Competition | March 2011 | By Daniel P. Smith

The Fall of Pizza

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According to industry analysts, pizza must continue hitting on value and convenience, two marketing mainstays. By and large, the segment remains a terrific value, offering the ability to feed a lot of people for not a lot of money. Furthermore, it remains a celebratory product; few people are upset when pizza’s laid on the dinner table.

“Ultimately, people eat pizza because it’s convenient and a good value, but I do fear that rising pizza prices could prompt consumer movement to other convenient dining options,” Saleh says. “Pizza has a real balancing act to pull off here.”

The category’s major players must respond to the restaurant industry’s wider evolution—hitting on convenience, value, flexibility, and quality in food as well as environment.

Pizza Inn, for instance, focused its efforts on new prototype stores launched at the end of 2008. The 4,000-square-foot, strip-center restaurants feature a 12-pizza buffet, salad bar, 150–180 seats, delivery, carryout, and red-and-white tabletops, an accommodating, fresh environment that resonates with a larger consumer base. The company also instituted initiatives to help franchisees succeed, including short-term royalty relief and a strategic companywide vision that includes a swelling focus on social media. Early returns show positive momentum: In fiscal year 2010, Pizza Inn opened more stores than it closed for the first time in 11 years.

“We’ve reinvented the concept and we’re growing again,” Morrison says.

For additional optimism as well as a plan of action, pizza may look no further than the burger segment, another staple of the American quick-service landscape.

A seemingly tired item, the burger has been resurrected by chains such as Five Guys and Smashburger, two concepts that surpassed traditional quick-service offerings and kicked competitors into innovation overdrive. The new concepts, fresh menu offerings, and line extensions appeal to recession-era diners who are trading down from fast casual, yet unwilling to skimp on quality. With the emerging wood-fired pizza craze, specialty pizzas with high-quality, gourmet ingredients, and advances in cooking technology allowing for pizza to be an individual occasion, the segment could have its own opportunity to rebound and follow burger’s lead, Saleh says.

And much like its burger brethren, some pizza chains will likely investigate a barbell pricing strategy wherein value items sit on one end of the menu and gourmet offerings on the other. Many will also pursue the upsell strategy, offering a $5 pizza as the hook and upgraded offerings or complementary products, such as appetizers or desserts, to raise the average ticket.

“The price competition over the last year has been unbelievable, but I’m not convinced it can continue down this road. We have to think about things differently—the dough, the toppings, the pricing,” Pizza Inn’s Morrison says. “We’re at the point where we all have to figure this out.”



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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