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An all-out food fight has erupted in the $21.7 billion pizza segment of the restaurant business as the leading chains compete for a bigger slice of a highly fragmented and slow-growing market.

A decade ago strong points of difference set apart chains -- Domino's Pizza in delivery, Little Caesars in value -- but now they're each offering delivery, value and quality simultaneously, with ads featuring luscious cheese pulls and big pepperoni slices to tout quality and some kind of value.

Sales wins in the lumbering market are coming at the expense of competitors. Those chains cutting their ad spending also are experiencing a concurrent dip in sales. For example, No. 3 player Little Caesars cut media outlays 31.8% last year to $36.3 million, and sales fell 1.4%.

Sales for the 10 pizza chains in the top 100 restaurant chains ranked by Technomic, a foodservice industry consultancy, are projected to grow a tepid 2% annually during the next five years; sales of all pizza-menu restaurants in the U.S. should advance 4.1% annually during the same period due to strength of smaller local chains and neighborhood pizzerias. Sales of these smaller players claim 47% of market. By contrast, sales of quick serve burger restaurants outside the top 10 hold only 5% of the burger market.


Competition "is very tough and it's getting tougher," says pizza industry consultant John Correll, president of Correll Consulting, Canton, Mich. "It's a pie of a finite size getting divided up smaller and smaller and everyone wants a bigger piece."

Papa John's International, fastest growing player in the pizza segment, seems the fiercest competitor. A feisty little guy taking on the giant, Papa John's has grabbed attention and customers from industry leader Pizza Hut in a comparative ad campaign that claims Papa John's uses higher quality ingredients.

Sales at Pizza Hut, a division of Tricon Global Restaurants, fell 4.4% last year, while Papa John's sales shot up 40%. At the same time, Pizza Hut stopped expanding, ending the year with 8,698 outlets, same as in '96, while Papa John's grew to 1,517 units, up 30.8%, according to Technomic.

Pizza Hut, beginning to show signs of a turnaround, hasn't taken Papa John's campaign lightly. Last month, Pizza Hut brought the battle to U.S. District Court in Dallas, charging Papa John's with engaging in a "systematic campaign of consumer deception." Papa John's founder and CEO, John Schnatter, called Pizza Hut's move a public relations stunt.


Domino's Pizza has stayed above the fray, focusing instead on reinforcing its delivery service. The strong-performing chain -- sales were up 7.9% last year -- will tout its new heat-retaining delivery pouch for the rest of the year, says Patrick Doyle, VP-marketing. "It not only delivers on our delivery heritage, but on our quality message as well," he says.

Mr. Doyle says advertising has become more comparative this year. "We strongly believe while there may be some short-term gains out of that, we are much better off telling our own story."

Little Caesars, whose "Pizza, pizza" ads set it apart, has declined in sales and customer traffic. A new campaign this fall from new agency, Bozell Worldwide, Southfield, Mich., will seek to stop the slide.

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