Domino's Pizza lands in New Zealand, ignites price war

July 16, 2003

JOHNSONVILLE, New Zealand -- Pizza wars have broken out in Johnsonville between Pizza Hut, Pizza Haven and Domino's Pizza, which entered the market on July 5.

According to The Independent Herald, three of the brands' outlets are located closely enough on the same street "to fire olive pits at each other."

Domino's fired the first salvo by offering two large pizzas for $10.95 (U.S $6.41). Pizza Haven returned fire by selling large pizzas for $4.95 each (U.S. $2.90).

The battle heated up over the July 12-13 weekend, when Domino's sold $4.95 larges between 10 a.m. and 3 p.m. for its customer appreciation day. On the same day, Pizza Hut countered with a $3.95 (U.S. $2.30) large pizza offer.

Domino's store manager Michael Garner told the Herald his store sold 900 pies during five-hour special window and another 800 that day.

"We had a blast doing it as well," he said. Garner added that $5.95 (U.S. $3.48) lunch and $6.95 (U.S. $4.06) dinnertime specials will remain part of the Domino's pricing strategy. "There's no reason to pay $11.95 for a large pizza."

Restaurant Brands (the Pizza Hut franchisee in New Zealand and Australia) Chief Executive Officer Vicki Salmon said Pizza Hut hyped its $3.95 promotion by having staff wear billboards at the Johnsonville motorway off-ramp while others circulated throughout a shopping village. The net result was store sales of about 2,000 pizzas that day.

In addition to being $1 (U.S. 59 cents) cheaper than the Domino's pizzas, Salmon said Pizza Hut pizzas are larger: 30 centimeters in diameter compared with 28 centimeters.

Johnsonville Pizza Haven franchisee Kwong Lo said the current market is setting the price and that lowering prices will drive buyers into all the shops.

"Since Domino's opened, our sales have been up by over 40 percent," Lo said. Though the low prices mean lower profits, Lo said "securing a good customer base" is worth the price cut.

Asked how when the price war might end, Lo said likely by the end of the year. "I don't think it will be a long-term thing, but it will be on for a while."

Watching the pizza wars from afar is independent operator Dick Gray of Leo's Pizzas, a 20-year industry veteran, who said his business isn't really affected by the price war. "We continue to get our loyal customers; ours is more of a gourmet pizza outlet.

Topics: Operations Management

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