Wal-Mart Takes the Lead on a Surprising, Half-Billion Dollar Growing Grocery Category

Wal-Mart Takes the Lead on a Surprising, Half-Billion Dollar Growing Grocery Category

Pizza is a staple food in most American households. Over the next 12 months, the average American will eat 46 pizza slices. It’s surprising then how few mainstream supermarkets have taken the steps needed in merchandising to capture the refrigerated pizza purchase occasion, which is related to, but different from the frozen and hot pizza purchase occasion. In contrast, Wal-Mart has achieved out-sized success with refrigerated pizza offerings in their prepared foods and deli area, branded as Marketside Pizza. All told, refrigerated pizza in supermarkets accounted for approximately $500M in 2016, and this category grew 6% compared to previous years. While frozen pizza is much a larger $5.5 billion category, it has been struggling with declining sales.

Wal-Mart is the significant category leader in the growing refrigerated pizza market. Let’s explore what makes its refrigerated pizza offering so successful.

In supermarkets, consumers have up to three pizza purchase options:

  1. Frozen, in the grocery store freezer
  2. Refrigerated, in the prepared food or deli section
  3. Hot, at an in-store foodservice eatery

Consumer Insight: Different Temperature States Suggest Different Consumption. Refrigerated Pizza Can Lead To Additional Purchases

Wal-Mart Takes the Lead on a Surprising, Half-Billion Dollar Growing Grocery CategoryDual purchasing consumers (those who buy both frozen and refrigerated) are the most valuable. And two-thirds of the consumers who purchase fresh, refrigerated pizza will cook and serve it the same day. This is very different than frozen pizza, where only 20% of frozen pizzas are for same day use. And hot pizza is usually purchased by the slice to eat immediately, or within the hour. While there are a large number of consumers who only buy frozen pizza, and a smaller number who only buy refrigerated, the biggest market opportunity lies in understanding the different occasions for each purchase and capturing dual-purchase consumers.

Both refrigerated and frozen pizza must meet consumers’ basic requirements of value for the price, toppings, crust preferences, etc. However, refrigerated pizza is more likely to be associated with superior freshness and high-quality ingredients, while frozen pizza is often seen as a great item to stock up on for quick meals or snacks.

Consumers expect to spend a bit more for a refrigerated pizza, compared to frozen. For instance, an extra-large Marketside Ultimate Meat Pizza costs $8.98, compared to a range of $2.98 to $7.48 for various, smaller-sized frozen pizza brands.

Marketside delivers on value with lots of meat for that higher price point.

How Wal-Mart Successfully Merchandises Refrigerated Pizza to Capture Same Day Purchase

Wal-Mart Takes the Lead on a Surprising, Half-Billion Dollar Growing Grocery CategoryWal-Mart shows great understanding for the purchase occasion for refrigerated pizza. Its massive, high visibility displays placed in the perimeter capture shoppers’ attention as a good option for a convenient, same-day meal. Beverages are also often at hand to complete the meal purchase. The large assortment of topping and crust options meet most popular consumer preferences, making a quick purchase decision fairly easy. And, the packaging often features cross-promotion with characters and movies, such as Marvel’s Avengers.

Gina Kinslow, grandma of a large family and frequent purchaser of Marketside Pizzas gives insight into why she appreciates the product:

“Everyone loves pizza—from my three-year-old grandsons to my 20-year-old granddaughter. When I know the whole family is coming over for the day, a pizza from Wal-Mart makes a great, fast lunch. If I’m cooking dinner, I don’t want to also have to cook a meal for lunch. When would I spend time with the kids? Frozen pizzas aren’t big enough to feed everyone, but the Marketside Pizza has enough toppings that one slice is often enough (except for my growing 15-year-old grandson!). And I like to add extra toppings to the pizza, too, like a special cheese. Just to make it more fun.”

Wal-Mart Takes the Lead on a Surprising, Half-Billion Dollar Growing Grocery CategoryEssentially, Wal-Mart’s Marketside Pizza catches the consumer’s eye, so they decide to buy it and make it the same day. Same day is important, as supermarkets experience more demand for their prepared foods starting at lunch and then extending into the afternoon and dinner time.

Once they are familiar with the idea, some customers (perhaps Gina) may even make a special trip for the refrigerated pizza, but most will pick it up as part of a multi-item shopping occasion. This may a big shopping trip, or a quick fill-in.

Often, supermarket retailers have refrigerated pizza offerings buried in a refrigerated case with limited facings (e.g., two to six pizzas). These retailers make it highly unlikely that consumers will happen upon the product and decide to buy. And, these same retailers are (not surprisingly) struggling to make refrigerated pizza a success in-store. Wal-Mart’s dedication to merchandising allowed this category to become an out-sized success in its stores and a much faster-growing segment than for most competitors. A clear opportunity exists for other supermarkets to tap into this latent demand.

