Is Frozen Pizza Going the Way of the Typewriter? Category Review and Recommendations for Frozen Pizza March 2013.

Is Frozen Pizza Going the Way of the Typewriter?

Category Review and Recommendations for Frozen Pizza

March 2013

Global Customer Insights & Analytics2

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


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 ScorecardWalmart Shopper Cross-Purchase ScorecardVolume Decomposition

3. What is the size of my opportunity?Shopper & Dollar DistributionTrip & Conversion Opportunity Assessment

4. Who is the shopper and who is winning with my shopper? What is my shopper looking for?

Shopper ShiftingShopper TrendsWalmart Shopper Cross-Purchase Scorecard

5. On what trip types do shoppers buy my category?

Trip Distribution

6. Is my price competitive?Key Item ReportLowest Price in Market Report

7. Do I have the right assortment?Competitor-specific AssortmentKey Item Reports New Item Trends


Frozen Pizza Product Hierarchy

Frozen Pizza

TTL US: $4.1 B (4.5%)*

TTL WMT: $1.0 B (5.3%)*

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%**

SS Mainstream

TTL US: $296.9MM (3.9%)* 7.3%**

TTL WMT: $68.3MM (8.3%)* 6.7%**

SS Premium

TTL US: $124.7MM (3.9%)* 3.1%**

TTL WMT: $29.9MM (7.3%)* 2.9%**

SS Unconventional

TTL US: $59.1 (23.3%)* 1.4%**

TTL WMT: $6.8MM (50.0%)* 0.7%**

Multi Serve Pizza

TTL US: $3.4B (4.2%)* 84.1%**

TTL WMT: $902.1 MM (4.5%)* 89.0%**

MS Value

TTL US: $362.2 (2.6%)* 8.9%**

TTL WMT: $157.8MM (4.2%)* 15.6%**

MS Mainstream

TTL US: $1.2B (4.8%)* 28.7%**

TTL WMT: $304.0MM (4.3%)* 30.0%**

MS Premium

TTL US: $1.4B (3.9%)* 34.6%**

TTL WMT: $333.7 MM (2.8%)* 32.9%**

MS Unconventional

TTL US: $338.5MM (1.6%)* 8.3%**

TTL WMT: $59.0MM (1.3%)* 5.8%**

MS Combo

TTL US: $145.6MM (12.1%)* 3.6%**

TTL WMT: $47.6MM (20.0%)* 4.7%**

Pizza Crust

TTL US: $11.0MM 23.9%* .3%**

TTL WMT: $29.5K 1442.9%* 0.0%**

Pizza Crust

TTL US: $11.0MM 23.9%* .3%**

TTL WMT: $29.5K 1442.9%* 0.0%**

Source: Nielsen Scan Data – 52 weeks ending 12/08/12 vs.YAG

* $ % chg. vs. YAG** $ Contribution to Frozen Pizza

Segment size and hierarchy

• Frozen Pizza is declining everywhere but it is more severe at Walmart

• Walmart underperforms vs. the market in Multi-serve Value and Combo segments and all Single Serve segments


Retail pizza sales did well moving into the recession; they, are losing to foodservice pizza as the economy recovers

Retail Pizza including:•Frozen pizza•Refrigerated pizza Crust/dough, kits

•Shelf-stable pizza crust mixes, kits, sauce

•Take-and-bake-pizza

Restaurant Pizza

Sales Projections

Price competitively with brands or segments that compete most directly

with take-out?

Dominos $4.99!


Frozen Pizza Sales Have Declined in Walmart and the Remaining Market Over the Last Two Years

01-02-11 03-06-11 10-02-11 12-04-11 02-05-12 07-01-12 09-02-12 11-04-120

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

90000000

100000000

FROZEN PIZZA Dollar Sales WM TTL US Linear (FROZEN PIZZA Dollar Sales WM TTL US)

FROZEN PIZZA Dollar Sales WM TTL US-ROM Linear (FROZEN PIZZA Dollar Sales WM TTL US-ROM)

FROZEN PIZZA Unit Sales WM TTL US FROZEN PIZZA Unit Sales WM TTL US-ROM

Do

llar

/Un

it S

ales

Frozen Pizza Sales Trends

Week ending dates


Total Walmart by $ per Buyer

Purchase Frequency & Annual Spend of Frozen Categories

Total US by $ per Buyer

• Pizza is purchased about as 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

Trips X Annual Spend

Know the shopperWho 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

• 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

• Mintel• BASE: TOTAL SAMPLE 2,000; AGE 18-24 – 260; 25-34 – 358; 35-44 – 370; 45-54 – 386; 55-64 – 292; 65+ – 334

