UPPER CRUST 2004

LUCIA MOSES

Any way you slice it, frozen pizza has got potential.

It's certainly come a long way from tasting little better than the cardboard disk it's packed in. Today, the standard pepperoni and cheese has made room for pies with restaurant-worthy crusts with toppings like pesto and artichokes.

Still, in a category where shoppers aren't especially brand loyal and often buy on impulse, price and promotion still drive sales.

Pizza-eating's big season is in full swing, and aggressive retailers are putting full lineups in secondary displays and promoting them with accompaniments. With quality perception is still the biggest reason why more pizza eaters don't try frozen, according to Mintel International Group, Chicago, retailers also rely on sampling to drive sales.

So when Douglas Hinkens, dairy and frozen food manager for Crossroads County Market, an independent in Wausau, Wis., introduced premium frozen pizza from Home Run Inn, a Chicagoland restaurant chain, three months ago, he lowered the price, piled it in secondary freezers, and offered samples. One Saturday last March, he invited customers to taste-test four premium pizzas and match them to their brand names. Those who guessed right were entered into a drawing for a pizza oven and 12 pies.

In the months ahead, when people will be looking for quick meals in between the holidays, or Super Bowl fare, "this is a real important time to be right," he said, with "some real hot featured items to boost your sales."

Hinkens usually puts two bunkers for pizza in the center of the frozens aisle, moving them to the front of the aisle just before the Super Bowl. They'll likely be flanked with Parmesan cheese, garlic bread and juice, and sold at a multiples price.

"This is just a way of trying to get an extra sale," he said. "You're not going to get every customer to grab a parm, but you might get one out of 20."

Central Market in Poulsbo, Wash., part of Town & Country Markets, promotes a different pizza each week in a three-door upright freezer at the end of the frozens aisle. Even though frozen pizza sells well in the market, the store demos a new or promoted pizza each month.

"You're trying to get those people that don't do frozen pizza," said Andrew Gagner, grocery buyer for the Poulsbo store. He seems to be doing something right: Frozen pizza sales are up 25% this year.

At Summit Trading Co., an independent in Puyallup, Wash., secondary freezer displays in the frozens aisle have pizza sales going "through the roof," according to Gary Carlson, store manager. He also samples occasionally.

"It's price-promotion, and putting it out in front of people," he explained. "What's difficult is getting aggressive deals."

Manufacturers would like to wean themselves off what Brian Nau, vice president of marketing for Schwan's Consumer Brands North America, Bloomington, Minn., called the "vicious cycle" of price promotions, though.

Schwan's, maker of Red Baron and Freschetta, and other manufacturers are pushing for more display and meal solution promotions to increase pizza-eating occasions. Noting that most households have tried frozen pizza at least once in the past year -- but that frozen accounts for just 10% of total pizza consumption -- Nau said the goal is to increase purchases of frozen by showing it's just as good and convenient as takeout.

"We need to do a better job of bringing the retail partners solutions," Nau said.

To that end, Schwan's has been stepping up efforts to get more operators using its freezer cases for secondary displays. It's also introducing a program to cross-merchandise pizza in other parts of the store with related products. "The focus is on providing more of a complete meal value for a consumer," Nau said.

Meal deals' logistical difficulties mean price promotions aren't likely to go away, however.

Buzz Dailey, a broker for DeJarnett Sales in Portland, Ore., who represents Western Family Foods' private-label frozen pizza and other grocery items, said that for most stores, the secondary freezers required to promote meal solutions are space-inefficient. Most of Western Family's pizza sales are promotion-based, especially from November to January, like a recent one that offered shoppers a slice of pizza and soda for $1. "The big thing is the trial," Dailey said.

A buyer for a Texas chain, who asked not to be identified, confirmed that while sales at least triple when the chain runs pizza-based meal deals, assembling frozen, non-frozen and refrigerated items is a space challenge.

