- WHITE PAPERS
In 2010, analysts praised the recession-proof nature of the pizza industry, pinpointing the segment's success on the 65,000 pizza parlors across the United States.
Americans order, on average, 5.5 billion pies per year, another strong indicator that the pizza business is thriving. Much of this resiliency can be attributed to cost and convenience, as well as the ubiquitous offerings of various chains and mom-and-pop shops.
But digging a little deeper, it's clear the pizza industry survived and thrived on far more than cheap expediency.
In 2010, the pizza industry embraced technology and competition; yielded bold — perhaps risky — marketing campaigns; diversified its offerings to broaden its appeal; and navigated a global wheat crisis.
PizzaMarketplace.com takes a look at some of the most intriguing stories from the past year, in no particular order:
1. Call it a comeback. Domino’s marked its 50th anniversary year with a bang, reinventing its pizza from the crust up as part of the “Oh Yes We Did” campaign — a promotion that included the implementation of customer focus groups via Twitter and Facebook.
"Our inspired new pizza was driven so heavily by listening to our customers through social media, having that component be a part of our online marketing campaign seemed like a no-brainer," said Domino's spokesperson Chris Brandon. "Our 'Oh Yes We Did' website not only shows consumers that we have indeed been hearing what they have to say — but it also shows them how we have done so."
Although the change was bold and perhaps risky, it seems to have paid off thus far, garnering massive media attention, attracting more than 80,000 Facebook fans and, most notably, driving a dramatic sales turnaround.
Perhaps feeling Domino’s swift momentum, smaller companies jumped on the reimaging train. For example, Pizza Inn experienced its strongest growth in years, especially in markets where it introduced its new retro prototype.
Zpizza is currently in the middle of a $100,000-per-store makeover, Chuck E. Cheese is undergoing major remodels, and Straw Hat Pizza has added earthy tones and upscale touches to tout its California roots as it grows east.
2. The $10 price wars. This year harbored a game of chicken to see just how low the big three (Papa John’s, Domino’s, Pizza Hut) would go. All three hovered around different $10 deals to raise comps, and while it worked for the most part, they all have slightly different positions moving forward. However, each is hard-pressed to stray too far from that price-point, perhaps out of fear for each other. Papa John's has tried to break away, with little luckin the earnings category.
Analysts have criticized the $10 price war as an undervaluation of their product and a short changing of their profit margins.
While this battle was going on, smaller chains quietly flirted with extremely cheap deals as well, including Cici’s, which offered up a $3.99 pizza for its anniversary celebration, and Papa Gino’s, which rolled out a $6 promotion.
3. A grainy picture. Since the Russian ban on exports in the late summer/early fall due to a shortage, wheat futures have gone up on this side of the world, making commodities more of a headache for pizzeria owners. Russia is the third largest exporter of wheat in the world.
If prices resume their upward trajectory, customers could wind up paying 25 to 30 percent more for a loaf of bread and at least 10 percent more for a pizza, said Darin Newsom, a senior analyst at Telvent DTN, an agriculture and commodities information company.
4. Diversification. With an increased demand for variety and convenience, pizza companies are dipping their toes in unconventional waters.
For example, buoyed by tremendous growth, the Fast Casual concept was officially declared a foodservice category this year and many pizza chains have purposefully molded their models to fit the bill. These include Top That! and Stone Flats, two companies that are also leading a build-your-own growth within the pizza industry.
Frozen Crossover– Frozen pizza continues to challenge the industry, offering creativity and, more often than not, lower price points. Many chains are taking advantage of a crossover market, including California Pizza Kitchen and Pizza Patron.
Food Truck Nation – As more big-name chains deploy food trucks, pizza has refused to be left in the dust. The industry certainly provides a sensible canvas for such a platform and, as such, Streetza and Pizza Cono have rolled out larger fleets this year. Also, CPK joined the road warriors in the fall.
Health, yeah – Who says pizza is bad for you? Not the founders of Naked Pizza or Pizza Fusion. As consumers attempt to focus more on healthier lifestyles, these companies should continue experiencing the benefits.
5. Online/apps ordering revolution/evolution.About a quarter of pizza orders that come in are now done via online or mobile application. This number is expected to continue to grow, and we’ll consequently continue to see innovation in the apps and online ordering interfaces. Already, Domino’s online Pizza Tracker includes sound effects and Papa John’s offers an interactive pizza-making application that shows customers a visual of their finished product that matches in-restaurant topping specifications.
In 2011, look for:
Jennifer Litz contributed to this story.
Topics: Business Strategy and Profitability, California Pizza Kitchen, Chuck E. Cheese's Pizza, CiCi's Pizza, Customer Service / Experience, Domino's Pizza, Dough, Equipment & Supplies, Food & Beverage, Franchising & Growth, Health & Nutrition, Marketing / Branding / Promotion, Online / Mobile / Social, Operations Management, Papa John's, Pizza Toppings, Restaurant Design / Layout, Trends / Statistics