Make no mistake: US consumers love pizza. However, more of them are taking their meal money to restaurant, take-out and/or delivery options.

Pizza at retail in the US experienced mostly flat sales between 2009 and 2014 for an estimated $5.5 billion and is forecast to remain at $5.5 billion into 2019. Poor sales performance is due to competition from restaurant/takeout/ delivery pizza, which a majority of consumers perceive to be better than store-bought pizza, and which an increasing number of consumers have returned to as the economy slowly recovers.

As economic indicators such as unemployment, consumer confidence, and spending power become more positive, an increasing number of consumers are able to spend on restaurant pizza and forgo having to settle for frozen brands. Unemployment has reached its lowest point (6.3% in April 2014) since its height (10% in October 2009), while consumer confidence gained for nine consecutive months until May 2014, when it slipped moderately.

Meanwhile, consumer spending power increased moderately between November 2013 and March 2014, according to the Bureau of Economic Analysis. Mintel, a global market intelligence agency, believes that all these factors have all driven a number of consumers back to spending on restaurant pizza—at the expense of store-bought brands.

However, store-bought brands can look to specific demographics to help stave off steeper declines in the coming years. For example, respondents aged 18-34 report the most likelihood to eat store-bought frozen or refrigerated
pizza, indicating that brands should target consumers in this age group with marketing that aligns with their interests, including pizza with hand-tossed or whole grain crusts, all-natural/organic varieties, and low-fat/low-calorie types.

Mintel cautions that population growth among those aged 18-34 is not forecast to be significant between 2014 and 2019, indicating that brands must find ways to increase consumption frequency among this group to best take advantage of its higher likelihood to eat store-bought pizza.

Households with children also represent an opportunity for store-bought brands to decelerate slipping sales. The presence of children is a strong indicator for consumption, due to kids’ love of pizza and busy parents’ love of its convenience. However, the percentage of households with children is in decline, indicating that brands must look for ways to increase penetration and consumption frequency among households with kids.

Brands can do this by targeting families with the types of store-bought pizza they are most interested in. These include pizzas that come with side dishes; single-serve and smaller format pizzas that facilitate sharing and eating with small hands; and craft/ artisan pizzas (likely for occasions when parents sit down to frozen pizza with their kids but do not want to eat the typical cheese and pepperoni varieties).

For the record, frozen pizzas dominate the retail category with 82% share in 2014, but are forecast to decline slightly into 2019.

According to Information Resources, five brands top the pizza at retail market sold through multi-outlet (MULO) channels, although Nestlé S.A. (DiGiorno, Tombstone, CPK (California Pizza Kitchen), dominates among these companies with roughly 40% share and an estimated $2 billion in sales in the 52 weeks ending Feb. 23, 2014 (down 2.2% from the 52 weeks ending Feb. 24, 2013).

Nestlé experienced success with its Pizzeria! brand during this time, achieving $89 million in first-year sales, attesting to the potential for brands that closely mimic restaurant-style pizza to help keep the frozen segment afloat.

Schwan Food Co. (Red Baron, Freschetta, Tony’s frozen pizza brands) trails with $877 million, a decline of 3.3% between Feb. 24, 2013, and Feb. 23, 2014. However, like DiGiorno’s Pizzeria!, Red Baron Pizzeria Style made substantial gains during this time, growing $7 million to $17 million.

General Mills Inc. (Totino’s, Jeno’s frozen brands) follows with $424 million. Bernatello’s Pizza Inc. (Bellatoria, Roma, other frozen brands) and Pinnacle Foods Group LLC (Celeste frozen pizza) account for less than 2% share in the year ending Feb. 23, 2014.

More than six in 10 respondents report eating takeout/ delivery pizza in the household in the last six months, compared to the less than six in 10 who report eating frozen pizza during this time. Close to half report eating restaurant pizza. These results point to the competition store-bought frozen brands face from restaurant/takeout/ delivery pizza.

More than four in 10 respondents whose household uses frozen/refrigerated pizza say they tend to buy pizzas with naturally rising crusts, while more than a third of respondents say they tend to buy pizzas with hand-tossed crusts. These results indicate that quality crust is a key attribute for consumers and one that they likely closely equate with restaurant-style pizza. A quarter of respondents report buying craft/artisan pizzas, suggesting that a number of consumers look for store-bought brands that provide premium quality or unusual flavor combinations. Two in 10 respondents report buying pizzas with toppings they have not previously tried.

Relatively few respondents consider healthy pizza attributes to be important. Some 22% of respondents whose household uses frozen/ refrigerated pizza say they consider health-related attributes such as no artificial additives/preservatives/ colors/sweeteners to be important when selecting store-bought pizza. Two in 10 say they consider all-natural/ organic ingredients to be important. These are relatively low response rates that suggest that users are not looking to store-bought pizza as a source of nutrition. Instead, they likely view these products as an occasional indulgence.

More than half of respondents agree that it is worth it to spend more on higher-quality store-bought pizza than regular store-bought pizza, indicating that users are more concerned with quality than with healthfulness.

More than half of those surveyed by Mintel whose household uses frozen/refrigerated pizza report interest in a wider variety of pizza styles, such as New York or Sicilian style. This result underscores that many consumers are looking for pizza varieties that restaurants offer and offers brands that provide a range of styles with an opportunity to better compete with pizzerias.

Some 45% of respondents report interest in store-bought pizzas that come with side dishes such as wings or mozzarella sticks. This, too, indicates that many buyers are looking for brands that closely replicate the restaurant experience. DiGiorno’s Pizza & Boneless Wyngz and Pizza and Breadsticks brands are marketed as “two more reasons why you don’t need delivery.” More than four in 10 respondents report interest in single-serve pizzas, and nearly four in 10 report interest in different formats such as smaller shapes that facilitate sharing, indicating that there is substantial potential for brands to offer convenient sizes for consumers on the go and parents looking for convenient snack and meal solutions for their kids.

Even as the air goes out of the pizza at retail market, brands have an opportunity to decelerate losses by focusing on the types of pizzas that consumers are most interested in. Specifically, although industry sources report that healthier pizzas represent a growth area for the category, it is more likely that most consumers perceive pizza to be an occasional indulgence, indicating that premium ingredients will likely resonate with buyers more than health attributes.

Brands that provide products that mimic the styles found at restaurants, with naturally rising or hand-tossed crusts; a wide variety of flavors, including unusual flavor combinations or craft/artisan styles; and side dishes such as wings, breadsticks, or deep-fried potatoes, are likely to resonate among pizza eaters more than BFY (better-for-you) claims. Continuing focus on convenience, including single-serve and smaller format pizzas, is also likely to help prevent further losses in the coming years. 

Source: Pizza-US-June 2014

Amy Kraushaar is US Category Manager, Foods & Drink and Foodservice at Mintel Group Ltd.