Jaya Kumar, vice president of marketing for Kraft Pizza, Glenview, Ill., said meal deals it's done with Albertsons that combined Kraft's Tombstone pizza with salad and Catalina dressing drove "tremendous sales," but conceded that "very often, you don't have the ability to move the freezer to the produce section."

Richelieu Foods, Braintree, Mass., a leading maker of private-label and branded upscale frozen pizza, also has worked with some retailers to group frozen pizza with salad, salad dressing and dessert. Vincent Fantegrossi, president and chief executive officer, said that given the competition in the category, though, "I do think the sale price will drive a consumer decision."

Indeed, vendors who cut trade spending do so at risk. "There are some pizza dealers that don't want to participate in the ad," said Gagner, "and because they're not participating, why should I carry their product?"

Most of the excitement in frozen pizza in recent years has been at the premium, pricier end.

Dollar sales in food, drug and mass channels (excluding Wal-Mart Stores) grew 27%, to an estimated $2.7 billion between 1998 and 2003, with the vast majority of sales coming from supermarkets, according to Mintel. At the same time, unit sales increased only 14%, indicating that category growth is due mainly to price increases. Further, the average price per pound rose 11%, to an estimated $2.87 during the same period, according to Mintel.

This year has been no exception. From January through October, manufacturers served up 100 new frozen pizza products, compared with 93 introduced in all of 2003, according to Productscan Online, a service of Marketing Intelligence Service, Naples, N.Y.

Many of the 2004 varieties are low carb or otherwise premium, such as Kraft's DiGiorno Thin Crispy Crust and Microwave Rising Crust, responding to consumers' demands for healthful and convenient meals.

Pizza sales of Petaluma, Calif.-based Amy's Kitchen, which offers organic soy cheese-topped and rice-crust pies, have grown about 24% annually since 2002, said Steve Warnert, director of sales and marketing. This year, a three-cheese with a cornmeal crust "is just going bananas." When retailers move Amy's from the naturals to the regular aisle, he said, sales more than double, which he suspects is taking share from the national brands.

Heavens' Bistro in Santa Monica, Calif., has also benefited from the trend. Some 1,500 stores picked up its low-fat pizzas this year, for a total of more than 2,000, said Eric Gault, president. Some customers who have contacted the company's Web site have said they'd given up on pizza due to health concerns, he said.

There's plenty of growth on the bargain end, too. Dollar sales in supermarkets of General Mills' Totino's brand jumped 211.2% this year through Oct. 3, according to Information Resources Inc., Chicago. "People are looking for faster, easier," said Mariana Quiroga, marketing manager for Totino's and Jenos. Totino's recently ended a cross promotion between its pizza and pizza rolls, with good results, and is looking at other co-promotion items to bring more consumers to the category, Quiroga said. Retailers like Carlson of Summit Trading confirmed her comments, saying that along with high-end pizzas, both General Mills brands have "just exploded" of late.

Private-label suppliers were late to match the quality of the premium brands. Yet with prices rising and consumer loyalty low, they see a big opportunity for lower-priced store brands. Mintel reported that private label's dollar sales grew 11% per year on average from 1998 to 2003, nearly three times as fast as the total pizza market, to represent a 6.6% share.

"Retailers are looking for ways to stand out from the crowd, and private label's the way to do it," Fantegrossi said. Schwan's Nau conceded that "loyalty is lower than what we would like. But by bringing new products to market that are unique, we hope to improve that."

The newer, higher-end varieties are also growing fastest in private label. Western Family's economy pizza is its biggest seller, but dollar sales of self-rising jumped 55% over the past two years, said Brad Tolliver, frozens product manager there.

Still, private label requires strong retailer commitment, given the direct-store-delivery nature of the category. "When you're up against a DSD category, they're continually stealing your facings," said Dailey, the broker for Western Family, also in Portland. "It's a constant battle against the DSD guys to keep your brands in there."

The category seems to have plenty of reason to stay lively. Mintel predicted the market would grow 22% (9% at constant prices) through 2008.

"Now," stated Robert Garfield, executive director of the National Frozen Pizza Institute, McLean, Va., "pizza is whatever the consumer wants."