Competition | March 2011 | By Daniel P. Smith

The Fall of Pizza

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Above all, perhaps, many of the major brands struggled with an ill case of “the sameness,” dizzying consumers with similar products and promotions. The copycat syndrome led many brands to focus attention solely on pizza competitors, thereby neglecting a broader view of the entire quick-service category, its evolution, and changing consumer preferences.

“We know we’re competing with Papa John’s, Pizza Hut, and Little Caesars,” McIntyre says, “but sometimes we forget we’re competing with the likes of Chipotle and Qdoba as well.”

Domino’s ignorance, McIntyre says, remained in place until 2008 when, amid declining store traffic and a faltering economy, Domino’s executive team faced two choices for a company that turned public just four years before: woe is me or innovative, intrepid action.

“For 48 years, we were doing the same thing with a slight tweak here or there, and something had to give,” McIntyre says.

Eighty percent of Domino’s menu options weren’t around in 2008, with new items including pastas, oven-baked sandwiches, and gourmet pizzas.

“That’s created fresh opportunities, particularly with lunchtime consumers and those looking for something different,” McIntyre says.

Along with Domino’s, other competitors are taking a proactive approach to their slowing segment. For a time, many industry insiders wondered if Little Caesars was on its way to a slow, painful death. Stores closed and sales lagged. Yet on the way to extinction, the now 51-year-old, Detroit-based pizzeria began reversing course. The numbers swung upward, and today the brand is reestablishing itself as an industry player with inventive franchising programs and determined, strategic new market expansion.

Both Little Caesars and Domino’s are enjoying a recent resurgence.

In early 2010, the latter unveiled a new pizza recipe, among the boldest moves a major restaurant chain has ever attempted, that reinvigorated the brand. Combined with innovative advertising and store-level execution, Domino’s recipe shift sparked double-digit sales growth at its outlets and spirited responses from competitors.

Since mid-2009, Saleh says, analysts have noticed an increased focus among the major pizza chains on retaining customers. The new strategy is often the simplified promotion, such as Pizza Hut’s $10 any size, any crust, any toppings offer, as a way to generate traffic and hit on the value proposition.

“In this way, consumers know what they’re getting,” Saleh says, reminding that such aggressive promotions lean on the cooperation of commodity markets and franchisees.

The segment’s struggles also steered concept leaders toward menu development to drive traffic, a trend likely to accelerate in the coming years to fend off still-mounting challenges from retail and to advance recent gains with the lunch crowd.

For now, at least, pizza’s moves appear to be working.

Among the major quick-service chains, pizza’s on the uptick, according to NPD Group numbers. After seeing traffic decline 7 percent and 4 percent in the final two quarters of 2009, major pizza chains enjoyed a 6 percent traffic increase in 2010’s first quarter, just as marketing initiatives and incentives took shape. In the second and third quarters of 2010, major-pizza-chain traffic grew 4 percent and 5 percent, respectively. While the numbers enliven corporate executives, they just as importantly excite franchisees, the backbone of any system.

“When you wake up and take note of what’s around you, the competitive landscape can change in a hurry,” Riggs says. “That’s certainly the case with pizza and helps explain its most recent progress.”

With recent success fueling the segment, the question arises whether it can maintain its new pace.

NPD’s recent industry forecast shows only a marginal outlook for pizza, dampened prospects given an aging U.S. population, steep discounts that establish a “new normal” on pricing, and pizza’s sluggish performance over the last decade.

“But forecasts aren’t set in stone,” Riggs says, “and the outcomes can shift.”

Now & Then
Over the last 10 years of the QSR 50, pizza chains have gone from comprising 12 of the nation’s top quick-service brands to just seven.



Pizza Industry

I have almost given up ordering commercial pizza and the stuff from the store has only gotten worse. The "hot and ready" epidemic is what drove me away. I don't want to be gouged but I also don't want cheap pizza - because you get what you pay for. As pizza places cut prices I saw a notable difference in the amount of toppings and the quality of the finished product in major companies: Pizza Hut, Little Caesars, Papa Romanos, Hungry Howies. The only brand that actually held my attention to some degree was Papa Johns but now they've started the low-price specials and it's just turning me off.You can't go from a $15.99 large works to a $10 large works and not have some change in how the pizza is made.As a lover of pizza I spent the better part of 5 years perfecting my own dough and sauce recipes and now we make it at home. It tastes that much better and I get consistent results. Why pay less with the big brands when the quality is lost when I can pay less and make it myself?

Maybe the small operators and single store owners are staging a comeback in this category. If I can get a great dough and sauce, topped with quality fresh ingredients in the amount that I want (some of us think 'less is more'), baked in a brick or other high-heat oven, made and served by a person who knows me and remembers me and is personally responsible for what s/he serves .... I'll go there every time. It doesn't have to be "artisan" (though there is a lot of that out there also, and CPK and a plethora of other brands in every grocery freezer case at lower price as well) to still be a lot better than what the chains offer. The difference in price (a few bucks) isn't worth the assembly line experience and taste at the chain stores.

Let's not forget about frozen retail pizza as a major competitor. The quality of retail frozen pizza has improved to a point where there is not much trade-off for the consumer. Factor in price and convenience, and it is easy to see that it is a real alternative in these more difficult economic times. As a consumer, I will either go with a frozen pizza (having a few stored in the freezer), or if looking for something significanly better, will buy from a local pizza joint where the dough is hand tossed and baked on a flat oven surface (versus conveyor chain).

