One of the most notable evolutions in the pizza market in 2013 has been a definite shift toward a blurring with other fast food types. Through leveraging the appeal of other such foods by incorporating elements into pizza, manufacturers are hoping to cater to everyone’s tastes and capture as many fast food eating occasions as possible.
Source: Mintel
These developments also add to the indulgent, ‘feast’ appeal of pizza for big nights in. As a result, in 2013 launches of kebab pizzas, cheeseburger pizzas, a loaded baked potato pizza and pizza with nacho chips have not seemed out of place. In many cases ultra-indulgent inspiration has been drawn from the out-of-home pizza sector, where pairing of entire fast food concepts, such as pizza with hot dog stuffed crusts, and pizza with mini cheeseburgers incorporated into the crust has been a recent feature.
Dr. Oetker epitomized the trend by launching its Pizzaburger into Germany. The product is a hybrid of pizza and burger whereby the two halves of crusty rolls with pizza toppings are designed first to be baked separately in the oven and then to be folded to the format of a burger.
Related to this trend is also a blurring with other cuisines, with pizza producers becoming more experimental in the use of ethnic cuisine-orientated toppings and flavors.
Such blurring can be expected as a way to connect with the experimental Millennial consumer in particular, and to position pizza as the ‘mother’ of all indulgent meal options.
Targeting new eating occasions
Pizza is a highly versatile type of food, and formats, toppings and ingredients are potentially well-suited to being adapted to fit different consumption occasions. For a number of years, for example, some attempts at positioning pizza in the breakfast occasion has occurred. Toppings such as eggs and bacon have been used to position the product as a viable choice for this meal occasion. However, this particular occasion has yet to yield to the power of pizza and there are potentially better avenues to explore to expand pizza eating occasions.
Snacking, for example, is one of the dominant consumer trends driving the food industry, with more people in developed economies consuming their food through snack occasions. In 2012, 52% of all eating occasions among American consumers were snacking occasions, up from 49% in 2010. Pizza is often positioned as a snack food in out-of-home channels, especially when sold by the slice, by street-side vendors.
However, it is more often a main meal product when sold at retail, or when it is positioned as a snack, it is often targeted just at children.
Re-positioning pizza at retail as an adult snack item is therefore a potential way to grow eating occasions, and some innovation efforts in 2013 have suggested manufacturers are starting to do this. A growth in flatbread pizza in the US, especially suited to workplace snacking, and a wider trend for mini pizza formats is designed to capture more snacking occasions. Other new hand-held snack option launches from the likes of Sodebo in France and Dona Flavia in Spain also point to the potential for individual on-the-go products to gain traction with adults.
Worldwide preferences
Pizza is enjoyed by consumers in all corners of the world, but with unique local variations and preferences very much in evidence. The US market is by far the most developed at retail and restaurant/delivery level. US retail pizza (primarily frozen pizza) sales in 2012 were worth $5,471 million, but were down almost 3% on 2011. Furthermore, they are forecast to decline by a further 10% by 2017 as American consumers continue to shun the frozen aisle. The biggest competition for frozen pizza brands is consumers’ return to restaurant/delivery pizza as spending power revives alongside the recovering US economy. US pizza restaurant/delivery sales are forecast to rise by a healthy 17% during the same 2012 to 2017 period.
Other large pizza markets are found in developed economies such as Canada, the UK and other major European countries. The sector in much of Europe is seeing more positive progression and comprises frozen as well as chilled formats. In the UK, for example, the retail chilled pizza segment is marginally larger than frozen and the category as a whole is seeing some growth (+5% in 2012 but dropping to just +3% in total over the 2012 to 2017 period).
More exciting for the industry is the potential for growth in emerging markets, including those in Asia, Latin America, Africa and the Middle East. In these regions US pizza chains such as Pizza Hut and Domino’s Pizza are fast developing, fuelling consumer familiarity with western-style pizza and creating interest for possible retail expansion of the offering.
Pizzas as a snack option
Sweet pizzas are another potential option to capture more eating occasions, extending pizza into a dessert space. The incidence of dessert pizzas on US restaurant menus, although very niche, grew by 13% between Q2 2012 and Q2 2013. The majority of these dessert pizzas feature chocolate, apple or cinnamon flavors.
More mainstream use of sweet pizzas occurs in Brazil where the outlets such as Pizza Hut include sweet pizzas featuring M&Ms on its menu. Some of the major retail pizza brands have also ventured into this field, the latest of which is the Wagner (Nestlé) brand in Germany, which in 2013 debuted frozen mini pizza cups filled with flavored sauce and positioned as a cake/dessert. Dessert pizzas are clearly a largely unexplored format so far, but could be one that is worth investigating further.
