Piece of the pie
In recent years, the US pizza industry has grown by leaps and bounds. What started out as a doughy crust topped with tomato sauce, cheese and handfuls of pepperoni and served either in small pizzerias or frozen and picked up in a supermarket, often wasn’t very good in the early days, but it was quick and easy.
Much has changed. Pizza today can still be bought in little, locally owned pizza shops, frozen from the grocery store and from huge national chains, but it’s no longer limited to crust, cheese, tomato paste and maybe pepperoni, although that meat is still one of the most popular toppings.
Pizza has evolved to include toppings spanning many types of meat, poultry and vegetables. For these reasons, the meat and poultry industry is playing a larger role in supplying pizza toppings to a growing segment.
Hormel Foods, Austin, Minn., and Tyson Foods, Springdale, Ark., are two of the largest pizza-topping makers in the US. Paul Sheehan, national accounts manager in Hormel’s Foodservice division, has been with the company for nine years, and has been focusing on the company’s pizza segment for the past six years.
Sheehan says Hormel doesn’t break out its results in terms of volumes of toppings produced, but he can say the company is the No. 1 supplier of pepperoni in retail groceries and supermarkets. Holly Drennan, senior product manager at Hormel Foods, says homemade pizza is the No. 1 use for retail pepperoni. Consumers like “pizza nights” because entire families become involved in mealtime. She adds Hormel pizza toppings were created as a convenient solution to save consumers time and cleanup when cooking hamburger and sausage.
Sheehan says Hormel has been committed to making high-quality dry sausage – pepperoni – since 1891. Pizza’s popularity began to blossom in the 1940s, as a result of soldiers returning from Europe at the end of World War II.
Hormel actually set up a dry sausage department in 1915, “a core part of our company,” he says. The company was also making Genoa salami.
Hormel got into the pizza business because it could see pizza was becoming an extremely convenient food. “You could call ahead and have it delivered; it’s a very social food; people gather to eat it right out of the box,” Sheehan says. “It’s also a comfort food, and kids love it. So, it was a natural for us.” And because of the popularity of pizza, making toppings and crusts, has become very big for the entire meat and poultry industry – “it’s a big segment,” he says.
Pizza toppings have evolved over the years, and what was once unthinkable as a pizza ingredient is often the latest rage. “At Hormel, we added beef, Canadian bacon, pre-cooked chicken and turkey pepperoni,” Sheehan says. “The turkey is not big now, but will be in the future.”
The company also works with large pizza chains, regional operations, large local independent pizza operators as well as “mom and pop” stores to come up with proprietary flavors. “We have a direct sales force working in every major market,” he says.
In August 2007, Hormel made a major move to consolidate its position in the pizza industry by acquiring the privately held Burke Corp., a maker and marketer of pizza toppings and other fully cooked meat products, for about $110 million. Jeffrey Ettinger, chairman of the board, president and CEO of Hormel Foods, explained at that time, “Hormel is a leader in pepperoni, and the addition of Burke Corp. strengthens our position in the pizza-topping industry by expanding our offerings to foodservice customers.”
Burke had been making and selling pizza toppings and other fully cooked meat products primarily to foodservice customers and makers of frozen entrées and appetizers. Its product lines included traditional pizza meat toppings, meatballs, Mexican meat fillings and breakfast meats. Cultural similarities between the companies made the acquisition almost seamless.
Hormel also introduced products targeting retail pizza and other foods, which include beef and Italian crumbles, next to pepperoni in the refrigerated case.
In Columbus, Ohio, there is an equipment supplier that plays a major part in the world of pizza and its preparation. Grote Company has roots going back to Donatos Pizza, a pizza chain founded by Jim Grote in Columbus in 1963. Today, Donatos operates 165 stores in seven states, and will celebrate its 50th anniversary in 2013.
The Grote family is one of the founding families playing a big part in the pizza business – still operating a large group of pizzerias, supplying equipment to the industry and inventing equipment universally used in the pizza industry.
