March 2013 Is Frozen Pizza Going the Way of the Typewriter? Category Review and Recommendations for Frozen Pizza Is Frozen Pizza Going the Way of the Typewriter? • Health concerns work against pizza – Health: Pizza is #2 source of saturated fat due to cheese, no credit as protein source, sodium, fat, processed food – Healthy means fresh, smaller portions, large pizzas do not work for small households • Multicultural America – ethnic foods sales are up, new flavors desired, shoppers want customization • Consumer redefining value to mean more than price – It will take quality and value to compete with Takeout • More people snacking, but pizza is not portable nor easy to prepare as are microwavable or toaster snacks 1 Global Customer Insights & Analytics Purpose: To Activate Shopper Insights to Drive Frozen Pizza Category Results A standard approach to answer the following questions Key Questions Answered Supportive Analyses 1. What is the Category? Consumer Decision Tree or Hierarchy 2. How am I doing with the Category? Dollar and Unit Sales Trends All Shopper Scorecard Walmart Shopper Cross-Purchase Scorecard Volume Decomposition 3. What is the size of my opportunity? Shopper & Dollar Distribution Trip & Conversion Opportunity Assessment 4. Who is the shopper and who is winning with my shopper? What is my shopper looking for? Shopper Shifting Shopper Trends Walmart Shopper Cross-Purchase Scorecard 5. On what trip types do shoppers buy my category? Trip Distribution 6. Is my price competitive? Key Item Report Lowest Price in Market Report 7. Do I have the right assortment? Competitor-specific Assortment Key Item Reports New Item Trends 2 Global Customer Insights & Analytics Frozen Pizza Product Hierarchy * $ % chg. vs. YAG ** $ Contribution to Frozen Pizza Single Serve Pizza TTL US: $640.4MM (6.5%)* 15.7%** TTL WMT: $111.8 MM (11.1%)* 11.0%** SS Value TTL US: $159.7MM (5.6%)* 3.9%** TTL WMT: $6.8MM 23.8%* 0.7%** Segment size and hierarchy Frozen Pizza TTL US: $4.1 B (4.5%)* TTL WMT: $1.0 B (5.3%)* Multi Serve Pizza TTL US: $3.4B (4.2%)* 84.1%** TTL WMT: $902.1 MM (4.5%)* 89.0%** Pizza Crust TTL US: $11.0MM 23.9%* .3%** TTL WMT: $29.5K 1442.9%* 0.0%** MS Value TTL US: $362.2 (2.6%)* 8.9%** TTL WMT: $157.8MM (4.2%)* 15.6%** SS Mainstream TTL US: $296.9MM (3.9%)* 7.3%** TTL WMT: $68.3MM (8.3%)* 6.7%** MS Mainstream TTL US: $1.2B (4.8%)* 28.7%** TTL WMT: $304.0MM (4.3%)* 30.0%** SS Premium TTL US: $124.7MM (3.9%)* 3.1%** TTL WMT: $29.9MM (7.3%)* 2.9%** MS Premium TTL US: $1.4B (3.9%)* 34.6%** TTL WMT: $333.7 MM (2.8%)* 32.9%** SS Unconventional TTL US: $59.1 (23.3%)* 1.4%** TTL WMT: $6.8MM (50.0%)* 0.7%** MS Unconventional TTL US: $338.5MM (1.6%)* 8.3%** TTL WMT: $59.0MM (1.3%)* 5.8%** Pizza Crust TTL US: $11.0MM 23.9%* .3%** TTL WMT: $29.5K 1442.9%* 0.0%** • Frozen Pizza is declining everywhere but it is more severe at Walmart • Walmart underperforms vs. the market in Multiserve Value and Combo segments and all Single Serve segments MS Combo