The Pizza Company may lead Pizza Hut battle for Thailand

 
Nov. 7, 2002

BANGKOK, Thailand -- The advantage in a heated Thailand pizza war between U.S.-based Pizza Hut and Bangkok-based The Pizza Company could be in the hands of the home team.

According to a report in the Far Eastern Economic Review (FEER), The Pizza Company, which was launched in March 2001 by parent company Minor Group (a fast-food, hotels and lifestyle-products conglomerate), claims to own nearly three-fourths of the total pizza market there.

To understand how the company executed such a feat -- in less than two years -- one needs to know the rest of the story.

From 1980 to 2000, Minor Group was Thailand's Pizza Hut franchisee. However, when it became a franchisor of Perth, Australia-based Chicken Treat, then-Pizza Hut owner, Tricon, accused Minor of violating its franchise agreement because Chicken Treat would compete against Tricon's KFC brand.

An 11-month lawsuit began and ended in 2000 with an out-of-court settlement that saw Minor divorce itself from the Pizza Hut brand and reopen its 116 stores under The Pizza Company badge in 2001.

Meantime, Tricon opened nearly 100 new Pizza Hut outlets in Thailand.

According to The Pizza Company chief executive Bill Heinecke, 53, that growth hasn't stopped his firm from taking a 70 percent share of the Thai market.

According to the report, his claim may be exaggerated, but it's one that's difficult to disprove. Louisville, Ky.-based Yum! Brands (which Tricon became in 2002 following the acquisition of two more restaurant chains) told FEER that "We do not break out" figures on its Thai Pizza Hut operations. Yum's Thailand managing director Panithan Sethabutra and marketing director Suwanna Usanachitt also told FEER's reporter they were indefinitely "unavailable" for interview.

The U.S. Yum representative did quote a survey by market-research firm AC Nielsen to show Pizza Hut was "top of the mind" in Thailand and mentioned other surveys claiming Thai customers found Pizza Hut restaurants "the best place" and the best employer.

The Pizza Company's sales represent 45 percent of Minor Food Group's revenue, and official figures for the group's operations show a total net profit of 51 million baht ($1.2 million) on 1.7 billion baht (U.S. $39.3 million) in the first half of 2002.

This is a dramatic turnaround in light of the group posting net losses of 224 million baht (U.S. $5.2 million) in 2001, partly because of legal costs spent defending itself against Tricon and expenses related to rebranding the company.

Additionally, Bangkok-based Tisco Securities analyst Rasmiman Sermprasert thinks 70 percent of the market is about right for The Pizza Company, given that others in the market apart from it and Pizza Hut are negligible.

"It has more branches than Pizza Hut, a good delivery service and strong promotion," she said. "It also has new flavors, catering to Thai tastes."

Pim Phan, investment analyst at SCB Securities, believes Pizza Hut and The Pizza Company are neck and neck in the race for share. But he foresees the future benefiting The Pizza Company because it knows the Thai market better and has stronger promotions.

Naree Apisawaittaken, of Phillip Securities, however, believes there's no doubt The Pizza Company is leading.

"I think this is one of the best Thai companies," said. "It knows Thai tastes."


Topics: Marketing


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