Working in pizza wasn’t the direction Bob Grote, now president of Grote, was first headed in life. He’s actually an engineer with a degree from the Rose-Hulman Institute of Technology in Terre Haute, Ind. After graduating, he got involved in selling hydraulics and other types of equipment. Eleven years ago, his Uncle Jim called him up and asked him if he would be interested in joining the Grote Company in sales. He sold for the company until 2008 when he became president of the company.
Grote Company has become the world’s leading manufacturer of precision slicing and application equipment for the food processing industry, including slicers, cutters and applicators for the pizza industry, the bread industry, and other food manufacturing. The company kicked off a celebration of its 40 years in business at Process Expo 2011 last month in Chicago.
While the company has developed equipment for a wide variety of slicing applications, pizza production is where it has gained its worldwide reputation. At Donatos, Bob’s uncle Jim was consumed with the idea of finding a better way to slice and apply pepperoni to his pies. In 1972, he invented the Peppamatic, the first automated pepperoni slicer and applicator.
“Before this, we had kids sitting in restaurants applying pepperonis to the pies,” Bob Grote says. “That was very time-consuming. And with frozen pizza starting to take off, we needed to find ways to speed up pizza manufacturing, to eliminate eight to 10 people working on the line.” Although the original machine was too large for retail pizza kitchens, it was ideal for automating the pepperoni slicing process on a frozen pizza production line. Jim teamed up with an engineer to automate the Peppamatic to mass production speeds. The Peppamatic’s automated process increased productivity, cut labor costs and increased efficiency.
During the first eight years, the Grote Company focused on the Peppamatic, which revolutionized the whole world of slicing. But then the company developed more slicing machines, for slicing deli meats, cheeses and breads. Today, pizza-making equipment represents about 25 percent of their business. The privately held company employs 165 across three locations: its parent company in Columbus; its Vanmark Equipment Division in Creston, Iowa, which specializes in potato processing equipment, and its European division in the United Kingdom.
The unique world of pizza is one of the key drivers for growth for Grote Company. “The pizza industry defies all logic,” Grote says. “It just grows and grows – 5 percent one year, 10 percent the next year, then by leaps and bounds. One big leap for the pizza industry was the self-rising crust. You remember frozen pizzas in the very beginning. They were pretty plain, and to be honest, not very good. But the self-rising crusts made the frozen pizzas a lot better, more than just bar food, and they’ve really taken off. And now, the pizza industry has been diversifying into more gourmet and better toppings. It’s just diversifying and growing like crazy. Back then, frozen pizza was not as good as what comes from local pizzerias.”
Grote describes the growth of the pizza industry and the wide variety of pizzas available everywhere as “amazing.” “If you look at the selection of pizzas available in grocery store cases, you’ll see new growth for the industry is coming from unique ingredients in pies you didn’t see just a few years ago, like chicken chunks and real vegetables. The consuming public expects more variety,” he says. “And coming from me, an equipment supplier, the industry has gotten very competitive, extremely competitive.”
“I used to say the pizza industry will reach a certain point and not grow anymore, but it will continue to grow, including in places like India and China, believe it or not. And frozen pizza is following that growth. Pizza crosses all boundaries.” He notes there has been some cannibalization, such as ‘take ‘n’ bake” pizza, made fresh in front of you that you then take home to bake in your oven and enjoy hot. “It’s the latest in a pizza revolution that I think will be never-ending,” he says.
One pizza-maker and processor of toppings for pizza taking advantage of new technology supplied by the Grote Company is Nation Pizza, based in Schaumburg, Ill. Mike Alagna is COO of the company, which processes meats, sauces, crusts, cheeses, pre-made frozen pizzas and dough balls.
The company was founded as an offshoot of Father and Sons Pizzerias in Chicago, and has been in business for more than 35 years. Alagna, a veteran of the frozen food industry, helped open the Schaumburg plant 20 years ago.
Today, Nation Pizza is a co-packer and co-developer. “We’re a frozen retail pizza manufacturer, we do food service for quick service restaurants [QSRs], and major grocery store chains, but we also do a lot of research and development for the industry,” Alagna says. “A lot of ideas in expanding the industry come from us.” He says companies come to Nation Pizza and ask them to make products for them, so there is a lot of collaboration.
