• Subway, Schlotzsky's push for a 'pizza the pie'

    Tags: Marketing

They're best known for sandwiches, but Subway and Schlotzsky's now appear to be vying for a bite of the pizza market.

Pizza is already a menu mainstay at Schlotzsky's, a 702-store quick-casual chain based in Austin, Texas, but the company wants to boost its sales beyond its current 15 percent of the menu mix.

At Subway, however, pizza is a newcomer to the mostly cold sandwich lineup served at the chain's 15,570 stores. The company does co-brand its stores with two pizza companies, Baltimore-based mama ilardo's and Indianapolis-based Noble Roman's, but market tests of single-order pizzas, which began last spring, marked the first time the chain has produced its own.

Officials at Subway's Milford, Conn., headquarters remain tight-lipped about the tests, but it appears results are positive. After a roll-out at seven Subway restaurants in May, the pizza tests were extended to 25 U.S. markets and one in Puerto Rico. Still, Annie Smith, public relations manager at Subway, downplayed the company's pizza pursuits.

"To Subway, pizza is not a big issue. Diversifying the menu with sandwiches is," said Smith, via e-mail.

Subway, Inc.

Headquarters: Milford, Conn.
Stores: 15,470 (74 countries)
Founded: 1965
At the Top: Fred DeLuca, president and co-founder
Privately held by: Doctor's Associates, Inc., Milford, Conn.
Systemwide sales, 2000: $3.6 billion
Average sales per store: $275,000

Somewhat similarly, Karl Martin, Schlotzsky's senior vice president of marketing strategy, said his company's pizza push is designed only to boost awareness of an existing product. Competing with pizzerias is not part of the strategy, he said.

"We don't have any delusions about being a major pizza concept," said Martin. "Our pizza is meant to complement the menu and increase customer frequency by having variety.

"Even if our stores were (deliberately built) next to pizza stores, we'd still not compete with them because we don't have giant pizzas and we don't deliver. That's a different customer."

Martin also insisted that Schlotzsky's pizzas are unique compared to most pizzerias'. Offerings such as Thai Chicken, Chicken & Pesto and Smoked Turkey & Jalapeno (prices range from $3 to $5) are notables on its 10-pizza list.

Schlotzsky's began promoting its pizzas in October with a month-long nationwide TV, radio and print campaign that ended November 4. Two pro-pizza songs-"Mouthful" and "Pizza Now"-were aimed mostly at the company's sandwich-buying loyalists, who it believes aren't aware Schlotzsky's serves pizza.

To make its pizza, Schlotzsky's stores make sour dough daily, form it into eight-inch rounds and parbake it prior to service. Once ordered, each round is topped and cooked in a conveyor in about four minutes.

For its tests Subway is using seven- and 14-inch parbaked crusts, which are topped to order and baked in about two minutes in a countertop TurboChef C3 non-vented oven. No details on toppings options or prices have been disclosed.

Don't mistake the message

Aware that their strongest daypart, lunchtime, is the pizza industry's weakest, it's clear that Subway and Schlotzsky's want to capitalize on the marketability of personalized pizzas. They're an attractive offering to consumers who eat lunch alone and to groups of people who want menu diversity at an affordable price. Tim Carlin, a senior consultant for industry tracker Technomic, said such products always go far to raise the appeal of a restaurant.

Schlotzsky's Deli

Headquarters: Austin, Texas
Stores: 702
Founded: 1971
At the Top: John C. Wooley, chairman and CEO
Ticker symbol: BUNZ (NASDAQ)
Systemwide sales, 2000: $429 million

Average sales per store: $550,000

"I see (parents) coming in with their 8-year-old daughter, she wants pizza, but they want a nice sandwich," said Carlin, whose firm is in Chicago. "She can grab a personalized pizza that tastes good, which eliminates what I call the 'veto vote.' "

Pizza industry consultant, Dave Ostrander, said that any efforts by Schlotzsky's and Subway's to downplay their pizza initiatives should only put pizzeria operators on notice. Loss of market share to any company -- especially well-known brands like Subway and Schlotzsky's -- should not be ignored, he said.

"That's a lot of pizza those two can put out in the market," said Ostrander, referring to both companies' combined 16,300 points of purchase. Ostrander, who owned and operated Big Dave's Pizzeria, in Oscoda, Mich., for almost 30 years, added, "If I were still in the business, I'd be concerned."

Subway and Schlotzsky's also are well-oiled and well-financed marketing machines that have succeeded at positioning their offerings as healthy and wholesome-a perception not typically enjoyed by pizza companies.

But, ironically, Carlin believes those companies' good marketing that could benefit the pizza industry in the end.

"It's going to do nothing but help pizza overall," said Carlin. "I may not get my pizza at Subway at lunch, but subliminally, that advertising has created an action step for me to order pizza somewhere."

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