A PIZZA ON THE ACTION
What it takes to keep a pizza brand growing and evolving.
Just a decade ago, nine out of 10 pizza orders were for traditional favourites such as Pepperoni, Supreme or Hawaiian. Today, many consumers are opting for a more gourmet pizza experience despite the relatively high cost.
No matter which way you slice it, the pizza industry keeps growing and evolving, but being among the top
players involves both innovation and technology.
“Both food-related television programs such as Master Chef and rising disposable incomes have supported growth in the gourmet pizza segment,” says Ibis World senior industry analyst Bao Vuong. “The success of Crust Gourmet Pizza Bar over the past five years suggests there is still scope for growth, but with increasing competition, brands may need to offer higher-quality products at lower prices to stay ahead of the curve.”
It seems that leading brands have also noted the trend.
“After a period of extensive discounting, we’ve started to see more premium ranges with higher-quality ingredients and, therefore, higher price tags,” says Euromonitor International senior research analyst Bettina Kurnik. “For example, the Domino’s revamped Premium range retails at a recommended price of $15.90 a pizza compared with $12.95 for its previous Chef’s Best offering.”
When Eagle Boys Pizza failed to respond to changes in the market, it paid a high price. In July last year the head office and all company-owned outlets were placed in voluntary administration. However, several franchisees continued to trade until they were acquired, and rebranded, by Pizza Hut in a bid to solve problems of its own. According to Roy Morgan research, the chain was hit by a 25 per cent decline in market share between 2012 and 2016.
“Acquiring Eagle Boys has enabled Pizza Hut to expand its store network and brand presence,” says Vuong. “It can also take advantage of economies of scale to boost profitability and revenue.”
He also believes that if Pizza Hut is to stay competitive, it must upgrade its equipment, boost its advertising and learn from the Eagle Boys debacle by keeping pace with changing consumer preferences. “It also needs to improve restaurant technology and focus on digital initiatives, like Domino’s ordering applications.”
TECHNOLOGY PIONEER
Domino’s is widely regarded as a pioneer in using technology to engage with customers, customise its offerings and ensure faster delivery.
“It introduced zero-click ordering last year, launched a digital gift card and – in a world first – used a drone to deliver a pizza in New Zealand,” says Kurnik. “Now the company is experimenting with preparing, cooking and delivering a pizza within 10 minutes.”
She anticipates that Domino’s and other major players will continue to aim for higher spend per transaction by extending their menus. “One example was Domino’s Taste the Colour initiative, which included a range of new pizzas, sides and desserts to encourage consumers to add to their orders.
“The strategy appears to be working. Last year we recorded a 5 per cent rise in value per transaction over the previous 12 months – a standout result, given that during the preceding review period the figure was hovering between 1 and 2 per cent.”
However, it has not all been plain sailing for sector leaders. Domino’s shareholders were not impressed when Australian and New Zealand same-store sales fell short of its guidance. And both Domino’s and Pizza Hut have faced wage payment controversies over the past year, though both have taken steps to rectify the situation.
“Domino’s announced its own investigations into wage frauds and appointed business advisory firm Deloitte to examine its compliance processes,” says Vuong. “Pizza Hut signed a compliance deed with the Fair Work Ombudsman to ensure employees receive the right pay and entitlements, and engaged a
third-party payroll provider to help franchisees meet their wage obligations.”
ENOUGH ROOM
Despite the controversies, Vuong believes there is enough room in the $3.7 billion market for both leading brands to succeed.
“Australia’s population growth, especially in the outer suburbs of capital cities, will continue to open up new markets,” he says. “In fact, the growth is now outpacing many
I believe the most important thing we do is respect the fact that people have a lot of calls on their income. If they decide to spend some of their money with us, we’re going to make sure they
feel welcome and valued.
existing pizza franchises, which is creating opportunities for new businesses.”
Vuong also sees opportunities for smaller pizza companies that can differentiate themselves from the major chains. Already numerous small, independent and locally focused pizza restaurants are working across Australia, he says. “Providing premium, gourmet or even healthy pizzas could enable others to develop their own niche in the market.”
Also possibly working in their favour is the growing popularity of online ordering services like Deliveroo, Foodora, Menulog and Ubereats.
“One of the most significant technological advances over the past five years has been the widespread implementation of online ordering systems among the industry’s larger players,” says Vuong. “Smaller companies tend to lack the capital to invest in customised software, or the sales volumes to justify the cost of the investment. Third-party platforms take a cut of proceeds in exchange for providing the option of ordering online, which can expand a smaller business’s customer base.”
MAJOR ROLE
All along, Crust Gourmet Pizza has been playing a major role in transforming pizza from basic fast food to an authentic dining experience.
“Ours has always been a premium product offered at a premium price,” says general manager Renee North. “We created a niche by focusing on quality in everything from the ingredients to our delivery service, and we don’t discount as a general rule.”
The market has changed significantly since 2001, when the first store opened in Annandale, in inner Sydney.