TTL US: $145.6MM (12.1%)* 3.6%** TTL WMT: $47.6MM (20.0%)* 4.7%** 3 Global Customer Insights & Analytics Source: Nielsen Scan Data – 52 weeks ending 12/08/12 vs.YAG Sales Projections Retail pizza sales did well moving into the recession; they, are losing to foodservice pizza as the economy recovers Price competitively with brands or segments that compete most directly with take-out? Restaurant Pizza Dominos $4.99! Retail Pizza including: • Frozen pizza • Refrigerated pizza Crust/dough, kits • Shelf-stable pizza crust mixes, kits, sauce • Take-and-bake-pizza 4 Global Customer Insights & Analytics Frozen Pizza Sales Have Declined in Walmart and the Remaining Market Over the Last Two Years Frozen Pizza Sales Trends 100000000 90000000 80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 Week ending dates 0 5 FROZEN PIZZA Dollar Sales WM TTL US FROZEN PIZZA Dollar Sales WM TTL US-ROM FROZEN PIZZA Unit Sales WM TTL US FROZEN PIZZA Unit Sales WM TTL US-ROM Global Customer Insights & Analytics Total US by $ per Buyer Trips X Annual Spend Purchase Frequency & Annual Spend of Frozen Categories • Pizza is purchased about as Total Walmart by $ per Buyer • 6 Global Customer Insights & Analytics frequently as snacks and less often than Meals This may imply that shoppers think of Pizza less as a meal alternative and more as a snack or it could be due to Pizzas and Snacks being on a separate aisle Know the shopper Who buys the category? On what trip missions do my shoppers purchase the category? What consumer trends affect the category Older People Eat Less Pizza than Younger Consumers, But Shoppers age 55 + Represents a Large Proportion of Sales Pizza type by age • 53% of respondents 65+ and 62% of those age 55 to 64 indicate that their household Frozen Pizza compared to about 70% of younger households • • 8 Mintel BASE: TOTAL SAMPLE 2,000; AGE 18-24 – 260; 25-34 – 358; 35-44 – 370; 45-54 – 386; 55-64 – 292; 65+ – 334 Global Customer Insights & Analytics Walmart Frozen Pizza Declines are Driven by Market Contraction, Retained Buyers Buying Less, Shifting is Minimal Shopper Shifting • Publix, Kroger, Dollar Channel, Sam’s and Save A Lot are gaining sales from Walmart Walmart Banner – Total U.S. – Frozen Pizza Dollar Shifting Walmart Banner Dollar trends are due to: -1.8 -0.9 -10.5 -13.2 Total Chg. 9 Market Category Net Shifting Contraction Non-buyers Global Customer Insights & Analytics Dollar Gains & Losses (000 Publix Kroger Dollar Sam's Save A Lot Target Hy Vee Drug Safeway HEB inc Pantry Winn-Dixie Albertsons LLC Giant Eagle Dominick's Fred Meyer ShopRite Conv/Gas Giant Landover BJ'S Food Lion Meijer Costco Albertsons/Supervalu Aldi Giant Carlisle King Soopers Harris Teeter Fry's Food Store Ralphs Stop + Shop Military Vons All other -27,179 -6,249 -9,331 -2,427 -6,148 -2,561 -3,897 -1,757 -1,802 -2,430 -1,639 -2,473 -241 -904 -255 -315 -591 -447 -235 -566 -2,004 -1,074 -1,828 -2,106 -1,640 -231 -396 -349 -470 -140 -325 -661 -219 2,881 6,204 992 4,918 