Pizza type by

age


Walmart Frozen Pizza Declines are Driven by Market Contraction, Retained Buyers Buying Less, Shifting is Minimal

• Publix, Kroger, Dollar Channel, Sam’s and Save A Lot are gaining sales from Walmart

Source: Nielsen Homescan - Total US 52 weeks ending 11/24/2012

Walmart Banner – Total U.S. – Frozen Pizza Dollar Shifting

Walmart Banner Dollar trends are due to: Dollar Gains & Losses (000

-13.2

-10.5

-1.8-0.9

Publix

Dollar

Save A Lot

Hy Vee

Safeway

Winn-Dixie

Giant Eagle

Fred Meyer

Conv/Gas

BJ'S

Meijer

Albertsons/Supervalu

Giant Carlisle

Harris Teeter

Ralphs

Military

All other

2,8816,204

9924,918

1,4653,023

8871,1211,7871,1102,235

15686401974973742075852,0461,1731,9292,2091,752

4176045666924599011,271900

32,145

-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

-27,179

Net Dollars

Interact 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 3918 5142 10199 62

101 66103 120112 162186 40208 75218 55222 66320 38577 43610 153682 69

4,966 93

Shopper Shifting


Walmart is Losing Pizza Stock Up Trips Which Account For 82.5% Of All Frozen Pizza Trips ; Kroger is gaining all trip types

NOTE: Competitors have been ordered in terms of Trip share Trip share is computed for Walmart Supercenters

Stock Up Trips

Immediate Needs Trips

Kroger

Publix

WMTSupercenters

Change in Walmart’s Trip Share in the US 2012 Vs. 2011 – Frozen Pizza

+0.4%

-0.4%

+1.2%

+0.3%

+1.8%

Source: Walmart POS Data, IRI Trip Data : Period : Last Year (Nov 2010 - Nov 2011) This Year (Nov 2011 - Nov 2012)

Top 2 Banners by Trip Share gain apart from Walmart

Department Destination Trips

+1.1%

Confidential: Internal to Walmart only

-0.3% WM Total US

Kroger +1.8%

Kroger

Publix

+0.6%

+0.6%

Trip Type Distribution


Walmart Is Losing Frozen Pizza Trips Across All Trip Types

• 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

Trip Type Distribution


22.1

21.9

21.7

21.1

20.6

20.1

19.6

19.6

19.5

19.5

Fz Pizza $/Trip

% of All Trips w/ Fz Pizza

Top 10 Affinity Products in Fz Pizza basket in Walmart Total ranked by Total Opportunity Dollars* Trip Index

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.

4.3

4.3

4.3

4.3

4.3

4.3

4.3

4.3

4.3

4.3

515

511

508

493

481

469

458

458

455

455

$7.74

$6.90

$6.85

$7.17

$6.08

$8.61

$6.63

$6.01

$6.88

$7.36

*Dollar Opportunity if get Fz Pizza into an additional 1% of Row Product baskets

% of Row Product Trips w/ Fz Pizza

SIG Syndicated Reviews ILD ConsumerNetwork Household data; Current 52 Weeks Ending 12-30-2012; 52wk static; Walmart Total


Finding Fz Pizza Walmart trips are more likely than average to include

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

Co-Promotion Ideation

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.

Summary of Recommendations – Fz Pizza in Walmart TotalConvenient Meal Solutions/Snacks & Stock up Items


Income: Frozen Pizza Buyer & Dollar Distribution by Retailer/Channel

Pizza Buyers are Distributed Across Demo Groups: Walmart Wins with Lower Income Pizza Buyers as do Dollar and Save A Lot Stores

15.3 17.5 14.4 11.4 16.1 11.618.9

11.3

29.9

7.7 6.5 7.018.9

29.513.2 15.7

14.212.4

13.212.9

15.313.2

23.1

8.6 11.4 6.2

18.9

19.711.7

13.212.6

11.813.3

11.6

13.4

12.9

12.5

11.0 8.55.7

12.7

13.2

10.511.5

11.711.0

13.19.9

8.9

10.0

11.0

10.0 10.9

7.8

10.2

10.116.7

16.817.6

18.918.2

21.117.0

20.1

13.4

19.8 16.7

15.9

16.3

13.115.4

14.114.4

16.714.3

16.013.3

16.5

7.3

18.7 21.1

19.8

10.99.317.2 11.2 15.2 17.8 11.8 16.9 13.2 16.0

0.0

24.1 24.937.6

12.1 5.2% of HHs

Income $100000 +

Income $70000 - $99999

Income $50000 - $69999

Income $40000 - $49999

Income $30000 - $39999

Income $20000 - $29999

Income Under $20000

TOTAL

U.S.

