AS SALES FLATTEN, TOP PIZZA CHAINS TURN UP THE HEAT: PIZZA HUT AND PAPA JOHN'S TRADE SWIPES IN AD CAMPAIGNS

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The pizza wars are escalating as chains compete for market share in a slow-growing segment of the fast-food business.

The fiercest battle is being waged between industry giant Pizza Hut and upstart challenger Papa John's, the fourth-largest and fastest-growing chain in the $21.1 billion category.

Papa John's is singling out Pizza Hut -- the struggling brand spun off last October from PepsiCo as part of Tricon Global Restaurants -- in a comparative ad campaign that is forcing its larger rival to respond.

DEDICATED TO WINNING

"We're dedicated to winning the pizza wars," Papa John's founder and CEO John Schnatter declared with zeal at a recent financial conference, prompting one investor to note, "This is brutal."

Sparing No. 2 Domino's Pizza and No. 3 Little Caesars Pizza, Papa John's last week took aim at Pizza Hut in a new $6 million TV campaign that claims customers prefer its pizza over Pizza Hut's.

The national campaign, set to run for three weeks, comes as Domino's is posting its best sales ever.

Little Caesars, on the other hand, is struggling, coping with declining sales and reduced national media spending. The chain last week threw its $40 million account into review (see story on Page 1).

"Papa John's has dramatically gained share at the expense of Pizza Hut," said John Weiss, a restaurant analyst for Nationsbanc Montgomery Securities, sponsor of the New York conference at which Mr. Schnatter declared war. Last year, Papa John's company-owned restaurants gained 9% in same-store sales, while Pizza Hut saw a 1% dip.

DARE FROM PIZZA HUT

The spark for Papa John's campaign is the challenge Pizza Hut launched last year on its pizza boxes, daring customers to find a better pizza.

In the new 30-second spot from Fricks/Firestone, Atlanta, Papa John's says it beat Pizza Hut in a blind taste test. The spot contrasts its sauce -- using a glamour shot of vine-ripened tomatoes -- with Pizza Hut's, depicted as thick red goo scooped from a plastic bag.

A spokesman for Pizza Hut said the chain disagrees with some of the claims made by Papa John's, but finds the focus on quality to be a flattering imitation of the quality initiative now under way at Pizza Hut.

Pizza Hut, however, isn't rolling over. The chain has launched versions of the 30-second spot it first aired during the Super Bowl with new voice-overs, showing footage of Elvis Presley that promote its Edge pizza. Each spot targets a different chain: Domino's, Papa John's and Donato's Pizza, a tiny chain in Columbus, Ohio.

In one version, a young man says, "I heard Elvis the king has come back. He was seen having the Edge pizza down at Papa John's." A second man snickers, "That's about the stupidest thing I ever heard. You can't get the Edge pizza at Papa John's. You have to go to Pizza Hut."

DOMINO'S STEERS CLEAR

Cheryl Bachelder, VP-marketing for Domino's, said her chain and its new agency, Campbell Mithun Esty, Minneapolis, are staying above the fray.

"When your plans are working, you do less looking around," she said. "Papa John's has singled [Pizza Hut] out as the Avis/Hertz discussion, which is not unusual for an upstart company."

Papa John's operates some 1,538 units in 41 states and Washington, with a goal of reaching 2,000 units by the year 2000.

According to NPD Foodservice Information Group, while pizza restaurant traffic increased about 1.7% in 1997, Papa John's had a 32.1% increase compared with Pizza Hut, which was down 4.75%; Domino's was up 2.9%, while Little Caesars fell 7.8%

LIKES THE ATTENTION

As for Donato's, VP-Marketing Tom Santor said he's delighted Pizza Hut is targeting his chain in one of its ads.

"I guess we'll take it as flattery that the largest pizza chain in the galaxy has singled out a little 123-store chain in Columbus, Ohio," he said.

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