Customization is of strong interest to pizza consumers
Customization is of clear interest to pizza consumers. As many as half of Italian pizza consumers for example say they like to customize their pizza toppings, whilst four in 10 Spanish also do so. In the US, meanwhile, almost a third (32%) say they tend to add their own toppings (such as cheese, oil, vegetables, or meat) before they heat frozen or refrigerated pizza.
Pizza restaurant/delivery consumers are well-used to having it ‘their way’ and choosing their own toppings and crust styles when ordering pizza. One of the strongest areas of growth in the huge US pizza restaurant/delivery sector is in fast casual chains that are based on the Chipotle customization, assembly line-style model. Chains such as Blaze and Pie Five Pizza are fast growing examples here.
Transferring that ‘make it mine’ concept to the retail environment is clearly more difficult, but one way which retail pizza makers have attempted to offer a degree of customization is through the inclusion of sauce and ingredient sachets in with the packaged pizza. Spanish company Campofrío has been particularly successful with this strategy, having introduced pizza packed with an additional sachet of sauce for garnishing in 2007, widening this concept into a complete range in 2008 with the roll-out of Campofrío Pizza & Salsa …a tu gusto (“pizza and sauce…to your taste”). The range has been very successful in the Spanish market.
Looking ahead
As mentioned above, indulgence is a key influencer in driving innovation in pizza, such as the fast-food blurring. However, there remains considerable development along healthier eating lines as well.
Aside from a growth in gluten-free options which have health connotations, the other main health focus in pizza in recent years has been around naturalness. Frozen pizza brands such as Annie’s in the US have seen growth on the back of an overtly natural positioning and, as a relatively processed food, pizza can certainly do more on this front to appease consumer concerns. Indeed, in 2012, ‘all natural ingredients’ was the most important health-related attribute for American consumers purchasing pizza.
Innovation concerning high fiber and wholegrain bases has also been ramped up in 2013. In the UK, consumers of pizza appear to be reasonably interested in increased fiber content, with almost one in 5 saying that they are keen to try high-fiber products (e.g. wholegrain crusts). Ancient grains such as buckwheat and spelt in particular have been used in pizza bases to deliver added fiber although much more potential remains.
There also remains potential for more overtly health positioned pizzas, such as those high in nutrients such as protein and with added vitamins. To date positioning on this front has been left to niche players such as Eat Balanced’s nutritionally-enhanced pizza which launched in the UK in 2012.
And market-leading vegetarian food maker, Quorn, extended its meat substitutes into the UK pizza market at the end of 2013 with two frozen pizza breads. The low fat health benefits of meat substitutes can appeal to pizza eaters looking for a more diet-friendly protein pizza topping, and the 38% of UK adults who would choose a higher-protein food over a low-protein one.
Given pizza’s inherent status as a family favorite, and some of the current moves towards more indulgent pizzas, it is more likely that health will start to creep into the product through gradual moves. Wholegrain bases, sodium and additive reduction, and more vegetable content are likely to be the tactics that the more mainstream companies adopt when addressing health concerns in the short-term.
Key emerging markets
As mentioned in the previous section, pizza is a global food, popular in most parts of the world. However, in many emerging countries it is far from the established food type it is in the West, and so remains something of a novelty. Western pizza chains (notably Pizza Hut, Domino’s Pizza and Papa John’s) have expanded rapidly in fast-growing economies such as China, India and Turkey and are prioritizing development into other emerging countries in Asia, Africa and the Middle East, and Latin America. In many of these markets, such chains are perceived as ‘destination’ outlets and have widespread appeal. Localizing the offer has been the key to success in many cases, blending the American pizza principles with local ingredients and toppings.
In other cases, low ownership levels of appliances such as freezers/refrigerators and ovens (whether microwave or conventional), especially in Asia and Africa, is also limiting demand, but as ownership levels increase so the opportunity for more retail pizza lines to develop is evident.
Dr. Oetker, the leading pizza company globally, is certainly banking on development in such countries as the company is one of the forerunning players in developing emerging retail pizza markets. The company has been selling in China since 2008 for example, and has been pushing a global expansion policy much more so than any of its retail pizza competitors.
As a conclusion…
Retail pizza producers, especially frozen pizza companies, face potentially tough times in well-developed markets such as the US and UK in years to come. Competition from the restaurant/delivery sector and from fresher, healthier and in many cases, better quality, convenience foods will continue to pile the pressure on the industry’s major players. Innovation will be crucial to continue to engage consumers interested in new varieties, cuisines and formats of pizza and to tap into increasingly segmented niches of the consumer base.
The ageing of the population in the western world is also not especially good news for the pizza industry as this is a food type very much associated with youth. Finding ways to prolong the connection with consumers as they age may be an increased focus for many of the key brands going forward.
And the on-going health versus indulgence debate will continue to play a major part in the pizza market and it is likely that we will continue to see moves at the extremes as brands choose which side to specialize in. Over time though, the most rewarding place to sit is likely in the middle, offering some concessions to health but still providing consumers with a product that looks, smells and tastes delicious.