Competition | September 2013 | By Sam Oches

Pizza’s Arms Race

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Blaze Pizza has 150 units in the pipeline.
Blaze Pizza, created by Wetzel's Pretzels founders Rick and Elise Wetzel, has 150 units in the pipeline. Blaze pizza
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Much like its burger counterpart, Ryan says, Live Basil is thriving on customers’ desires for new, bold flavors in a familiar format; one of the company’s best-selling signature pizzas is topped with truffle mushrooms, arugula, and mascarpone. “Ten years ago, people didn’t even know what truffle was, and here we are, it’s one of our top three selling pizzas,” Ryan says. “I think that just reflects the kind of flavor diversity that people are actually looking for these days.”

People are also increasingly looking for fast-casual brands that allow for maximum meal customization. Younger demographics are especially flocking toward dine-out options that give them the ability to try new things and build their own culinary masterpieces.

“This new generation, Millennials, they’re used to getting everything their way,” Grier says. “It’s just a customized world they’ve grown up in; they haven’t known anything different. They’re used to directing what they want because of the technology they’ve grown up with, and having those options and choices … we think is a big win.”

But it’s not just Millennials who are flocking to these better-pizza brands. Wetzel says he sees everyone from grandparents, families, and first dates dining at Blaze. And Andrew at Uncle Maddio’s says his chain’s casual atmosphere and range of menu items—which also include paninis and salads—is similarly attracting a diverse consumer base.

“We cater to all walks of life, all demographics, all genders, and up and down the socioeconomic scale,” Andrew says. “What’s cool is people get to be individualistic; it’s all about being yourself, and I think today that’s been more and more accepted as people want to express themselves even outwardly.”

None of this success would be possible without the advent of new technologies that press and bake pizza in a few short minutes. Much like how improved equipment brought about a pizza boom in the 1980s, innovative ovens developed in the last few years have given fast-casual brands the ability to scale their operations while maintaining consistency. Many of the better-pizza players use open-hearth ovens at enormously hot temperatures (800 degrees, in the case of 800 Degrees) that keep the total order time at less than four minutes.

Ben Pote, an R&D chef at San Francisco–based menu development consultant The Culinary Edge, says pizza is a very labor-intensive process, which has always prevented pizza brands from speeding up preparation methods. He adds that the dough used for the thin-crust Neapolitan style bakes much quicker than traditional crusts.

“For fast-casual restaurants, people are coming in and they want to get that same high-quality pizza dough that they’re looking for, but they don’t want to wait a half hour for it to be made and topped and turned in the oven and then rested and then cut,” Pote says.

Irv Zuckerman, founder and co-CEO of PizzaRev, says the streamlined process by which fast-casual pizzas are made improves the overall customer experience. He says guests want to watch their meals being made, want to see it go in and out of the oven. But the fact that the new brands have crunched a long process into a short time frame, he says, will leave a lasting impression on the way Americans eat pizza; much like the Wetzels in 2011, many people want pizza for lunch.

“We think the paradigm shift to lunch for pizza is a major element in the success that we are having and will continue to have,” Zuckerman says. “Because when you can get an item like pizza—which is America’s favorite, basically—at lunch without having to take 45 or 50 minutes total, but you can actually order a pizza, choose all your ingredients, and then have it go oven to you in three minutes or less and be quality—not roller grill oven, but high-end, stone-hearth oven—people appreciate that.”

This fast-casual pizza paradigm shift is hitting at an opportune time: The broader fast-casual space is the lone bright spot in the post-recession restaurant industry, while pizza languishes as an American staple with little by way of innovation or excitement.

According to market consultant The NPD Group, traffic within the fast-casual industry—which accounts for 5 percent of outside-the-home eating—increased 8 percent between March 2012 and March 2013. In the two years prior, traffic increased 6 percent each year. In that same time, traffic at quick-service restaurants was essentially flat.

“The restaurant industry overall is forecast to grow only 4 percent in a 10-year period, so less than a half a percent a year,” says Bonnie Riggs, restaurant analyst at The NPD Group. “But one [segment] that is forecast to grow at a double-digit rate over the 10-year period is fast casual.”

Pizza, meanwhile, is in a sort of holding pattern. The industry hauled in $33.5 billion in 2012, a 4.4 percent gain over 2011, but continues to be dominated by delivery, takeout, and buffet brands. Only six pizza brands made it into the QSR 50 this year—Pizza Hut, Domino’s, Papa John’s, Little Caesars, Papa Murphy’s, and CiCi’s—and the three fastest-growing outside-the-home pizza categories are C-stores, grocery stores, and price clubs, according to The NPD Group.

Sources interviewed for this story are torn on whether the rise in fast-casual pizza brands will affect major players like Domino’s and Papa John’s. While most believe this new crop of concepts will force those companies to improve their quality and experience, many say the better-pizza angle is different enough that it will create a new dine-out occasion. Much like McDonald’s, Burger King, and Wendy’s have survived the onslaught of better-burger brands, the experts say, major pizza companies will continue to fit their own niche audience.

“It’s a much better experience than the traditional way, and I think everyone is going to have to adapt,” says Samit Varma, cofounder and president of The Pizza Studio. “[But] Domino’s and Papa John’s and the delivery guys, they’re not going anywhere. That is a different product; that is a different business. I would go right next to Domino’s if I could. I think those two customers are completely different; the uses are completely different.”

Rather than worry about competing with the pizza elite, the fast-casual pizza brands may have to worry about competing with each other. The better-pizza executives all speak highly of one another and wish each other success, but just like with any other restaurant category, too many competitors in the same markets will leave someone out in the cold.

The NPD Group’s Riggs says the winners in the better-pizza category will be those brands that best create a unique position in the marketplace.

“Within the other segments of fast casual, there have been winners and there have been losers, and it’s those that best address the needs [that succeed],” she says. “So those getting into this market really need to do their homework and really need to understand what consumers are looking for from their concepts and who their target buyers are.”

Grier may not like the constant comparisons between fast-casual pizza and Chipotle, but as he looks ahead to Pie Five’s potential success—the company has deals for 38 stores in place, and has analyzed the top 50 markets in the U.S. for potential growth—he can’t help but pine for that brand’s position among the fast-casual Mexican field.

“The question is going to be, How is it going to shake out? Who’s going to be the Chipotle, who’s going to be the Qdoba, who’s going to be the regionals?” he says. “Or, Who’s going to be Five Guys, who’s going to be Smashburger? Each category seems to play out with a large player, a strong competitor, and then the regionals.”