In doing so, he says a lot of these products are manufactured with Grote equipment. Speaking about the benefits of working with Grote, Alagna says, “They deliver in a time frame that satisfies my customers and feeds my business. Working with their equipment takes labor off the line. In the old days, pepperoni was put on by hand. No more. We also slice ham and vegetables.”
He adds that Grote Company has always been innovative. “They listen to us and our needs. We don’t have to buy off their shelf. They just don’t say ‘take it or leave it.’ They’re very good people to do business with. Grote Company and Nation Pizza both thrive on people relationships, not just making decisions based on price. And their equipment also helps us comply with the new food safety standards.”
In Alagna’s view, pizza has become much more of a commodity. “It’s less likely for people to stay loyal to a particular brand,” he says. “So you have to offer huge values for people to stay loyal, because the return on pizza is very small.”
Tyson Foods is a leading supplier of pizza crusts, pepperoni, sausage and beef toppings to national chains and retail frozen pizza manufacturers. “We are the largest suppliers of pepperoni and pizza toppings to the foodservice industry,” says Worth Sparkman, Tyson Foods spokesman. “In fact, each year Tyson produces enough pepperoni slices to cover 23,000 acres.”
The company has been in the pizza-topping business for the past 10 years, following its acquisition of IBP inc. in 2001. Customers for the company’s pizza-topping ingredients range from national quick-service restaurants to foodservice companies.
To meet customer demand, Tyson has started a multi-million dollar renovation of its Council Bluffs, Iowa, plant in order to produce more pepperoni. Sparkman says the prepared foods business in the US is thriving, thanks in part to growth in the pizza toppings segment.
“Those sales last year totaled about $3 billion, and 60 percent of those sales were in foodservice,” he says. “Customers are supplied with pizza toppings both directly by us and through foodservice wholesalers.”
Shipment of toppings depends on the products, with some toppings requiring specific packaging, he adds.
He also notes Tyson Foods is one of the nation’s largest makers of pizza crusts. TNT (Thick n’ Thin) Crust, a part of Tyson’s prepared foods unit, operates two Green Bay, Wis., bakeries, covering a total of 117,000 sq. ft. of production space, five to six days a week.
“The plants make millions of pizza crusts each year,” Sparkman says. The crusts are either par baked or in self-rising form and are sold to frozen pizza manufacturers, chain accounts, foodservice distributors and specialty pizza distributors.”
Pizza by the numbers
There are approximately 70,000 pizzerias in the United States, according to Jeremy White of Pizza Today and the National Association of Pizza Operators. Ready-to-eat pizza is a $38 billion industry.
Pepperoni is by far the most popular topping in the US, followed by sausage. Independent pizzerias range in annual gross sales from $2.1 million to $20 million. They operate 393 units, opened 35 units last year, and were planning to open 48 more this year.
With about 70,000 pizzerias throughout the US, the top-three companies are Pizza Hut (7,500 stores), Domino’s (4,927 stores) and Papa John’s (2,781 stores). These top three control more than 15,000 units in the US, and more than 10,000 units throughout the rest of the world.
These top-three businesses generate almost $19 billion annually throughout the world, and $11 billion across the US. The top-10 pizza companies control approximately 19,500 stores and more than $12 billion in annual revenue in the US. As a group, independent pizza operators, as well as most of the chains, tend to buy their products from more than 100 specialty distributors throughout the US. Seventy-four percent of pizza shop operators have dining rooms, 94 percent serve appetizers, 56 percent serve pasta meals and salads, 48 percent offer beer and 38 percent serve wine.
Types of pizza include barbecue chicken, cheese pairings, Pizza Margherita, deep dish, eggplant parmigiana, Greek, grilled, Hawaiian, meat lovers, Mediterranean, pesto, Pizza Arrebba, Pizza Insalata, pulled pork, San Giovanni, pork, sandwich, sausage, seafood, shrimp, Sicilian, take “n” bake, and three cheese Mexican brunch, among others.