Putting together the pasta puzzle

by Eric Schroeder
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The image of pasta as “big business” received a shot in the arm earlier this year when two of the nation’s largest dry pasta producers and marketers were acquired within the span of three months. The investments in American Italian Pasta Co. and Dakota Growers Pasta Company, Inc. speak to the potential of the pasta category, even during challenging economic times. Consumers continue to look for inexpensive, healthy food options, and pasta makers are filling the need.

The first domino to fall occurred in 2005, when New World Pasta Co., Harrisburg, Pa., exited Chapter 11 bankruptcy with a $240 million financing package from Morgan Stanley Senior Funding Inc., GE Capital Markets Inc. and Wells Fargo Bank. By June 2006 the company had been acquired by Madrid, Spain-based Ebro Puleva for $362.5 million, a transaction that established Ebro as the world’s second-largest pasta maker behind Barilla S.p.A.

New World Pasta subsequently has been integrated into sister company Riviana Foods, Inc., and together the companies make up the two business units of Ebro North America — a $1 billion pasta and rice manufacturer.

In the 52 weeks ended Oct. 3, New World Pasta’s spaghetti/macaroni/pasta (no noodles) dollar sales totaled $330,874,900, down 5% from the same period a year ago, according to SymphonyIRI Group, a Chicago-based market research firm. The loss was accompanied by a 2% decline in unit sales to 261,748,900.

Of the top 10 brands tracked by SymphonyIRI, New World Pasta owns six. Five of the six brands sustained dollar sales declines during the 52-week period ended Oct. 3, and four of the six suffered unit sales declines. The exception was Ronzoni, which posted dollar sales of $93,218,620, up 2% from the same period a year ago, and unit sales of 82,606,640, up 5%, according to SymphonyIRI.

Helping drive the Ronzoni brand was the December 2009 reformulation of Ronzoni Smart Taste to include vitamin D. Originally launched in 2008 as a product featuring three times the fiber of regular white pasta and the same amount of calcium as an 8-oz glass of milk, Ronzoni Smart Taste was reformulated to include 100 I.U. of vitamin D per serving.

“Ronzoni Smart Taste complements our Healthy Harvest Whole Wheat Blend pastas by providing a wide variety of great-tasting and healthy pastas for the whole family,” said Dave Heimbecker, director of marketing for New World Pasta.

Viterra throws hat in the ring

While New World Pasta has had time to strengthen its relationship with Ebro Puleva, two other major pasta players are still in the honeymoon stage.

In March, Carrington, N.D.-based Dakota Growers Pasta Co. became the latest acquisition for Viterra Inc., Calgary, Alta. As part of its strategic vision to increase investment in food processing, Viterra paid approximately $240 million for Dakota Growers Pasta, which operates one of the largest durum mills in North America and supplies the ingredient, food service and private label retail markets. The company owns an integrated durum mill and pasta production plant in Carrington and a pasta production plant in New Hope, Minn. In addition to the Dakota Growers brand, the company markets products under the Dreamfields label.

“Viterra has a reputation for quality and performance, and we share similar cultures and values,” Tim Dodd, president and chief executive officer of Dakota Growers, said in late March when the transaction was announced. “This is an exciting opportunity for both companies, one that I believe will secure our long-term future and allow us to expand our product and service offerings to improve the value proposition for Dakota Growers customers.”

Although it does not have any top 10 brands as tracked by SymphonyIRI, Dakota Growers ranks as the No. 5 spaghetti/macaroni/pasta producer with dollar sales of $22,494,320 in the 52 weeks ended Oct. 3. The company also was one of the few to exhibit year-over-year strength in the period, as dollar and unit sales were up 21% and 23%, respectively, from the same period a year ago.

The company’s Dreamfields pasta brand did rank No. 12 in the period, though, with dollar sales of $21,983,800 and unit sales of 9,677,333. The brand has an average price point of $2.27, making it the third most expensive branded product among the top 20 spaghetti/macaroni/pasta (no noodles) brands tracked by SymphonyIRI.

Ralcorp diversifies with AIPC

The largest, and most recent, change in the pasta landscape took place in late July, when Ralcorp Holdings, Inc., St. Louis, completed a $1.2 billion acquisition of American Italian Pasta Co., Kansas City.

Founded in 1988, AIPC operates four plants that are located in Columbia, S.C.; Excelsior Springs, Mo.; Tolleson, Ariz.; and Verolanuova, Italy. The company has been on the rebound from extremely difficult years in the decade, including 2006, when the company sustained financial difficulties and became mired in an accounting investigation that led to lawsuits, criminal charges and the departure of top AIPC executives.

