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Here's a cold, hard fact for pizzeria operators: Frozen pizza sales are hot.
According to a 1998 study done by the Food & Agricultural Products Center at Oklahoma State University, frozen pizza sales in the U.S. totaled approximately $1.9 billion in 1996. During that same year, Kraft introduced DiGiorno, which sent frozen pizza sales soaring. According to estimates from the American Frozen Foods Institute, sales hit $3 billion in 1999 and were expected to climb to $3.5 billion in 2001.
A recent article in Prepared Foods magazine also reported some telling discoveries made by food industry researchers at the NPD Group. A 1990 study showed found that U.S. consumers ate frozen pizza an average 6.2 times a year. Nine years later, that average yearly consumption had grown to 10.9 times.
Impressive numbers, certainly, but is frozen pizza a serious threat to the fresh pizza market? John Schnatter, CEO of Papa John's in Louisville, Ky., thinks so. The founder of the world's third-largest pizza chain has stated publicly that frozen pizza sales took a bite out of his company's 2001 revenues, and surely Papa John's isn't alone.
And if that's true, it's likely a result of these three facts: frozen pizzas are far better than they used to be; the public knows it; and they're selling at an increasing rate.
"I wouldn't say frozen pizza's popularity has as much to do with an economic trend as it does the manufacturers' willingness to produce higher-quality products that are able to compete with the restaurants," said Julie Henderson, vice president of communications for the National Frozen & Refrigerated Foods Association. "In the last few years, we've seen the advent of the rising-crust pizzas that have dramatically changed the way consumers perceive frozen pizza."
Frozen pizza manufacturers also have added a wide variety of high-quality toppings to those vastly improved crusts.
" We compare ourselves favorably to a takeout pizza. We've had people tell us they'll never buy another takeout again."
"They've really made some leaps and bounds in the quality area," said Karen Sherman, spokesperson for Papa John's. "(J)ust like casual dining, we're all being impacted by supermarkets and frozen pizza. ... I think it would be foolish for us not to pay attention to it."
Clearly the pivotal change in the quality of frozen pizza came with the DiGiorno "rising crust" pizza. With the assistance of chemical leavening -- unlike yeast used to leaven fresh dough -- DiGiorno dough rises when baked, yielding a tender, not cardboard, crust. Today the brand is responsible for more than $1 billion in sales.
In the years since the delivery of DiGiorno, the frozen pizza industry has witnessed the rapid development and deployment of other high-end frozen pies, such as Schwann's Freschetta brand and uniquely flavored treats from gourmet chef Wolfgang Puck and California Pizza Kitchen.
Heavens' Bistro Inc., a small gourmet frozen-pizza company in Santa Monica, Calif., makes high-end, low-fat pizzas for health-conscious consumers. Company president Eric Gault believes the frozen pizza market is beginning to take share from the delivery/takeout market.
"We compare ourselves favorably to a takeout pizza," Gault said. "We've had people tell us they'll never buy another takeout again."
Heavens' Bistro uses toppings like grilled vegetables, chicken with barbecue sauce, and low-fat turkey pepperoni. CPK's frozen pies, which are manufactured and distributed by Kraft, include Thai chicken, portobello mushroom, and rosemary chicken potato varieties.
Henderson believes frozen pizza sales are growing because time-poor consumers enjoy their convenience.
"Frozen offers the choice of when and where to eat," she said. "Frozen pizza is by no means going to out-sell the delivery man, but with the high-quality ingredients and tasty choices available, it is offering a viable alternative."
Few understand such benefits as well as Papa John's Sherman, a mother of two youngsters. But as one would expect, she's staying loyal to her boss's brand.
"I wish I could cook all the time, but I can't," she said. "And ... sometimes it's just easier to buy something in a grocery."
The Best of Both Worlds
CPK, Connie's Pizza and Home Run Inn (the latter two are located in Chicago) represent a few chains which sell frozen pizzas in addition to fresh offerings. Operators of all three added frozen lines at their customers' requests.
As Home Run Inn's customers began moving away from the city to the suburbs, said owner Joe Perrino, they wanted to take several pizzas along with them for later consumption.
"Customers would request the restaurant to make 10 pizzas to go and they would keep them ... to get the Home Run Inn pizza fix," said Perrino, whose frozen pizzas are sold in 12 states. As early as 1950, "the restaurants started making pizzas in the down time and freezing them for the customers, and then started distributing frozen pizzas to local the grocery stores."
" Just like casual dining, we're all being impacted by supermarkets and frozen pizza. ... I think it would be foolish for us not to pay attention to it."
Perrino also said HRI's frozen sales are about equal to revenues at its six restaurants, but he didn't disclose exact numbers.
The Price Appears Right
In most cases, frozen pizzas cost several dollars less than their fresh-made counterparts; even the most elaborate freezer pleasers cost about $7, still slightly less than a one-topping large.
But despite that advantage, chains like Papa John's aren't competing at the price point of their frozen competitors.
"We're not going to get into a pricing war," Sherman said. "You've got Pizza Hut that introduced a P'Zone for $5.99 (and) their Big New Yorker has been all over the board ... we're not going to do that. What we really need to continue focusing on is the quality of our product."
No, such low prices can't be ignored, she added, but instead of pizzerias lowering their basic prices to counter grocery store products, she believes pizzerias' high-end pies will see sales decline.
"Gone are the days of a $16.99 large pizza," Sherman said.
Topics: Operations Management
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