Pizza giants lick lips over Russia
• Regional cities still chiefly small local chains’ preserve
Global pizza brands Domino’s and Papa John’s are preparing an assault on Russia’s provinces, betting they can turn a profit far from Moscow as card payments become more widespread and consumers get to know foreign brands.
Global pizza brands Domino’s and Papa John’s are preparing an assault on Russia’s provinces, betting they can turn a profit far from Moscow as online card payments become more widespread and consumers get to know foreign brands better.
While stay-at-home Muscovites can order an array of international pizza brands from Sbarro and Domino’s to Papa John’s, regional cities such as Rostov-on-Don and Nizhny Novgorod are still chiefly the preserve of small local chains.
Many challenges have kept global fast food brands wedded to major Russian cities, including patchy transport links, bureaucratic delays, finding an army of chefs who can maintain quality, as well as the sheer cost of shipping often perishable ingredients across a vast country that spans 11 time zones.
Western fast food chains have also had to adapt menus to suit Russian palates better, once the allure of new foreign tastes has worn off.
But the Russian franchisee of Domino’s Pizza, DP Eurasia, believes the time is right to expand beyond Moscow, where sales at the 76 outlets it had at the end of March are far outstripping growth in its main market, Turkey. “The company has done its own research and realised there’s almost no quality pizza in the regions, which gives us enormous ground for development,” said DP Eurasia’s head of Russian development, Elena Ivanova.
Like-for-like sales in Russia rose 30.1% in the year to May 21, whereas the comparable figure for Turkey was 6.3% growth.
FRAGMENTED MARKET
Domino’s was Russia’s thirdlargest pizza chain in 2016 yet its share of the fragmented market stood at less than 2%, according to Euromonitor International.
Guvenc Donmez, DP Eurasia’s Russian head, said he saw room for 1,500 Domino’s outlets in the longer term. The company is using part of the £148m it raised listing shares in June to add 40 outlets in 2017, venturing as far as Krasnodar, 1,200km south of Moscow.
The Russian franchise of US chain Papa John’s International, the fourth-biggest player in the country in 2016, sees room for 60-80 store openings each year over the next five years.
“We still see potential in Moscow. I think we could open a further 40-50 stores there, but we are also embarking on an aggressive expansion to small towns,” Christopher Wynne, CE of Papa John’s franchisee, said.
Another US brand, Sbarro, was the market leader with a 4% market share in 2016, according to Euromonitor, followed by DoDo Pizza, a Russian chain with a presence in former Soviet states, China and the US.
Sbarro’s Russian franchise had 88 stores in 2016, including in provincial cities. However, it was hit by a Russian food import ban and a drop in the rouble as Sbarro refused to let it replace imports with local products and the franchising agreement was terminated, Russia’s RBC daily has reported.
Wynne said Papa John’s Russia had imported 90% of products before the 2014 food ban came in but had replaced all its suppliers within six months.
DP Eurasia acknowledged the restrictions could adversely affect its business.
COMPANY … REALISED THERE’S ALMOST NO QUALITY PIZZA IN THE REGIONS, WHICH GIVES US … GROUND FOR DEVELOPMENT