 

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  • Pizza aside (and it appears that Marketside, Safeway/Signature Select, Culinary Circle, Market Pantry etc. all come from the same supplier, and I couldn't figure out why Supervalu was selling the same brands to Jewel and independents), I don't get the Walmart food thing. They had the attack ad strategy a couple of years ago, but basically only forced the Jewel at 8201 Golf Road, Niles out of business, and it was replaced by Fresh Farms. Their cash register tape challenge didn't save vs. other stores, and once Jewel was sold to Cerberus, it became competitive, too.I don't frequent the place, except to buy 2 packs of mouthwash, but glancing at the food display signs indicates Walmart is not cheaper than what's on sale elsewhere. One can usually get higher quality and lower prices at Tony's.

  • In reply to jack:

    Thank you Jack- The focus here is on pizza, and it's about the fact that not only does WalMart have a wide range of pizza products in refrigerated, but also they also merchandise and display them well in a prominent position in the store's perimeter. Certainly, it may be that Tony's where you shop (I'm not familiar with Tony's) and Jewel and others also do a great job on refrigerated pizza, having a wide range and merchandising them, but across the country, most other supermarket retailers simply do not. I'm guessing you are in the Chicago area, the company you mention that makes pizza for WalMart is based in the Chicago area, so it makes sense that a better job is done for refrigerated pizza in Chicago, but on a national basis, we're not seeing that in the category performance. I'm now working from the Los Angeles area, and not seeing much here at all at the major retailers like Ralph's and Vons. Even higher end Whole Foods emphasizes more the hot to go pizza rather than refrigerated in this market. Much appreciated for the perspective!

  • In reply to Michal Clements:

    Yes I live in the Chicago area, and no, I don't know in particular who the pizza supplier is. What I do know is that there were stories that companies such as TreeHouse run most of the private brand business, including with both the Albertson's Cos. and Whole Foods.

    I brought up Signature Select, because shortly after Cerberus took over Safeway, Safeway brands appeared in Jewel stores, which are part of New Albertson's. There were 2 quick reactions. Jewel would not answer questions on its comment board "Isn't this the same stuff that was sold at Dominick's?" (Dominick's was a local chain purchased and then put out of business by Safeway, and was generally panned for shoving Safeway brands down our throats. I guess not much different than Von's.). Then Jewel starting posting signs, including on the pizza freezer with pictures of Culinary Circle and Signature Select saying "same product, different package." Similarly, with Lucerne milk "same product, different package, farmed in Illinois." So, basically a brand shell game.

    Whatever Walmart is doing, I doubt that Sam is baking the pizza.

    Anyway, being from Chicago, I basically get Lou Malnati's Pizza hot and I see that Sunset Foods is now carrying Lou's frozen again. I had Uno's in college, but it is no longer the real thing; Malnati's is. Another choice is Mariano's, a food chain started by the former president of Dominicks, now owned by Kroger, that has a gigantic aisle of prepared food (including a BBQ shop, oyster bar, and hot out of the oven pizza shop).

    BTW, there was a standalone in the Chicago area that sold "unbaked pizza" and it quickly went out of business.

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    You should check out the UK market, where Walmart's Asda operates. Here, chilled pizza far outstrips frozen sales. Retailer's own brands play a major role (and there are several key chilled pizza suppliers) but we also have authentic Italian imports and pizza restaurant brands well-represented on UK fixtures. Walmart's UK subsidiary does not serve hot but does serve-over custom-made pizza "home meal replacement" style ... something that is rare in the UK but not mentioned in the article above when I thought that was commonplace in the US?

  • Thanks Robin- Yes, you are right! Chilled/refrigerated foods are very big in the UK. To date, they've not been able to be as successful in the US, and there have been many tries but organizations to do so. A notable example was Fresh & Easy which was a big foray from Tesco, bringing a new store format with a lot of chilled foods to the US, but Fresh & Easy wasn't highly successful for Tesco. I'm not sure on the "home meal replacement" name, thanks for sharing that!

  • Hi Michal great piece!
    I am one of the small vendors that produce a refrigerated take and bake pizza and retail to grocery stores. Our product is naturally healthy as it is authentic to Italian ingredients and Italian know-how. I import the flour from Italy and I use only 4 ingredients for my dough. I sell my pizza to all the Whole Foods stores in North California. I am writing you because I would like to know where I can find all that amazing and very useful data about the refrigerated vs frozen pizzas. I'm putting together a BP and having those data would definitely help me a lot!
    Thank you
    Andrea

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    Michal Clements

    Michal is co-author of Tuning Into Mom and an experienced consultant. Michal develops winning growth strategies and detailed go to market plans for some of the world’s outstanding organizations including McDonald’s, Gatorade, Abbott, Barilla, Tylenol, Clorox, Key Bank, Eagle Ottawa, Quaker and the Baker Demonstration School.

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