PASTA PEAKS

LIZA B. ZIMMERMAN

Retailers across the country report steady growth at the refrigerated pasta case, although some suspect it is a category that may have reached its apex.

Far from a newcomer to the supermarket shelf, the refrigerated pasta category can still be the subject of debate over such basic issues as whether to merchandise in the deli or the dairy, and what kind of role it should play in a supermarket's home-meal replacement strategy.

"We are selling more refrigerated pasta than we ever did. This is not a category [that represents] double-digit growth for us. It's at a maturity level," said Scott Silverman, vice president of specialty food at Houston-based Rice Food Markets -- which operates under three banners, Rice Food, Rice Epicurean and Grocery World.

"It has really only sold in middle- to upper-middle-class areas. It has not done well in lower-end stores," said Silverman, who added that he carries refrigerated pasta in about one-third of his stores.

"The growth rate is small. I think it is growing, but not very quickly," said Mike Klein, owner of Klein's Super Markets, Forest Hill, Md. He estimated category growth at about 5% over the past year and attributed it to consumers' desire for faster food and the perception that "pasta as a category is a quick item to prepare."

Scan statistics for plain pasta analyzed by ACNielsen, Schaumburg, Ill., show a 4.5% drop in refrigerated pasta sales nationally, to a five-year low of $159.6 million in annual sales in 1996, following four years of steady growth.

Despite these statistics, however, some retailers said they see refrigerated pasta as a category with room to grow.

David Bennett, co-owner of Mollie Stones, an independent retailer in Palo Alto, Calif., noted that his refrigerated pasta sales had been continually increasing at a rate of about 5% a year since he started carrying refrigerated pasta 11 years ago. He also noted particular growth in the area of filled pastas.

"Sales have gone up 50% over the last two to three years," reported Tom Stabler, owner of Stabler's Marketplace in Tempe, Ariz. "The refrigerated pasta category is expanding. More people are buying it and manufacturers are offering a larger menu."

"Sales are up over last year by 10 percent," said Matty Kuhn, a deli clerk at the Neptune ShopRite, Neptune, N.J., about the category's movement in his store's deli department. He attributed the sales growth to increased advertising on television.

Kuhn noted not only a wider variety of refrigerated pasta available, but also a greater interest on behalf of his customers. "People are interested in a quick and easy dinner and [refrigerated pasta] is something that you can microwave," concluded Kuhn.

The dairy department at the Neptune ShopRite also carries refrigerated pasta, with what was reported to be a slightly less successful track record.

"Sales haven't been going well," noted Bob Crane, dairy manager. "Most people associate refrigerated pasta with the deli."

The presence of refrigerated pasta in two of the Neptune ShopRite's departments shows how retailers have been able, with varying success rates, to merchandise the category in both the dairy and deli sections of the supermarket.

Retailers said their motives for choosing to offer refrigerated pasta in one or both departments included price points, cross-promotion options and the desire to select the department where they believed their customers expected to see the product.

Klein said he has sold his refrigerated pasta either in the deli food-to-go meal program or dairy.

He noted that one of the deli department's distinct marketing advantages is that most national pasta programs have "complementary sauces with the same label that are usually merchandised as a unit."

Mercy Martinez, a deli clerk at a Safeway store in Tempe, puts jars of Safeway and Contadina sauces in the case with the pasta in her deli section.

Neptune ShopRite's Crane noted that not only does the deli department tie refrigerated pasta in with other items, but also tends to sell refrigerated pasta faster.

In a self-service case in the deli at Price Plus, Aberdeen, Wash., deli manager Rhonda Nickle cross merchandises refrigerated pasta with "wedges of Parmigiano, Romano and Asiago [cheese] in the case."

Nickle has found that merchandising refrigerated pasta in the deli also gives her more flexibility to explore a wider variety of cross marketing and HMR ideas.

She said that she'll "bring in prepared meatballs and put them next to the pasta or do a meal with vegetables and garlic bread in the to-go microwavable container."

She also cross promotes refrigerated pasta at the deli's full-service salad case. "We cook refrigerated pasta and make salad entrees with it," said Nickle, who estimates that she offers four to five different refrigerated pasta salads for $2.59 a pound.

Even ShopRite's Crane said refrigerated pasta's future is in the deli department, noting that although he thought at least one brand would remain in the dairy, "I see it moving more over into deli."

Some retailers continue to choose to sell refrigerated pasta exclusively in the dairy section, a department which offers a different set of cross-promotional opportunities for the category. Selling it in the dairy might allow retailers to market it "near Italian cheeses and closer to the cheese program," noted Klein.

At Rice, the refrigerated pasta is displayed in the dairy. "We used to carry it in the deli, but our delis have limited space, which we like to use for imported cheese," explained Silverman.

Silverman said that for at least half of the 15 years that Rice has carried refrigerated pasta, the pasta had been coming through a deli distributor, giving them little choice as to where to display it. He said that moving refrigerated pasta into the dairy department greatly increased sales.

"Refrigerated pasta had the biggest growth spurt when it moved to dairy. It at least tripled in sales," he said. The category "never would have had that kind of growth in deli," because 80% of customers shop the dairy, he explained.