1,465 3,023 887 1,121 1,787 1,110 2,235 15 686 40 197 497 374 207 585 2,046 1,173 1,929 2,209 1,752 417 604 566 692 459 901 1,271 900 Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012 32,145 Net Interact Dollars Index -3,368 138 -3,128 104 -1,436 219 -1,230 191 -1,096 216 -874 137 -870 88 -681 155 -643 83 -529 109 -239 154 -227 106 -218 81 -215 33 -119 43 -95 32 -73 237 -28 39 18 51 42 101 99 62 101 66 103 120 112 162 186 40 208 75 218 55 222 66 320 38 577 43 610 153 682 69 4,966 93 Trip Type Distribution Walmart is Losing Pizza Stock Up Trips Which Account For 82.5% Of All Frozen Pizza Trips ; Kroger is gaining all trip types Change in Walmart’s Trip Share in the US 2012 Vs. 2011 – Frozen Pizza Top 2 Banners by Trip Share gain apart from Walmart Kroger +1.2% Publix +0.3% Kroger +0.6% Publix +0.6% Kroger +1.8% WMT Supercenters +1.8% Stock Up Trips -0.4% Immediate Needs Trips +0.4% -0.3% WM Total US Department Destination Trips +1.1% NOTE: Competitors have been ordered in terms of Trip share Trip share is computed for Walmart Supercenters Confidential: Internal to Walmart only 10 Global Customer Insights & Analytics Source: Walmart POS Data, IRI Trip Data : Period : Last Year (Nov 2010 - Nov 2011) This Year (Nov 2011 - Nov 2012) Walmart Is Losing Frozen Pizza Trips Across All Trip Types • • • • • Trip Type Distribution Walmart’s share of Pizza trips exceeds 19% but it is declining (.3%) Walmart’s total box trips are increasing at 0.4% suggesting an issue with Pizza, not the box 83.6% of Pizza is purchased on stock-up trips; both sales and visits declined 7.5% Immediate Needs (What’s for Dinner Tonight) are10.8% of sales but they are declining. Walmart’s share of Seasonal/Party trips is 28.7%; only 1.7% of Pizza is sold on these trips 11 Global Customer Insights & Analytics In Walmart Total, FZ Handheld Entrees and Fz/Rfg Processed Chicken are the top 2 of the top 10 affinity products in Fz Pizza baskets; representing over a 4 million dollar opportunity each if Fz Pizza increased by 1% in each of their baskets. Top 10 Affinity Products in Fz Pizza basket in Walmart Total ranked by Total Opportunity Dollars* % of Row Product Trips w/ Fz Pizza % of All Trips w/ Fz Pizza Global Customer Insights & Analytics Fz Pizza $/Trip 22.1 4.3 515 $7.74 21.9 4.3 511 $6.90 21.7 4.3 508 $6.85 21.1 4.3 493 $7.17 20.6 4.3 481 $6.08 20.1 4.3 469 $8.61 19.6 4.3 458 $6.63 19.6 4.3 458 $6.01 19.5 4.3 455 $6.88 19.5 4.3 455 $7.36 *Dollar Opportunity if get Fz Pizza into an additional 1% of Row Product baskets 12 Trip Index SIG Syndicated Reviews ILD ConsumerNetwork Household data; Current 52 Weeks Ending 12-30-2012; 52wk static; Walmart Total Summary of Recommendations – Fz Pizza in Walmart Total Convenient Meal Solutions/Snacks & Stock up Items Finding Fz Pizza Walmart trips are more likely than average to include CoPromotion Ideation Fz Handheld Entrees (Non-Breakfast) Processed Fz/Rfg Chicken/Chicken Sub Fz Appetizers/Snack Rolls Dry Dinner Mixes With