The U.S. population consumes about 6 billion pounds of pasta per year, good for approximately 19.4 pounds per capita.
“This speaks to the tremendous upside that exists for this industry,” Smith said. “If we can continue, through innovation, new products and consumer communication to make pasta more relevant for today’s consumer it’s a tremendous opportunity for us, but also a great case of critical mass for us to operate from.”
The U.S. accounts for almost 24% of global consumption, followed by Italy at 12.9% and Brazil at 11.4%. In terms of production, Italy is No. 1 at 6.9 billion pounds, followed by the U.S. at 4.4 billion pounds and Brazil at 3.3 billion pounds.
Looking at the health of the dry pasta industry, unit sales were up about 1% during 2010, but dollar sales fell about 2.5%. Despite the erosion in dollar sales, Smith expressed an upbeat outlook going forward.
“The positive thing is we continue to have a very solid business in terms of organic growth from a tonnage or unit perspective,” he said.
Drilling down further, the “healthy segment,” made up of whole grain and multigrain pastas, performed well in 2010, he said.
“That is where the growth is currently being driven within the industry,” Smith said, pointing to dollar and unit sales growth of 10% and 14%, respectively. “This is an important development because this speaks to some of the change in consumer, some of these macro societal trends that we need to be aware of, that we need to respond to as an industry. Health and wellness – this is not a fad – this is an enduring trend that we need to continue to address. And as the population ages it’s going to become increasingly more important.”
Meanwhile, the white pasta category experienced a 5% drop in dollar sales and a 1% decline in unit sales during 2010.
“My prediction is this will continue this year,” Smith said of the slowdown in the white pasta category. “So we cannot as an industry — in terms of white pasta — sit here and be complacent and be stagnant. The consumer is voting with their pocketbook and the world is changing. We need to be cognizant of that and we need to react to it as an industry.”
Looking beyond the $2 billion dry pasta category to the more than $7 billion mega pasta category, the industry has thrived, Smith said.
He pointed to dramatic growth in the frozen category as a key driver, while the only noticeable weakness has occurred in the canned shelf stable pasta category.
“Overall, pasta remains a relevant food stuff for Americans, but we need to remain aware of where the shifts are taking place to make sure we’re very agile and very responsive to that,” he said.
Digging inside the numbers, household penetration of dry pasta was at 85.2% during 2010, up from 84.7% in 2009 but still down from closer to 90% pre-Atkins. Breaking purchasing down by outlet, most of the dry pasta — 75% — is bought at retail, followed by U.S. supercenters at 28%. Two underdeveloped categories are club stores (5.2%) and dollar stores (5.1%), Smith indicated.
Citing a base price point of $1.50 and promo price point of $1.09 during 2010, Smith said retailers are using pasta to drive business and customer count. By comparison, the average base price point in 2009 was $1.53 and promo price point was $1.14.
Smith said the 2% decrease in stock-keeping unit rationalization that has prevailed over the past few years gave way to a 1% increase in distribution during 2010.
“That was driven primarily by new product innovation as we continue to bring new products to market that can drive organic growth,” he said. “The trade has responded favorably to that and we’re starting to rebuild our distribution base.”
Breaking down pasta spending by household, Smith said highest pasta consumption during 2010 took place in households with more than five members. Additionally, the highest consumption also took place for families with income over $100,000 per year.
“Our consumer base is relatively affluent consumers, and they’re going to be very responsive and demanding to new products, whether it’s convenience, health and wellness, etc… We have a very affluent consumer base that we need to be in tuned to,” he said.
Looking at the purchase dynamics of the past year, Smith said the good news is an uptick in household penetration. Average purchase size increased 1.7%, while average purchase frequency eased 0.9%.
“This is a key metric that we need to continue to focus on as an industry,” he said. “We need to get pasta into more households, more usage occasions and continue to drive business.
“We cannot be complacent. We cannot be stagnant. The world is changing as we speak.”
In the period 2000-20, relatively little growth is expected in the younger age groups, but explosive growth is expected in the aging population.
“We need to peer into the future and make sure that we are going to meet the needs of those aging consumers,” he said. “What does that mean? Well, it means consumers are going to be demanding in that they’re going to say, ‘You know what, I want health and wellness. I want things that help me maintain a healthy lifestyle. Health plus, health minus, sterols, reduce my cholesterol level, fiber, heart health.’ We need to be very in tuned to that and respond to it. It needs to be very convenient and portion controlled.”