And selling refrigerated pasta in the dairy not only boosted sales, but also "cut the price by 20% to 30% because the deli works on much higher margins,"he said.

Mollie Stones' Bennett combined the advantages of both the deli and dairy departments by displaying his refrigerated pasta in a combined dairy/deli self-service case near the luncheon meats. "It's adjacent to the cheeses, both shredded and grated, and [we] also merchandise ready-to-heat polenta there," he added.

Bennett noted that one of the main reasons that Mollie Stone's had chosen to merchandise refrigerated pasta in its combined deli/dairy section is because the department is so highly shopped.

The retailers interviewed by SN said they had been carrying refrigerated pasta for anywhere from two to 15 years. Most retailers ranged between five to six years.

Almost all the retailers interviewed said they carried two or three different brands of refrigerated pasta, with Contadina generally leading the pack.

"The lion's share is being done by Contadina, which is probably 80% of the category," said Rice's Silverman. "We have carried other brands, none of which can really compete. Contadina was the first to get into it and is the category leader for us," he added.

ShopRite's Kuhn agreed that "Contadina has much more variety and outsells the other brands he carries by five to one."

"Contadina is the bulk of the market," Klein added.

Mollie Stone's Bennett begged to differ, however asserting that Contadina only represented about 7% to 8% of his total refrigerated pasta sales, with the bulk of sales being done by other brands like Monterey and Mallard's.

And Safeway's Martinez said that her store's in-house brand moved faster than Contadina.

In addition to Safeway, both ShopRite's Kuhn and Price Plus' Nickle said they featured their own in-house brands of refrigerated pasta.

Retailers reported carrying anywhere between 15 and 40 different refrigerated pasta varieties including angel hair, linguine, fettuccine and a wide range of meat and cheese-filled tortellini and ravioli.

Nickle explained that "homemade pasta was my idea. No one in town makes their own and everyone likes pasta." She said that Price Plus had a pasta machine, which it used to make pasta on-site in the store for almost three years.

In the great pasta wars at the supermarket, two of refrigerated pasta's strongest selling points are that it usually takes less time to prepare then dry and has the value-added appeal of a fresh product.

"Part of the advantage is convenience, [but] it's not necessarily higher quality," noted Rice's Silverman.

"Refrigerated takes two to three minutes to prepare instead of ten for dry," added Safeway's Martinez.

"I think it's the freshness issue and the taste," said Stabler. "I don't think it's easier to prepare, but there's a perception in the consumers' mind that they are getting a fresher product."

Mollie Stones' Bennett said that refrigerated pasta accounts for 30% to 40% of his total pasta sales; Rice's Silverman put that figure at 25% and Stabler estimated 15%.

At Klein's, dry pasta was by far the largest selling segment of his pasta sales, partially because of cost. Klein noted that the price of a dry pasta meal with sauce was not even half that of a $6 refrigerated pasta and sauce meal.

"I don't think that refrigerated can overtake the dry program," added Klein.

"It's a tough sell because it's a higher priced market."

Rice's Silverman also mentioned the price issue, saying that "refrigerated costs two to three times as much."

Nationally, ACNielsen reported an average 1996 price of roughly $4 a pound for refrigerated pasta compared to $1 for dry. And while refrigerated pasta lost sales dollars in 1996, both dry and frozen gained, 1.1% and 9.4% respectively.

These figures prompted an ACNielsen analyst to speculate that substitution might well be driving sales in the refrigerated pasta category down.

According to ACNielsen's figures, there's no real competition between refrigerated and dry. In 1996, refrigerated pasta had slightly over 10% of the market for plain pasta, compared to dry pasta's 83% and frozen's 7%.

The retailers interviewed said they participate in frequent promotions for refrigerated pasta.

Rice's Silverman said refrigerated pasta was advertised at least once a month, involving specials like 33% off, $1 off, or a two for $3 deal.

Safeway stores will periodically run a $1-off coupon on Safeway refrigerated pasta, and occasionally an in-store special in a coupon book or weekly newspaper ad, according to Martinez. She added that Contadina also runs sales once in a while.

Mollie Stones' Bennett said he will, at times, do a buy-one, get-one-free special or offer a $1.99 package for 99 cents. And "we will sometimes move bunkers over and fill them with refrigerated pasta for promotions." He said he occasionally advertises refrigerated pasta with sauce, and gives out recipes when the stores demo it.

ShopRite's Crane said that the refrigerated pasta usually goes on sale about once a month.

Price Plus' Nickle said she made signs and a display for specials that run three times per year when pastas, usually featured at $2.99 a pound, sell for a $1 less.

Stabler's typically runs refrigerated pasta on feature, puts complimentary sauces on sale, and throws in garlic bread along with a bottle of Chianti Classico. "We are more inclined to market refrigerated pasta as a meal," said Stabler.

Although few retailers said they were doing much HMR with refrigerated pasta -- an endeavor Klein called far from cost efficient -- many thought that was the direction in which the category needed to go.

"Maybe you'll see something where you can just pick up one package, maybe with sauce, and garnish it with cheese if you're a single person," suggested Stabler.

"I think that more opportunities exist for putting out refrigerated pasta as a meal solution. That's where the category is headed more than packaged," concluded Klein.