A new round of change looms as AIPC is integrated into Ralcorp. Although AIPC will remain as an independent division of Ralcorp, the company is expected to fuel further market share gains, perhaps through the possibility of entering new categories such as refrigerated and frozen pasta.

“We are excited about the addition of AIPC to the Ralcorp family,” Kevin J. Hunt, co-c.e.o. and president of Ralcorp, said at the time of the acquisition. “This transaction strengthens our position as a diversified provider of private label and branded food products and we anticipate that by adding AIPC’s No. 1 position in private label dry pasta, strategically located production facilities, solid brands and top-tier customer base to Ralcorp’s capabilities, we will be able to better address a broader spectrum of customer and consumer needs.”

Leading the charge for AIPC will be Walt George, who was named president of AIPC in early August. Mr. George, who most recently was chief operating officer of AIPC, was set to succeed Jack Kelly following a transition period scheduled to conclude Nov. 1.

Mr. George and others will be looking to spur branded sales at AIPC, which suffered a decline of 16% in dollar sales in the 52 weeks ended Oct. 3, to $122,381,600, according to SymphonyIRI. The company’s

Mueller’s brands sustained a loss of 10% during the period due in large part to a 7% drop in unit sales.

AIPC hopes to capture part of the growing gluten-free trend with the launch earlier this fall of Heartland gluten-free pastas. Available in spaghetti, penne and fusilli shapes, Heartland’s gluten-free pasta “matches the color, texture and flavor of traditional pasta,” the company said.

On the plus side, AIPC’s private label pasta business remains strong, and was a key factor in the 0.10% gain in overall private label unit sales for the category. At $325,781,600, private label sales were down 3% for the 52 weeks ended Oct. 3, according to SymphonyIRI.

Pasta leader stays strong

“Business as usual” has not slowed growth at Parma, Italy-based Barilla S.p.A., the world’s largest pasta maker. In the 52 weeks ended Oct. 3 spaghetti/macaroni/pasta dollar sales rose 5% to $424,977,100 while unit sales increased 10% to 309,041,400, according to SymphonyIRI.

Dominating company sales was the staple Barilla brand, which posted dollar sales of $359,199,500 in the period, up 5% on an 11% gain in unit sales. Also exhibiting strong growth was the company’s Barilla Plus brand, which saw dollar and unit sales rise 5% and 6%, respectively, in the period. Higher price point, better sales?

Despite the challenging economic climate in recent years, some of the best selling pasta brands on the market during the past 52 weeks have been those carrying the highest average price per unit, according to SymphonyIRI Group, a Chicago-based market research firm.

The reason — added value.

Among the top 20 spaghetti/macaroni/pasta (no noodles) brands tracked by SymphonyIRI, Tinkyada from Food Directions Inc., Scarborough, Ont., had the highest price, at $3.63 per unit. Tinkyada is a wheat-free/gluten-free pasta made from different types of rice. In the 52 weeks ended Oct. 3, Tinkyada capitalized on the growing gluten-free trend by posting dollar sales of $10,685,180 on unit sales of 2,941,914, up 27% and 23%, respectively, from the same period a year ago, according to SymphonyIRI.

Even after a 32c-per-unit decline over the previous 52 weeks, De Cecco pasta from F.lli De Cecco Di Filippo Fara San Martino S.p.A. remained the second most expensive pasta at $2.71, according to SymphonyIRI. But unit sales during the period advanced 4% to 11,020,760. The De Cecco pasta brand carries a higher price point in part due to its line of whole wheat and organic certified products.

Available in seven shapes, Dreamfields pasta from Dreamfields Foods, a unit of Dakota Growers Pasta Co., Carrington, N.D., has about the same high fiber as whole wheat pasta (5 grams; 20% of the daily recommendation), fewer digestible carbs and a lower glycemic index than traditional pasta. This “added value” supports the brand’s $2.27 average price per unit, the third highest among the top 20 brands. The added value helped consumers look past the price to the tune of a 23% increase in dollar sales and 27% increase in unit sales during the 52 weeks ended Oct. 3, according to SymphonyIRI.

The fourth and final pasta brand among the top 20 to carry an average retail price above $2 was Barilla Plus from Barilla S.p.A., Parma, Italy. The higher price point ($2.08) did little to slow sales during the period, as dollar and unit sales advanced 5% and 6%, respectively. Launched in early 2005, Barilla Plus was one of the first pasta brands to hit the market offering a product made from multigrains, legumes, ground flaxseed, wheat fiber and egg whites. The pasta’s standing as a source of omega-3 fatty acids also has served it well among consumers looking for healthier pasta options.

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