Meat Fz Ravioli Fz Onion Rings Fz Pretzels Fz Breaded Vegetables Fz Tortellini/Tortelloni Fz Cookie Dough Recommendations Offerings in the above categories to this consumer group should address the need gap/need state around quick meal solutions and stock-up needs; offering options that deliver on convenience needs for a busy household. Focus on convenient, yet satisfying or flavorful attributes of the offerings and various ways the products can be used to satisfy meal and snack cravings. Appeal to the desire for quick, easy meals. Focus on convenience as ways to meet their needs. Convey the promotions as a quick, easy way to incorporate convenient products into their hectic schedule. 13 Global Customer Insights & Analytics Pizza Buyers are Distributed Across Demo Groups: Walmart Wins with Lower Income Pizza Buyers as do Dollar and Save A Lot Stores Buyer & Dollar Distribution Income: Frozen Pizza Buyer & Dollar Distribution by Retailer/Channel Income $70000 - $99999 17.2 11.2 14.1 Income $50000 - $69999 15.4 16.8 Income $40000 - $49999 Income $30000 - $39999 16.7 11.5 10.5 11.7 Income $20000 - $29999 Income Under $20000 0.0 % of HHs Income $100000 + 13.2 15.3 13.2 15.7 17.5 15.2 14.4 17.6 11.7 12.6 14.2 14.4 17.8 11.8 14.3 16.7 16.9 16.0 21.1 13.1 11.0 13.3 11.8 12.4 11.4 13.2 16.1 13.3 16.0 9.9 11.6 8.9 13.4 15.3 12.9 16.5 11.6 20.1 10.0 12.1 24.1 24.9 37.6 11.0 12.5 23.1 12.9 13.2 18.9 7.3 13.4 17.0 18.2 18.9 13.2 29.9 11.3 18.7 21.1 19.8 19.8 16.7 10.0 10.9 15.9 11.0 8.5 8.6 7.7 11.4 6.5 7.8 5.7 6.2 7.0 10.9 5.2 9.3 13.1 16.3 10.1 10.2 13.2 12.7 19.7 18.9 18.9 29.5 % of Dollars 17.0 10.2 13.8 16.0 16.9 17.4 10.9 Breaks with fewer than 50 raw buyers in the Channel/Retailer are excluded 14 11.7 14.2 TOTAL U.S. 17.3 12.4 16.8 15.7 12.2 WALMART KROGER Global Customer Insights & Analytics 15.0 15.2 20.5 13.2 17.9 19.7 15.1 12.7 11.6 12.9 14.2 9.4 19.3 17.8 16.9 12.1 9.2 10.0 17.9 11.6 19.3 13.2 16.3 17.8 12.1 15.8 PUBLIX ALDI 15.8 10.3 11.6 11.9 15.7 12.9 13.1 12.4 25.9 25.4 38.2 21.5 10.0 21.1 29.6 17.5 12.4 8.1 11.7 27.9 12.1 6.6 8.3 SAVE A LOT TARGET TOTAL 9.8 14.6 9.9 MEIJER FOOD LION H-E-B Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012 16.3 10.3 7.3 10.1 14.1 12.9 6.1 6.2 5.5 7.4 7.5 SAM'S COSTCO 7.7 11.0 12.8 12.1 7.1 11.5 9.8 19.6 16.4 21.6 23.8 9.2 11.8 11.7 16.5 0.0 9.3 9.8 19.2 19.2 DRUG STORES 31.0 DOLLAR STORES Buyer & Dollar Distribution 26% of US Pizza Consumers are Over Age 55, They Account for only 20% of Pizza Dollars Age: Frozen Pizza Buyer & Dollar Distribution by Retailer/Channel % of HHs No Female Head Age 18.1 Age 65 and Over 11.6 Age 55 to 64 14.5 21.6 Age 45 to 54 14.5 Age 35 to 44 Age Under 35 19.7 15.1 10.6 13.7 23.0 16.3 21.4 19.0 10.0 11.6 19.7 16.5 23.2 17.7 12.9 12.9 11.5 12.7 13.3 17.7 14.8 23.5 23.6 17.3 22.0 16.1 10.4 15.4 21.9 16.8 13.7 17.3 10.1 7.5 12.5 15.9 21.5 16.1 15.6 23.1 17.7 14.6 21.6 16.5 17.8 20.3 13.3 5.9 8.9 19.1 20.0 14.7 27.1 14.7 17.9 9.4 7.6 14.9 14.5 25.8 25.6 16.7 12.5 15.6 14.5 