“Australia is in the middle of a food revolution,” says North. “Third-party delivery services are providing easy access to an endless choice of cuisines, and this is changing and fragmenting the market. Quality and convenient meal options combined with growing awareness of health and wellness are driving further change in terms of offerings and ways of helping consumers manage their busy lives.”
To stand apart from the increasing competition, Crust is focusing on ways to improve the customer experience. “We have a product innovations chef and support team who are employed to develop new menu items,” says North. “We like to stay ahead of the latest food trends at home and abroad so we can introduce new ideas before they become mainstream.”
Crust has added salads and tapas to the menu to help cater for a wide range of tastes and dietary requirements. “The launch of our first vegan pizza last November was so successful we have introduced two more vegan products.”
Crust plans to continue to develop two new areas of business next year. The first is a corporate catering service, tapping into the lucrative lunchtime market.
“We’re offering streamlined ordering through a new bespoke catering platform, and delivering direct to meetings and events,” says North.
The second is an alcohol-delivery service, which won the award for Best Food & Beverage Innovation at the Quick Service Restaurant Media Awards.
“Customers in some areas of Victoria can now order beer, wine or cider with their pizza, and we’re planning to roll out this option across Australia,” says North.
CONSUMERS LOSERS
Meanwhile, Pizza Capers general manager Sunny Olak believes consumers were the losers in the big chain price war.
“Those brands sacrificed quality and generosity in a fight to acquire customers at the lowest possible cost,” he says. “We’re bringing it back to providing a good, generously topped pizza, and we introduced the Tracker Tracker campaign as a cheeky way to challenge our competitors in taste and quality, a space we know we can win.”
He believes consumers are looking for fast food that is also real food made from fresh, quality ingredients. “Of course people are value-conscious too, but, in our experience, they’re happy to pay that little bit extra for a quality meal.”
Olak considers innovation to be as
Now the company is experimenting with preparing, cooking and delivering a pizza
within 10 minutes.
fundamental to success as the overall eating experience. “We pride ourselves on our ability to be innovative, not just in terms of new pizza flavours but also in the way we cater for different occasions,” he says. “For example, our lunch menu includes the Phat Boy Pizza Wraps range.”
He also acknowledges the changing role food plays in a digital age. “Food is a very important part of our customers’ social lives so it needs to be made to share – and not just around the table,” he says. “Social media and bloggers are hugely influential, so the food must be Instagrammable too.”
Pizza Capers aims to recruit more young millennials next year with special student product offers, events and an exclusive sector partnership with Red Bull. A Tracker Tracker on Tour campaign will also develop the role of the brand’s consumer champion.
“He’ll be touring the world discovering different cuisines, which will then appear as new flavours on our menu,” says Olak. “We’ll be kicking off with a spin on trending dishes from Japan and the US, and following up with more international toppings over the coming months.”
There are also plans to expand Pizza Capers’ range of vegan pizzas and calzone by releasing new flavours twice a year.
“We know our customers are open to new experiences and appreciate our innovation,” says Olak. “We have the awards to prove it – we received Canstar’s Most Satisfied Customer (Pizza) five years in a row.”
DIY CONCEPT
Over at Pizza Pasta Please P3 in Sydney’s west, the concept is built around speed, choice, freshness and value in a family atmosphere. Customers can construct their own pizzas from a range of bases, sauces and toppings.
“We then cook your pizza in front of your eyes in just one minute and 45 seconds,” says owner Andrew Osborne. “If you prefer pasta, you have the same freedom of choice in terms of both the pasta and the toppings, and your meal is ready in the same time.”
Osborne says the brand was four years in the making, including investment in the services of a psychologist and cognitive scientist, who helped him to shape the long-term strategy. But Osborne claims not to have spent a cent on marketing or advertising.
“Our success so far is all down to word of mouth,” he says. “People like the fact we provide fresh, tasty food the whole family can afford to enjoy – you pay $12.99 for any pizza or $15 for a bowl of pasta big enough for two people to share.
“We also cater for every preference with options including gluten-free, vegan and halal. And I believe the most important thing we do is respect the fact that people have a lot of calls on their income. If they decide to spend some of their money with us, we’re going to make sure they feel welcome and valued. They appreciate that – and they tell their friends.”
There is also another side to the story. The company won the 2017 Campbelltown Local Business Award for being the most inclusive employer in the region.
“We are committed to providing opportunities for people of all abilities, and many of our staff are deaf,” says Osborne. “Inclusivity is a win-win strategy. People who find it hard to get a job have a chance to earn a living, and we have a very capable, efficient and loyal workforce while other brands are struggling with an industrywide skills shortage.”
So far, eight franchisees have been approved and Osborne expects to have 10 stores up and running by the end of next year.
“Our focus is on sustainability as well as growth,” he says. “The babies and children who come in today will be our target market in 15 or 20 years’ time, so we want to make sure the whole family has a really good feeling about the brand.”
Meanwhile, Vuong expects the overall market for pizza to continue to grow steadily over the next five years. “I think we’ll see more of what we’re seeing now,” he says. “Stiffer competition among franchises and from external competitors will drive increased expenditure on technology along with faster product innovation.”