As the U.S. economy improves, it is interesting to look back at how the pizza industry performed during the “Great Recession”. In this economic slowdown, pizza sales fell rather than increased. Traditional wisdom offers that in recessions, consumers eat more pizza. Here are some thoughts and reasons why we saw different results during this business cycle and how you can improve your sales.
Pizza remains America’s favorite food. At $36 billion a year in sales, pizza racks up more U.S. restaurant dollars than any other single segment. The system to “deliver” pizza to consumers is a well-balanced machine. Competition is fierce in this mature market but most players along the channel prosper. Here are six structural factors that affect the incremental demand for pizza.
The Price of Pizza
Traditionally, pizza flourished in poor economic times because pizza was inexpensive. It has roots as a peasant food, designed to keep the stomach full for a small cost. Ten years ago, a large pizza was $7; today it is $14. The perception that a large pizza, for a family of four represents a cheap meal is in the past. Today, pizza is a moderately priced family alternative, not a cheap belly stuffer. Solution: Offer “Value Meals” that bundle salads and drinks for one price. Create loyalty programs so customers can earn FREE food or discounts.
The Hispanic population has taken off in the United States. Hispanics represent the largest minority population segment in the U.S. and growing rapidly. They have brought their own culture and food. In addition, the popularity of Mexican Foods has exploded with Middle Americans. Today, most strip shopping centers have a pizzeria and a taco shop. This obviously pulls incremental sales away from pizza. Solution: Hispanics are rapidly assimilating with American culture. Market “Mexican Pizza” with taco meat and Hispanic Cheeses as a topping. You can create variations on the theme with Guatemalan pizza, Peruvian pizza etc, by using authentic foods from these regions as toppings. Many other ethnic groups have growing populations, all that are here want to embrace America AND honor their roots, create fusion pizzas.
America’s love affair with ethnic foods is now several decades old. There was a time when Italian fare was different and “Ethnic”. Today, Italian food is as Middle American as meat and potatoes. The “hot” Ethnic foods of today are Chinese, Thai, sushi and Indian. To some degree, Italian food is “old hat”. People go out to eat to satisfy hunger but also for fun and entertainment. New, exciting choices grab attention and dollars. Solution: Show massive creativity with your toppings. Chicken Chow Mein Pizza, Curried Beef Pizza and Satay Chicken Pizza will capture those Oriental flavors that are stealing customers away. I have done the research and recommend that you refrain from sushi pizza.
The Aging of America
The American population is aging. Older Americans are living longer and a steady stream of baby boomers turns 60 every day. The empty nest syndrome has hit a large number of these households. In many homes, kids drive the choice for pizza. With pizza’s traditional customer base aging, the decision to buy pizza occurs less often. As baby boomers age, their tastes are shifting toward a preference for healthier foods. Older Americans eat more healthy foods in an effort to maintain better and longer life. I love pizza and do not claim it is unhealthy, but realistically, pizza is not “health food”. Solution: Expand your menu to include senior offerings such as Italian entrée salads, lighter pasta dishes, vegetable lasagna, antipasto & soup combinations. Part of pizza’s popularity is the delivery component, offer healthier Italian foods with the convenience of delivery and keep aging consumers in your customer count.
Newer chains such as Panera Bread, Mimi’s Café and Applebee’s capture more sales everyday with their fresh, healthier menus and comfortable environments. Many pizza shops, particularly independents, are aging and many could use a face-lift and a fresh coat of paint. The choices facing the consumer are massive and intriguing and people like to try new things. Solution: Take a good look around your shop. Can you clean, paint or brighten your surroundings? Clean restaurants give customers the confidence that your kitchen is clean too. Add posters, table tents and sharp, crisp new menus for accent. Pizza.com has a great new print program.
When is the last time you bought a frozen pizza in the grocery store? If your experience dates back a few years, the times they are a changin’. The frozen pizza available is pretty darn good. Freshetta, CPK and others have reasonably priced, good quality pizza. Traditionally, frozen pizza was marketed to satisfy “the kids” conveniently and inexpensively. Parents were not going to eat it, so they did not demand higher quality. Kids today are more sophisticated; they know good pizza and want it at home too. The new frozen pizzas satisfy and hold the line on food budgets for families. Solution: Focus on quality and service. Surely you can beat a frozen pizza in a box.
Is there a future for pizza in the United States? You bet. However, the future will not be won on business-as-usual approaches. Pizza remains a very big business and progressive marketers will win more sales with these tactics:
Offer Order Online – Today’s younger, more mobile customer orders online. If you don’t have it, get it. Pizza.com has a great program, easy and affordable.
Expand menus – Offer healthy alternatives such as great salads and Italian chicken dishes to satisfy parents and those who seek healthier alternatives.
Eliminate dollar off coupons – Don’t go to war with a reduced treasure chest; this weakens your ability to fight. Market offers that increase consumer trial, such as “Free Salads” with a large pizza to build new consumer habits and increase ticket averages.
Take & Bake – Develop a product that will fit this growing market.
Healthy Offers – Even something as simple as an ultra thin crust marketed, as a “reduced calorie” pizza will attract customers. High protein entrees and dinner salads with chicken will satisfy as well.
Serve wine – American wine consumption has increased dramatically. Keep it simple and inexpensive and customers will flock to it. Margins on wine are very good and will make up for lost pizza profits. The popularity of “Two-Buck Chuck” proves that Americans will try wine if the entry point is not too high.
Aggressively market desserts andcoffee – Get customers in the door and keep them there.
Service – Great service in any product category, delivered consistently will bring raving, repeat fans. Americans want to enjoy their food and food entertainment. Deliver on the promise of value, flavor and sensible eating; this will draw customers for many years. Run your business with confidence, draw on your experience, but don’t depend on past performance alone to create a winning future.
Yes, the world is changing, embrace the entrepreneurial spirit that brought you in to the business. Identify your closest competitors, see what do that creates excitement and sales and go get new customers.
Wishing you success in pizza – Ed
Ed Zimmerman is a pizza industry veteran and President of Pizza.com, the number 1 web portal that connects consumers to pizzerias. His almost four decades of foodservice experience includes food manufacturing and distribution leadership, food industry technology, marketing services and restaurant and grocery operations management.
Ed Zimmerman is a pizza industry veteran and President of The Food Connector. His almost four decades of foodservice experience includes food manufacturing and distribution leadership, food industry technology, marketing services and restaurant and grocery operations management.