WALM

ART

KROG

ER

PUBLIX

ALDI

MEIJ

ER

FOO

D LIO

N

H-E-B

SAVE A L

OT

TARGET T

OTAL

SAM'S

COSTCO

DRUG S

TORES

DOLL

AR STO

RES

14.2 17.9 12.2 12.1 15.8 9.8 14.6 9.927.9

8.3 6.1 7.519.2

31.012.9

16.815.7 11.6 11.7

12.913.1

11.7

29.6

6.6 12.9 7.4

19.219.6

11.612.7

13.210.0

17.911.8

15.712.4

11.6

12.1 7.35.5

9.8

11.510.9

11.712.4

9.2

12.111.9

9.210.0

10.3

8.1 10.36.2

12.87.1

17.416.9

17.316.9

17.819.3

17.823.8

9.8

17.5 16.314.1

16.412.116.0

13.8 15.120.5

15.219.3 16.3 15.8

9.3

21.5 21.6

21.1

10.1 11.017.0 10.2 14.2 19.79.4 15.0 13.2 16.5

0.0

25.9 25.438.2

12.4 7.7

% of Dollars

Buyer & Dollar

Distribution

Breaks with fewer than 50 raw buyers

in the Channel/Retailer are

excluded



Age: Frozen Pizza Buyer & Dollar Distribution by Retailer/Channel

26% of US Pizza Consumers are Over Age 55, They Account for only 20% of Pizza Dollars

19.7 21.4 23.2 23.5 22.0 21.6 17.827.1

15.632.8

20.3 18.4 23.916.4

14.5 16.3 16.5 14.8 17.3 14.6 16.5

17.7

14.7

20.0

14.9 16.0 10.413.0

21.623.0 19.7 17.7

23.621.9 23.1

21.5

20.3

19.1

25.8 25.618.7 21.9

14.513.7 11.6 13.3

12.7 15.4 15.612.5

16.1

8.914.9 14.5

14.5 16.5

11.6 10.610.0 12.9

11.5 10.4 10.17.5

15.9

5.9 9.4 7.612.5 15.6

18.1 15.1 19.0 17.7 12.9 16.1 16.8 13.7 17.3 13.3 14.7 17.9 20.1 16.7

% of HHsNo Female Head Age

Age 65 and Over

Age 55 to 64

Age 45 to 54

Age 35 to 44

Age Under 35

TOTAL

U.S.

WALM

ART

KROG

ER

PUBLIX

ALDI

MEIJ

ER

FOO

D LIO

N

H-E-B

SAVE A L

OT

TARGET T

OTAL

SAM'S

COSTCO

DRUG S

TORES

DOLL

AR STO

RES

21.4 21.8 26.6 23.8 15.9 24.1 20.7 28.816.8

33.219.3 17.1 22.8 15.6

16.6 17.2 16.7 15.012.8

17.1 15.218.4

16.1

21.0

14.5 17.1 10.211.5

24.0 24.0 20.4 20.0 35.023.8

24.720.8

22.5

19.2

24.9 26.517.5 26.9

12.0 12.4 10.2 12.912.6 12.8 12.7

10.013.3

7.214.2 13.4

13.119.0

8.2 8.6 7.6 10.0 9.2 6.8 7.8 4.810.6

4.37.8 6.9

11.112.4

17.7 16.0 18.5 18.3 14.5 15.4 18.9 17.2 20.8 15.1 19.3 19.1 25.314.7

% of Dollars

Buyer & Dollar

Distribution

Breaks with fewer than 50 raw buyers in the Channel/Retailer

are excluded


Know the competition

Have shoppers shifted purchases to other retailers?

How do I compare (benchmark) against others?


All Category Buyers: Volume Driver by Key Competitors

Most Retailers Convert More of their Pizza Shoppers than WalmartIncreasing shopper conversion by 10 points is a $165 MM opportunity 1 extra trip from our shoppers is a $159 MM opportunityOpportunity 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

Shopper Scorecard


Frozen Pizza All OutletsWalmart Banner

Kroger Banner Publix Aldi Meijer

Food Lion Banner H-E-B Corp Save A Lot Target Total Sams Club Costco

Woodmans Food Market

Buying Households (000) 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 0.3Chg. 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 47.6Chg. 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

