quick and easy for two-income families, and it can be healthy in certain quantities."
The category will also overcome price competition from dry pasta, Giannini said.
"People are really migrating to fresh pasta for quality. Plus, you cannot buy shelf-stable filled pasta, such as ravioli or tortellini."
Low-fat pasta is also catching on, he said: "We will see some growth there."
Growth will also play a big part in Monterey's future, Giannini says. The company is going after the spot currently occupied by DiGiorno.
Supermarkets ultimately are having to pay attention to the category, concluded Harris, whether they feature national or regional brands or their own private label.
"Because of all of the pressure being put on supermarkets for quick service, they need to do this.
"These days, it has to be ready to eat, ready to heat or ready to prepare. We will hear a lot about [this] in the next six months to one year."