Pizza: It's What's For Dinner?
By Sherry Frey, Vice President, Nielsen Perishables Group
Friday, 18th October 2013
There's no denying the popularity of pizza, especially when it's National Pizza Month in the US and when you consider the size of this $40 billion pie, that's a ton of slices; In fact, Americans consume 350 slices per second.

Ninety-three percent of Americans eat at least one pizza a month, and they're consuming a large portion of them in the comfort of their own homes. Notably, the popularity of America's No. 1 meal choice translates into about $3 billion in annual sales for grocery retailers, whose offerings are split between the in-store deli and frozen foods departments.

Shifting Pizza Dynamics in Retail

At the grocery store, pizza dynamics are changing as the effects of the recent recession dissipate. For example, when economic conditions are tight, some consumers would likely opt for frozen over deli pizza as a means of feeding a craving for pizza while being cost conscious. Since the recession, however, sales dynamics have shifted, spurring growth in the deli department and declines in the frozen aisles. Frozen pizza, however, has a much higher penetration rate than deli pizza does (55% vs. 15%).

With an average price of $6.37, grocery deli pizza became a more affordable alternative to pizzerias during the recession.

During the recession, deli pizza sales reflected consumer attitudes toward discretionary spending. When consumer confidence hit its low in 2011, sales of deli pizza sales skyrocketed. Despite a frugal mentality during the recession, pizza buyers were still willing to spend more for deli-prepared pizza than frozen pies. Deli pizza maintained a 30 percent price premium over frozen pizza and consistently gained sales over the past three years, while sales of frozen pizza declined.

Now in a recovering economy, deli pizza sales are still rising while frozen pizza sales continue to decline. Sales aren't growing for all types of deli pizza, however. Shrinking household sizes are affecting growth of small sizes in deli pizza.

Whole pizzas account for over 50 percent of deli pizza sales, but whole pizza sales declined 4 percent over the past three years. Deli pizza slices and calzones/Stromboli—both viable options as dinner for one—saw improved sales during the same time. Moreover, deli pizza sales are strong across all household sizes—from start-up families to senior singles and couples—whereas frozen pizza sales are strongest among households with children.

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Toss It Yourself

Part of what makes deli pizza appealing is that it gives the impression of being a hot, freshly prepared meal. And consumers are even taking this appeal to new heights by seeking out ingredients to handle the preparation themselves, which has fueled the fastest-growing deli sub-category over the past three years: pizza components.

As consumers load up on doughs and toppings, it highlights their growing interest in preparing their own meals—even if that preparation only involves adding slices of pepperoni or black olives.

And retailers are powering this trend by stocking new and unique pizza components—and the growth in unique component sales has been stronger over the past three years than any other deli pizza sub-category.

Lessons from the Deli

As with any category, consumers have steadfast preferences when it comes to their take-home pizza. Most pizza buyers have a discernible preference for deli or frozen, as less than one-fifth (18%) buy both types in a given year. While frozen and deli pizzas aren't really competing for the same consumer, they are meeting the same buyer needs.

By taking a look into the shopping baskets of both buyers, we can gain insight into certain consumer behaviors. And not surprisingly, buyers of frozen and deli pizzas are both in the market for time-saving grocery items, including shelf-stable prepared foods, frozen snacks and prepared seafood.

For frozen pizza buyers, however, we can see the time-saving theme exemplified to some degree, as their baskets often also include frozen dinners, frozen breakfasts and packaged macaroni and cheese.

In looking at what's driven the growth in deli pizza sales in recent years, we can apply many of the lessons learned to the freezer aisle. It is, however, important to realize that deli and frozen pizza buyers have very little overlap, so implementing the successful characteristics of deli pizza to frozen pizza (and vice versa) may help spur sales spikes from loyal frozen shoppers while possibly sparking interest and crossover sales from deli pizza buyers in the process.

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In the frozen aisle, try adding a semi-homemade element. That will give consumers the feeling that they have a hand in preparing the meal. By understanding what component items frozen pizza buyers purchase with their frozen pizza, retailers can co-promote with those items to incentivize shoppers for making frozen pizza their own.

There is also untapped potential to partner with the deli for a co-promotion such as, "deli pizza for tonight and a frozen pizza for this weekend," to entice more consumers to become buyers of both deli and frozen pizza.

To help maintain the growth in deli pizza and remain a viable competitor to restaurants, delis should offer combos to serve as full meal solutions. For smaller households, delis must offer an assortment of sides and other personal-sized meals such as calzones.

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