Dollar Share 11/27/11 - 11/24/12 100.0 18.1 8.0 3.5 0.8 1.9 1.9 1.5 1.0 2.7 3.1 2.7 0.4Chg. YAG 0.0 -0.4 0.8 0.7 -0.5 -0.1 -0.1 0.1 0.1 0.5 0.5 -0.3 0.0

Dollars per Buyer 11/27/11 - 11/24/12 42.37 24.39 28.36 28.77 10.17 25.63 24.38 23.91 13.48 14.59 28.70 27.56 37.86% Chg. -3.15 -2.21 2.34 11.41 -36.08 5.61 -4.10 -3.20 4.49 10.34 -2.97 2.77 -12.87

Dollars per Occasion 11/27/11 - 11/24/12 6.96 6.37 6.55 7.33 4.61 7.01 6.49 5.33 4.99 6.70 12.50 11.82 9.45% Chg. 0.57 0.18 1.52 5.33 -4.50 7.77 -9.13 -6.43 5.84 6.61 -0.92 -0.11 0.86

Purchase Frequency 11/27/11 - 11/24/12 6.1 3.8 4.3 3.9 2.2 3.7 3.8 4.5 2.7 2.2 2.3 2.3 4.0% Chg. -3.7 -2.4 0.8 5.8 -33.1 -2.0 5.5 3.5 -1.3 3.5 -2.1 2.9 -13.6

Purchase Cycle (Days) 11/27/11 - 11/24/12 36.8 41.0 42.9 44.2 51.7 45.7 43.7 40.5 45.5 52.1 63.3 70.2 42.5% Chg. 2.4 -1.7 1.6 2.6 25.5 -0.4 0.2 -2.8 -4.8 -4.0 4.3 9.6 4.6

% Dollar Volume on Deal 11/27/11 - 11/24/12 39.1 12.2 47.8 56.5 5.8 58.2 47.7 21.3 9.2 42.0 6.3 37.5 30.6Chg. YAG 1.9 0.0 -0.5 10.3 4.8 6.1 2.5 4.6 -2.0 1.0 3.8 6.7 -3.1

Raw Buyers (N=) 11/27/11 - 11/24/12 38,815 11,354 4,645 2,234 1,490 1,567 1,286 881 1,149 2,605 1,924 1,774 218

Tactics - pricing

Is my pricing competitive?


11/26/2010 03/26/2011 07/26/2011 11/26/2011 03/26/2012 07/26/20120%

25%

50%

75%

100%

35%45%

Percentage Unit Volume Sold on Deal ROM

% U

nit

Vo

l on

de

al R

OM

Source: Nielsen syndicated POS and Walmart POS data for 104 weeks ending 11/16/2012

11/26/2010 03/26/2011 07/26/2011 11/26/2011 03/26/2012 07/26/20120

25

50

75

100

7361

WMT Price Position

WM

T P

rice

Po

sitio

n

11/26/2010 03/26/2011 07/26/2011 11/26/2011 03/26/2012 07/26/2012$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

$3.85 $3.82

$4.33 $4.24

Avg. Price for WMT and the ROM

Avg

. Pric

e

WMT ROM

2898bps

WMT-77bps

ROM-207bps

-1597bps

Price Position, Cause and

Effect

Increased Promotion Contributed to Lower Market Price Implying Vendor Negotiation Opportunity


But Deal Does Not Drive Incremental Sales – Implies Need for Competitive EDLP Pricing and Vendor Negotiations

Total US- FROZEN P...

Base $

Incr. $

81.6%

18.4%

Source: Nielsen Scan Data – 52 weeks ending 12/08/12

Base & Incremental

Sales

Brands whose Price Position Worsened

• 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

39% on deal

20.7% wasted


Price PositionRest of MarketWalmart

BrandPrice (First

Week)

Price (Last Week)

PriceChg

(Bps)

Price (First

Week)

Price (Last Week)

PriceChg

(Bps)

Avg. Unit Vol on

Deal TY

Chg in Unit

Vol on Deal

Price Pos

(First Week)

Price Pos

(Last Week)

Chg in Price

Pos 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

Source: Nielsen syndicated POS and Walmart POS data for 52 weeks ending 11/16/2012

Our Price Position Declined Overall and with Totino’s, Red Baron, Tony’s and California Kitchen; Some of our Highest Volume Brands

Price Position by Brand

Is Frozen Pizza Going the Way of the Typewriter? Category Review and Recommendations for Frozen Pizza March 2013.

Documents

ttl wmt

pizza crust ttl us

ms value ttl us

single serve pizza ttl

ss value ttl us

ms combo ttl us

ms mainstream ttl us

ms premium ttl us