That's Amore: Fresh & Easy Neighborhood Market Introduces New 'Gourmet' Frozen Pizzas For $3.99 Each

Private Brand Showcase

In Napoli where love is king

When boy meets girl here's what they say...

When the moon hits your eye like a big pizza pie

That's amore

When the world seems to shine like you've had too much wine

That's amore

- That's Amore: By Dean Martin

[Click here to listen to "That's Amore" while you read the story]

Tesco's Fresh & Easy Neighborhood Market is introducing a new line of frozen artisan Italian pizzas under its 'fresh&easy Gourmet' brand, which the grocer debuted in January of this year. [See - January 21, 201: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand; and February 8, 2011: Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand.]

There are three SKUs in the new frozen Italian pizza line - Margherita, Four Cheese and Pesto & Arugula.

According to John Burry, the chief commercial officer (head of buying and merchandising in U.S. industry terminology) for United Kingdom-based Tesco's Fresh & Easy Neighborhood Market, the fresh&easy brand Gourmet pizzas, which were created by the grocer's in-house chefs, "are handcrafted in Visso, an Italian village just outside Rome known for its extremely pure water from Monti Sibillini National Park . The dough and sauce are made on-site by the pizza maker who gives the pizzas a traditional, rustic Italian crust by double-proofing the dough and baking the pizzas in a stone oven," Burry says.

Margherita is the classic Italian pizza variety, made with just crust, tomato sauce or marinara, mozzarella cheese and fresh basil. It's often called the 'Italian Flag" because when prepared, most famously in Italy's Neapolitan region, its colors mimic that of the national flag. The fresh&easy Gourmet frozen pizzas uses just those ingredients, keeping to the traditional Italian recipe.

The fresh&easy Gourmet Four Cheese Pizza also follows a traditional Italian recipe, using mozzarella, edamer, emmanthal and gran moravia cheese, along with Italian balsamic vinegar from Modena.

The Pesto & Arugula Pizza is modeled after a popular variety in Italy's Liguria Region, which is famous for its pesto. The variety contains basil, crushed garlic, grated hard cheese, pine nuts and olive oil. All of the ingredients are from Italy.

The three varieties are also very popular in the United States, where over the last few years many consumers have been trading-up to higher quality premium pizzas, making a choice of quality (smaller pizzas) over quantity, huge and inexpensive belly-filler pizza pies that use inferior ingredients, including in some cases artificial cheese.

All three varieties of the fresh&easy Gourmet brand frozen Italian pizzas, which based on their size are designed to serve two or three people (depending on appetites of course), sell for an introductory price of $3.99 each. (More on that below.)

The Italian pizzas contain no artificial colors or flavors, high-fructose corn syrup or added trans fats.

The introduction of the fresh&easy Gourmet premium frozen Italian pizzas is the latest example of what we first identified - correctly so far - in late 2010 as a major new private brand development trend at Tesco's Fresh & Easy, which is a focus on creating and launching more upscale, premium, specialty, gourmet and natural/organic types of products than it has in the past. [See - December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus; and December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market, for examples of our thesis.]

We've tied this flight-to-quality and niche-oriented product private brand developmental trend at Fresh & Easy Neighborhood Market in part to the Tesco-owned fresh food and grocery chain's need to increase its margin from what's currently a negative-38% to in the plus category. Theoretically at least, premium and gourmet types of private brand products generally allow a retailer to take a higher margin because consumers are willing to pay more for the quality items. Therefore, following that notion, if a retailer offers - and sells - enough higher-end specialty food items, at higher gross margins than it can get on everyday grocery items, it's overall profit margin should eventually rise.

Additionally, specialty and premium-oriented foods under a retailer's private brands - think Trader Joe's - can help a retailer create a niche among shoppers, along with over time developing loyalty from consumers because they like the retailer's brands - Think Trader Joe's again - and products under those brands, and therefore will become regular customers of the retailer's stores.

It's our analysis that all three of these things are the main drivers of Fresh & Easy's current focus on developing more niche-oriented specialty, premium, gourmet, healthy and natural types of private brand items.

Prices at $3.99, the fresh&easy Gourmet artisan Italian Pizzas should sell well, since the everyday price point is considerably lower than similar offerings of similar sized pizza's by brands like Wolgang Puck and California Pizza Kitchen. Retailer's like Trader Joe's, Safeway and others already offer similar artisan pizza's in their stores.

Pricing: Food for thought

The $3.99 price point is excellent. However, considering the ingredients for the frozen artisan pizzas come from Italy, where the pies are also made by hand, and adding in the cost of shipping the pizza's from Italy to California in a frozen state (have you seen the soaring cost of fuel and ocean and air shipping recently?), we doubt Fresh & Easy's gross margins are where they should be on the items. And if you add in promotional pricing and discounting from customers using the Fresh & Easy coupons, the margin becomes even slimmer.

We've seen similar pizzas everyday priced for $4.99 - $6.99. We would go $4.99 each everyday on the items - then discount the pizza's every so often for $3.99 on ad.

In fact, it's our analysis that the $3.99 price-point is actually too low - and thus takes away from the premium quality positioning of the artisan pizzas. There's a psychology to price when it comes to specialty and premium food products. Priced too low consumers perceive the items as not gourmet. Too high, they just won't buy them, at least not in significant volume.

But at the current price of $3.99 each, although we haven't tasted the fresh&easy Italian pizzas yet, we're willing to say it sounds like it could be ... "An offer you can't refuse." And ... "That's Amore."

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Readers: See and read the numerous past stories in our Private Brand Showcase feature at this link - private brand showcase.