16.5 18.7 21.9 14.9 16.0 10.4 20.3 18.4 23.9 25.3 32.8 15.6 20.1 13.0 16.4 % of Dollars 17.7 16.0 18.5 18.3 8.2 8.6 7.6 10.2 10.0 12.0 24.0 Breaks with fewer 16.6 than 50 raw buyers in the Channel/Retailer 21.4 are excluded TOTAL U.S. 15 12.4 24.0 17.2 20.4 16.7 12.9 20.0 14.5 15.4 9.2 6.8 12.6 12.8 23.8 35.0 17.1 15.0 18.9 17.2 20.8 15.1 19.3 19.1 7.8 4.8 10.0 10.6 4.3 7.2 7.8 6.9 13.3 19.2 14.2 13.4 22.5 21.0 12.7 20.8 24.7 18.4 15.2 21.8 26.6 WALMART KROGER Global Customer Insights & Analytics 23.8 PUBLIX 15.9 ALDI 24.1 20.7 MEIJER FOOD LION 16.8 H-E-B SAVE A LOT 11.1 24.9 26.5 14.5 17.1 10.2 19.3 17.1 22.8 SAM'S COSTCO 33.2 28.8 12.4 19.0 13.1 16.1 12.8 14.7 TARGET TOTAL Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012 17.5 26.9 11.5 DRUG STORES 15.6 DOLLAR STORES Know the competition Have shoppers shifted purchases to other retailers? How do I compare (benchmark) against others? Shopper Scorecard Most Retailers Convert More of their Pizza Shoppers than Walmart Increasing shopper conversion by 10 points is a $165 MM opportunity 1 extra trip from our shoppers is a $159 MM opportunity Opportunity Calculations: • Conversion = (25MM Walmart buyers / 36.9% conversion) * 10% * $24.39 = $165 million • Trip = (1 trips / buyer) * $6.37 per trip * 25MM Walmart shoppers = $159 million All Category Buyers: Volume Driver by Key Competitors Walmart Kroger Food Lion Woodmans All Outlets Banner Banner Publix Aldi Meijer Banner H-E-B Corp Save A Lot Target Total Sams Club Costco Food Market 11/27/11 - 11/24/12 79,909 25,088 9,500 4,171 2,727 2,534 2,677 2,074 2,584 6,377 3,688 3,375 346 % Chg. YAG -2.5 -5.5 2.2 5.2 -10.2 -16.9 -6.2 3.3 4.3 3.8 16.6 -17.2 2.5 % Household Penetration 11/27/11 - 11/24/12 67.1 21.1 8.0 3.5 2.3 2.1 2.2 1.7 2.2 5.4 3.1 2.8 0.3 Chg. YAG -1.8 -1.2 0.2 0.2 -0.3 -0.4 -0.2 0.1 0.1 0.2 0.4 -0.6 0.0 % Household Conversion 11/27/11 - 11/24/12 100.0 36.9 62.7 53.1 17.7 43.2 42.3 60.6 31.3 13.0 17.9 22.1 47.6 Chg. YAG 0.0 -1.4 2.8 3.2 -2.8 -6.0 -0.7 -0.8 0.0 1.0 3.1 -3.6 -3.7 Frozen Pizza Buying Households (000) Dollar Share Dollars per Buyer Dollars per Occasion Purchase Frequency Purchase Cycle (Days) % Dollar Volume on Deal Raw Buyers (N=) 17 11/27/11 - 11/24/12 Chg. YAG 11/27/11 - 11/24/12 % Chg. 11/27/11 - 11/24/12 % Chg. 11/27/11 - 11/24/12 % Chg. 11/27/11 - 11/24/12 % Chg. 11/27/11 - 11/24/12 Chg. YAG 11/27/11 - 11/24/12 100.0 0.0 42.37 -3.15 6.96 0.57 6.1 -3.7 36.8 2.4 39.1 1.9 38,815 18.1 -0.4 24.39 -2.21 6.37 0.18 3.8 -2.4 41.0 -1.7 12.2 0.0 11,354 Global Customer Insights & Analytics 8.0 3.5 0.8 0.8 0.7 -0.5 28.36 28.77 10.17 2.34 11.41 -36.08 6.55 7.33 4.61 1.52 5.33 -4.50 4.3 3.9 2.2 0.8 5.8 -33.1 42.9 44.2 51.7 1.6 2.6 25.5 47.8 56.5 5.8 -0.5 10.3 4.8 4,645 2,234 1,490 1.9 -0.1 25.63 5.61 7.01 7.77 3.7 -2.0 45.7 -0.4 58.2 6.1 1,567 1.9 -0.1 24.38 -4.10 6.49 -9.13 3.8 5.5 43.7 0.2 47.7 2.5 1,286 1.5 0.1 23.91 -3.20 5.33 -6.43 4.5 3.5 40.5 -2.8 21.3 4.6 881 1.0 0.1 13.48 4.49 4.99 5.84 2.7 -1.3 45.5 -4.8 9.2 -2.0 