Chain reaction: Thinking outside the pizza box for growth

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As independents and small chains slice into their share, leading pizza chains are increasingly turning to tactics beyond new pies and price promotion to deliver growth. Each top pizza purveyor has undertaken a quality makeover and is stuffing its new-product pipeline with grab-and-go non-pizza items and meal combos to appeal to time- and money-pressed consumers. Big chains also are emphasizing carryout and online orders.

After stumbling in 2000 and losing some share (see chart at right), No. 2 Domino's Pizza delivered the best quarterly sales gains in the category for four straight quarters while its two chief rivals, Pizza Hut and Papa John's International, suffer anemic sales. Domino's still has a way to go to regain its 1997 share peak of 11.5%.

Ken Calwell, who joined Domino's in June 2001 as exec VP-build the brand from VP-new product marketing, research and testing at Wendy's International, has installed a new marketing team, streamlined store evaluations and developed a product-testing protocol that marries what he learned at Wendy's and his earlier stint at Pizza Hut.

side-item strategy

In February, he shifted Domino's advertising account to WPP Group's J. Walter Thompson, New York, from Interpublic Group of Cos.' Deutsch, New York. "We've been able to grow the business with a combination of our mainstream pizza focus as well as fundamental operations-quality, consistency, speed-and our side-item strategy," said Mr. Calwell.

While each of the chain leaders has introduced its own version of breadsticks and chicken wings, Domino's has leveraged the side-item strategy more effectively than the competition. "They already have the pipeline that reaches into your home," said Alan Hickok, restaurant analyst for U.S. Bancorp Piper Jaffray. "Now they can put more stuff in the pipe using the same cooking methods without any capital expenditures for kitchen equipment."

"When we talk about hot dough with cheese on it, that's a step away from pizza," said Mr. Calwell. "Hot, fresh bread-based CinnaStix and Cheesy Bread is not too far a stretch."

Other items that could soon follow the Domino's Kickers are Pizza Dots, bite-sized cheese-filled dough with dipping sauces now in test.

Share leader Pizza Hut has also begun touting its combo meals on its Web site and is experimenting with a cinnamon dessert product called Cinnaparts, as well as Grabbers, cheese-filled breadsticks.

Papa John's, meanwhile, is preparing its own August 26 launch of chicken-breast strips under the name Papa's Chickenstrips, as a combo of six strips with a large, one-topping pizza for $13.99. Its campaign via newly hired agency Interpublic Group of Cos.' Austin Kelley, Atlanta, breaks Sept. 2.

Delivery Growing

For Domino's the side items complement its equity on delivery, the point of difference that built the chain in the 1980s. Domino's, however, lost share after Pizza Hut started home delivery in the early 1990s. Delivery has been the fastest-growing segment over the last 10 years, now representing 35% of all sales, according to NPDFoodWorld's CREST data. Carryout also comprises 35% of the total, and is up 3.1% in the last 12 months. Dine-in, 30% of all sales, is flat.

Those trends aren't lost on the nation's No. 1 pizza chain. Pizza Hut last week began encroaching on Domino's delivery business with a guarantee to deliver pizza within five minutes of the quoted time.

Similarly, Domino's has its eye on carryout with a "Ready to Go Domino's" concept test. "We're trying to learn what customers care the most about," said Mr. Calwell, cautioning that it's not their main focus. A TV spot from JWT touts a buy one get one free offer for carryout orders with a modified tagline: "Get the door. It's Dad."

Despite the flurry of non-pie introductions, the chains insist their focus is still pizza. In fact, Little Caesar's and Pizza Hut are about to introduce deep-dish pies.

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