the country's two top pizza chains are suffering identity crises.
With the $28 billion pizza business growing only slowly, and players carving out slices on the low and high ends, No. 1 Pizza Hut and No. 2 Domino's are caught in the middle.
They're buffeted on the value side by a resurgent Little Caesars and pizza-buffet concept CiCi's, and on the premium side by California Pizza Kitchen and sandwich and brewery concepts that have added pies to their menus. In fact, topped pizza pies are the third-most-popular item ordered in restaurants after hamburgers and french fries, according to NPD Group.
All that's led the two top chains to rethink their traditional strategies based on delivery and limited-time offerings. "Just as Starbucks created an experience and quality coffee, Pizza Hut and Domino's will have to shift focus so people will know what they stand for," said Darren Tristano, managing partner, Technomic.
That's easier said than done in a fragmented market where 63% of sales are controlled by mom-and-pop stores and chains other than Pizza Hut, Domino's and Papa John's. With only 3.4% growth in the category, the result is a fierce share battle where marketing weighs heavily on the success or failure of a brand, said Sandelman & Associates CEO Bob Sandelman. "A lot of it comes down to who's promoting what, how they're promoting and what the price points are," he said.
looking to new year
Yum Brands' Pizza Hut is trying to break out of that trap with a strategy it plans to unveil in mid-December for a possible New Year's Eve launch. It recently restructured its management team, naming marketing whiz Scott Bergren, former exec VP-chief marketing and food innovation officer for parent Yum, to succeed Peter Hearl as president.
Amid its soul searching earlier this year, the marketer is believed to have given shops beyond its agency of record a shot at its business-though it would not confirm that-but stayed with Omnicom Group's BBDO.
For its part, Domino's has been focused on delivery but has realized it should also be paying attention to carryout. In an Oct. 12 call with investors, CEO David Brandon blamed gas prices and soft consumer spending for lower store traffic across the category. But he also conceded the delivery-focused company blundered with its ill-timed Super Six offer, which created an $18 minimum check while consumers were stretched by gas prices and other financial demands. "Carryout, being a few dollars less on a per-order basis, is going to do better and perform better [under these conditions], and we've seen that here at Domino's," he said. WPP Group's JWT, New York, handles.
Though it had been faring better than its two top rivals, No. 3 Papa John's suddenly showed a 1.8% decline in October after posting healthy 5%-plus same-store sales gains through the first three quarters of the year. Jim Ensign, VP-marketing communications, however, is optimistic sales will improve in December when the "better ingredients, better pizza" chain partners with Warner Home Video for a promotion around the DVD release of "Superman Returns." The chain will offer a film-themed pie called the Superman Pan Pizza with seven toppings and a $3 instant coupon for the DVD with each delivered pie.
Papa John's is also setting itself apart by promoting its online ordering. It's boosting awareness for the service by making its website, rather than the company as a whole, the title sponsor of a college bowl game. Naming the game the PapaJohns.com Bowl creates a built-in reminder, if not a call to action, every time the game is mentioned. "We asked ourselves how we can take this entitlement and have it communicate about a service we offer," Mr. Ensign said.
The marketer announced its two-year deal with ESPN Regional Television on Nov. 16 for what had been known as the Birmingham Bowl, to be played Dec. 23 between a Conference USA team and a Big East Conference team. Beyond TV coverage of the game, the marketer will get additional exposure from media coverage and, of course, its own promotional schedule, including TV spots that will promote the website.
One chain that has carved out a clear niche is once-flagging No. 4 Little Caesar Enterprises, which has been winning on value with carryout pizza by the slice and $5 Hot-N-Ready pies that customers buy in multiples. The closely held brand doesn't release sales figures but said it has had five straight years of sales increases following a turnaround plan in 2000 to reverse a three-year slide.
Also winning on price is pizza buffet chain CiCi's, which offers an all-you-can-eat array of 16 pies, as well as salads, pastas and drinks for $5 per person. With a 12.9% gain in 2005 to $490 million in systemwide sales across 579 units, CiCi's was the fastest-growing of the top 10 pizza chains, according to Technomic.