COLD COMFORT 2003

BARBARA MURRAY

The mouth-watering aroma of pies baking evokes memories of holidays past for many consumers. Indeed, it is this sense of tradition that retailers hope will take precedence over the economy, world affairs, and even the Atkins diet as they reset their freezer sections to feature desserts and toppings for the coming holidays.

However, increasing competition from a number of sources, including in-store bakeries, continues to take a toll on the category, according to retailers and industry observers.

"Competition is everywhere," said Mike DiGeronimo, frozens category manager for Victory Supermarkets, Leominster, Mass. The category veteran plans to stay ahead by upscaling the pie category with items such as Mrs. Smith's Restaurant Classics, and offering more luxurious desserts like Delizza mini eclairs and cream puffs from Belgium. Russ Hahn, buyer and merchandiser of frozen foods for Scolari's Food & Drugs, Sparks, Nev., agrees there is intra-store competition that is pitting traditional grocery against the perimeter.

"That's part of the turmoil in the grocery stores -- conflicting departments. We drive price, and [ISBs] drive freshness," he told SN.

As a result, the bakeries get all the credit and the glory. The challenge -- to make frozen pies and related desserts an option -- is being met with some strategies that emphasize value, retailers said.

"We're trying to get the customer to go up to the 43- to 46-ounce size, more like a 10-inch pie, instead of the regular nine-inch pie, which is about 37 ounces," said Kathy Mondloch, new buyer at Save Mart, Modesto, Calif. "When you have competition, like Costco -- they have those big [fresh] pies -- it's hard to know whether to get rid of them or what. We want to keep a variety out there, for our variety of customers."

Mondloch, who buys for frozen and dry grocery, is looking forward to her first holiday season in frozen pies and cakes, following the retirement of longtime veteran Pat Brooks.

Retails are stable, but costs have gone up pretty much across the board, Mondloch said. Save Mart will offer a variety of pies for its diverse consumer base. No matter what their income, "everybody is into convenience, and time is the biggest thing, no matter who you talk to," she said.

They may be convenient, but frozen foods have a lingering reputation for poorer quality, DiGeronimo said, one that is often not deserved. He spoke to SN about a frozen cookie-dough ball, called the "600 Pound Gorilla," made by a Massachusetts company. Similar in taste to Mrs. Field's, the cookies baked from the dough are "outstanding," he said. "It's a better quality than refrigerated, but people don't think so."

Sure enough, frozen ready-to-eat cookies and frozen cookie dough showed declines in sales and volume of about 26% this year, according to statistics from ACNielsen, Schaumburg, Ill.

The frozen pastry section has also taken a beating, some noted, although total frozen baked goods dollar sales keep climbing, from $1.2 billion in 2000 to $1.3 billion the next year, to $1.4 billion in 2002 and $1.5 billion for this year through mid-July, according to ACNielsen.

Frozen cheesecake sales were down 13% in 2002, but up 3.7% in dollar sales this year. Dessert cakes were flat, but pies up nicely, showing a 7.9% dollar sales increase in 2001, 7.2% in 2002 and 6.2% in 2003, according to the data. Total dollar sales in frozen pies were $325.8 million, through July 15 of this year. Volume was up by 6.5%, the best gain in the past two years, for a total of 85 million units of pies.

Retailers cited hot prices on frozen pies last year as the most likely reason for these gains.

However, this year may be different, due to the April acquisition of Mrs. Smith's, one of the leading frozen pie brands. Flowers Foods, Thomasville, Ga., sold the brand for about $240 million to The Schwan Food Co., Marshall, Minn., which also owns the Edwards pie brand. Grocers told SN that Schwan's has a different marketing strategy from the previous owner, a fact that was confirmed by Jim O'Sullivan, senior vice president and general manager of Schwan's Bakery Inc., retail division, in Suwanee, Ga., where Mrs. Smith's is still located. Although the brand is spending more money this year on promotions than it did last year, according to O'Sullivan, this year's promotions focus more on television advertising and coupons for consumers.

"The only real change is trying to integrate the Edwards and Mrs. Smith's brands," he told SN. "Both have distinct personalities, and are seen differently by the consumers." Consumers are more likely to connect Mrs. Smith's with fruit pies, the kind that their grandmothers baked, while Edwards is viewed as a more upscale, restaurant-type dessert, he said. This difference in perception allows for each brand to have its own niche, and they will retain their original names, he added.

An upcoming Thanksgiving promotion in some markets will offer consumers $2 off with the purchase of two pies.

"Most retailers will run our nine-inch pies at two for $6 or two for $7, so that's a very good value to the consumer," O'Sullivan added. In some markets, there is also a Thanksgiving promotional tie-in with Cool Whip.

Mary Bevacqua, category manager, frozen foods, Unified Western Grocers, Livermore, Calif., told SN that Schwan's has to pay the bill for its purchase of Mrs. Smith's. "They tried to have a moderately good amount of an allowance to move out product at a reasonable price, but not a hot price."

The worry, she said, is that at the holidays, "I think people buy price. If you saw a hot price, you'd buy two. If you're looking at a [buy-one, get-one free offer] and it's not $1.99 or hotter, you probably won't buy it."

At last year's low retail prices, she said, "no one made any money on [pies]. The stores didn't care as much as they wanted that consumer -- just to get them in the store. It was always a driving element, especially during holidays.

"If we have a flat year, that would indicate a successful season, rather than less cases sold because the prices won't be as hot.

There is nothing the retailer can do about it," she added. "This is a manufacturer decision."

Perhaps even more noticeable than price points is the fact that there haven't been many new introductions in the sweet goods category, with the exception of FlipIts cakes -- upside-down cakes from Mrs. Smith's, introduced about a year ago in three flavors. However, this year there are some new pie flavors, and Kraft has introduced a new concept for Cool Whip: keeping the same UPC code, but rotating the flavors seasonally. Strawberry came out in the spring, and French Vanilla is replacing it now. "We didn't do too bad with it," said Hahn. "We set it up for 100 days, and have moved quite a bit of strawberry."

Save Mart introduced some new Edwards products in midsummer, and Claim Jumper pies this year. "They're of very good quality," Mondloch observed. "In pumpkin, apple, cherry, pecan, Dutch apple with a laced top, and blackberry, but it's very tasty, almost like a marionberry."

Frozen Favorites The most popular frozen pie flavors may vary by region, time of year -- or even price. But SN talked with several sources, including The NPD Group's Harry Balzer, author of "Eating Patterns in America" and an expert on eating trends. One of Balzer's surveys measured "eatings of pie" for the last two years, and found that, in order, America's favorite pies are:

1.Apple (including Dutch apple)

2. Pumpkin

3. Cherry

4. Chocolate

5. Pecan

6. Peach

7. Blueberry

8. Sweet potato

9. Lemon meringue

10. Coconut custard

Another industry expert told SN that "when people are going visiting, they don't buy an esoteric pie. Everybody likes apple. If you buy apple or pumpkin, you can't go wrong."

BARBARA MURRAY