There is no doubt in my mind that Papa Murphy's is the best pizza out there. When I have talked to others about Papa Murphy's, I have actually heard several times that a family member doesn't like pizza, and Papa Murphy's is the only pizza they will eat.You cannot beat a fantastic crust, the freshest and highest quality toppings, whole milk mozzarella cheese, baked hot and fresh when you want it. They do everything they can to make the pizza YOU want. The store in my town will not charge for every topping on a build your own. If there is a similar pizza with about the same amount of toppings, I get that price.If you haven't tried this pizza, get in there. You won't be disappointed.

Please my friend, How much Papa Murphy's has paid you for this comment, I though this was objective forum.

Good Lord, if it was that easy to make money, I would be a very wealthy person. We have been fans for a long time and asked a lot of questions, simple as that.

I happen to own a small pizza franchise. We have copied the "Big Boys" to a point of loosing ourselves in the advertising games. Pizza has become the "coupon industry." Value is in the eyes of the beholder. Want to pay $5.00 for a quick fix, go to Little Caesars. Want to pay $15 for a quality pizza, come to us. Bottom line is that the less you pay, the less you're going to get. As costs continue to rise the pizza company will do one of two things, raise prices to make a reasonable profit or cut quality and hope to make a profit. I guess there is a third option and that' is to hang the closed sign.

I remember whan I was a kid growing up in the 70s and 80s...and the types of pizza choices that were out there. At first there were the Pizza Huts and the Shakey's "pizza parlors" (remember those) and then they gave way to the delivery giants of Lil Caesars, Domino's and chain fast-food pizzas like Godfather's and Sbarro...and then more delivery like Papa John's later in the 90s. What I do remember most is that the pizzas from these places at one time were all of a significantly higher quality than they are now. I remember the cheeses, sauces and crusts all being much better tasting with way better textures and quality. The chains lowered their costs (probably in an effort to compete with all the other QSR value meals) and in doing so, had to sacrifice quality across the board. It's a real shame when I remember how delicious a Caesar's pizza used to be in the 80s and how it just isn't made like that any longer. Quite honestly, a Tombstone from the grocery store tastes better than a Caesar's these days. At long last, Domino's finally "got it" by acknowledging the problem, admitting it and then returning to a quality pledge. I hope the other guys have the same revelation and improve the quality as well. It's way over due.

I think another reason why pizza chains are so challenged these days is because people prefer their local " Mom and Pop" pizza place. It's the quality of the product, the warm atmosphere, as well as the emotion of feeling a sense of ownership in your local pizza shop.

I think that here in St Louis you've seen a huge rise in "gourmet" pizza shops. Couple that we the Great Recession...people are saying "Well we can't go on that cruise this year so let's skip the chain pizza joints and upgrade to an artisan pizza joint." My 2 cents.

I am a local pizzeria operator who the economy has eaten alive. Only been able to pay myself 4 times this year. Commodity prices up to the point that the cost of flour has almost tripled in 6 years and customer go for the $10 pizza at the big guys. They even bring their kids in for a "local" job and stand there an tell me they eat at Pizza Hut because it's cheaper.Almost had it. Cheaper might not be better, but from my point of view, it might be what is left.

] can happen all to fast. Little Ceasars is attempting a comeback lately if they study their mistakes they won't end up again like Godfathers, Noble Romans, Sir Beef, Chi-Chis, and countless others.My 2p

...and let us not forget 'soon-to-be-added-to-the FAIL-list' Arby's.

How has that place lasted so long? I've never been there, and I don't know anybody who has.

I go to Papa Murphy's because 1) I can afford it; 2) the store staff have always been very nice & 3) It's a local home-grown business (I'm from Vancouver, WA). Is it the best pizza? No, but it sure beats any hot delivery pizza. When we are looking for tastier pizza and have time to spend, then we go to a local specialty pizza place. Papa Murphy's has the advantage of accepting food stamps which I would expect would make them far more recession prone than other pizza joints.

Hate to break to all on this post, but there is not a whole lot of difference from any chain pizza. Period. In fact, I would bet that most are using close to the same ingredients... Papa Murphy's sure isnt using any better.... Bottom line if it comes out of your oven fresh and hot, it will taste better than riding in a hot bag or no bag for 15 minutes, not to mention a conveyor oven....

I beg to differ from your statement because as an owner of a pizza chain the ingredients are different. Yes the veggies are the same but the meats and cheese have a huge impact on the taste and quality as well as price. We are currently paying 39.00 for 15lbs of cheese. Some of the other chains putting cheaper cheese on their pizza are selling their pizza 3 large for 9.99. Our pizzas are 11.00 for one large. In our town we have too many pizza chains and that will drive out the weaker pizzerias. I just wish everyone would buy quality over quantity then the truly better chains will flourish.

The mom and pops pizza shops from 25 years ago mostly gone and the chains are too expensive for a take-out pizza now. They need to offer a $5.99 pizza ready to be sold at a drive-thru. The pizzas are not as good as they were from the 1970s to mid 1990s they all seem generic now except for Round Table Pizza.


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