"The pizza battle is on, and grocery stores are winning. Consumers are shifting to at-home pizza, resulting in the big four pizza players losing a 3% share of wallets compared to the same time last year, according to Numerator.”
From COVID highs to softer sales: Pizzerias fall, as grocery stores gain ground
While pizzerias “had this huge surge when COVID hit,” restaurant traffic has started "to nosedive across the board” in the last month and a half, Baggett said. The main reason is consumers are stretching their dollars in the face of inflation, Baggett said.
Consumers are realizing that food prices are up across the board and shifting their behaviors to save money.
Overall, “64% of consumers say that the rising prices are making dining out to be too expensive,” and “45% said they were going to cut back on restaurant” spending, Baggett said. However, “41% of people say that the rising food prices make grocery shopping not as budget-friendly as it used to be,” she added.
When it comes to how many are making the switch, 13% of restaurant pizza consumers said that because of inflation that they will “cut back on dining out on pizza, and that they're going to buy frozen pizza,” according to Numertaor data, Baggett said.
Circana (formerly IRI) research has shown that this is already taking place, as the frozen pizza segment saw a “9% increase in sales” for the 52 weeks ending February 26, 2023, which equates to roughly $322m of sales, she added.
“The bottom line is that consumers are looking for savings. And when it comes to pizza, the two things that they're really interested in is convenience and value," Baggett said. "Right now, we see that grocery is outpacing restaurant growing their share.”
Grocery stores turn to promotions to capitalize on shifting consumer behavior
And as consumers are looking for savings, grocery stores and other retailers have ratcheted up the promotions and incentives to grab consumers' attention, Baggett said. Frozen brand promotions have increased by 214% in the past two years through print, email, loyalty programs, coupons, and more, according to Numerator data, she added.
While couponing can drive down the price of a purchase, consumers with a coupon often end up spending more money overall, Baggett said.
“They're not necessarily trying to spend the least amount of money possible, but they're just trying to get more for their dollar,” Baggett said. “People will ... spend more [with a coupon] because it's kind of like they're getting permission to upgrade or to get more for their dollar.”