Pizza price war slices profits in Australia

Dec. 21, 2003

BALLARAT, Australia—The battle for the local pizza market has pushed the price of a large pie to as low as AUS $4.95 (U.S. $3.65).

According to The Herald, the price war began when a Domino's Pizza outlet opened just meters from one of Ballarat's long-time pizza shops, Don Ciccio's. The competition is expected to stiffen when Pizza Hut opens a unit a short distance away.

Don Ciccio's owner Tony Rizzo has been in business for nearly a decade in a market that already contains 48 pizza shops. When he heard Domino's would open nearby, he cut the price of his large pizzas from AUS $6.50 to $5 (U.S. $4.79 to $3.68).

"I don't think I could go any lower," said Rizzo, adding that such prices leave no margin for profit.

When the Domino's store opened, it countered Don Ciccio's offer with a AUS $4.95 (U.S. $3.65) lunchtime large pizza it normally sells for AUS $8.95 (U.S. $6.59).

"It's a pretty cutthroat industry," said Brett Parsons, the Domino's franchisee. But he doesn't believe his entry into the market undermines local businesses. "We own this store 100 percent. The profits are staying in Ballarat. It's a family business."

Rizzo plans to counter by expanding his carryout offerings.

Topics: Domino's Pizza , Marketing , Operations Management , Pizza Hut

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