1,149 Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012 2.7 0.5 14.59 10.34 6.70 6.61 2.2 3.5 52.1 -4.0 42.0 1.0 2,605 3.1 0.5 28.70 -2.97 12.50 -0.92 2.3 -2.1 63.3 4.3 6.3 3.8 1,924 2.7 -0.3 27.56 2.77 11.82 -0.11 2.3 2.9 70.2 9.6 37.5 6.7 1,774 0.4 0.0 37.86 -12.87 9.45 0.86 4.0 -13.6 42.5 4.6 30.6 -3.1 218 Tactics - pricing Is my pricing competitive? Price Position, Cause and Effect Increased Promotion Contributed to Lower Market Price Implying Vendor Negotiation Opportunity Avg. Price for WMT and the ROM Avg. Price $5.0 WMT ROM -77bps -207bps $4.5 $4.33 $3.5 $3.85 % Unit Vol on deal ROM $3.82 $2.5 03/26/2011 07/26/2011 11/26/2011 03/26/2012 07/26/2012 Percentage Unit Volume Sold on Deal ROM 100% 75% 50% 25% 45% 35% 0% 11/26/2010 03/26/2011 75 07/26/2011 11/26/2011 03/26/2012 07/26/2012 WMT Price Position 100 73 61 50 25 0 11/26/2010 19 $4.24 $3.0 WMT Price Position -1597bps ROM $4.0 11/26/2010 2898bps WMT 03/26/2011 Global Customer Insights & Analytics 07/26/2011 11/26/2011 03/26/2012 Source: Nielsen syndicated POS and Walmart POS data for 104 weeks ending 11/16/2012 07/26/2012 But Deal Does Not Drive Incremental Sales – Implies Need for Competitive EDLP Pricing and Vendor Negotiations Base & Incremental Sales Base $ Incr. $ 18.4% 39% on deal 20.7% wasted 81.6% Brands whose Price Position Worsened Total USFROZEN PIZZA 20 Global Customer Insights & Analytics • • • • • Totinos 56th percentile to 48th Totinos Party Pizza 55th percentile to 51st Red Barron 75th percentile to 48th Tony’s 90th percentile to 83rd California Pizza Kitchen 85th percentile to 77th Source: Nielsen Scan Data – 52 weeks ending 12/08/12 Our Price Position Declined Overall and with Totino’s, Red Baron, Tony’s Price Position by Brand and California Kitchen; Some of our Highest Volume Brands Rest of Market Walmart Price Position Brand Price (First Week) Price (Last Week) Price Chg (Bps) Price (First Week) Price (Last Week) Price Chg (Bps) Avg. Unit Vol on Deal TY All Brands $4.09 $3.82 -660 $4.61 $4.24 -803 56% 15% 64 61 -424 Totino’s Party Pizza $1.32 $1.32 0 $1.40 $1.39 -71 43% 27% 55 51 -766 Di Giorno $4.53 $4.50 -66 $5.02 $5.16 279 48% 10% 77 77 -56 Red Baron $3.63 $3.65 55 $4.33 $3.75 -1339 67% 19% 75 48 -3649 Tombstone $4.09 $3.75 -831 $4.48 $4.35 -290 70% 13% 55 63 1520 Tony’s $2.50 $2.37 -520 $3.12 $2.65 -1506 62% 24% 90 83 -859 Celeste Pizza for One $1.11 $0.98 -1171 $1.10 $1.08 -182 54% -4% 6 81 127755 Jack’s Original $2.98 $2.75 -772 $3.06 $3.02 -131 68% -1% 48 57 1838 Freschetta $5.55 $4.86 -1243 $6.32 $5.31 -1598 71% 21% 71 73 298 California Pizza Kitchen $4.55 $4.58 66 $5.19 $5.21 39 48% 12% 85 77 -1017 Totinos $1.43 $1.33 -699 $1.56 $1.35 -1346 42% 35% 56 48 -1355 Great Value / Private Label $4.26 $3.98 -657 $4.49 $4.65 356 47% 3% 53 93 7620 21 Global Customer Insights & Analytics Chg in Unit Vol on Deal Price Pos (First Week) Price Pos (Last Week) Chg in Price Pos TY Source: Nielsen syndicated POS and Walmart POS data for 52 weeks ending 11/16/2012