Price War! Price War! : Pizza Chains Follow Burger Joints” Lead With New Deals
In their corporate war rooms and across the nation’s restaurant battlefields, three leading pizza chains are firing their dough at a burgeoning campaign: cheaper pizza.
Bombarded for years by Little Caesar’s value-priced, two-for-one pizza offer, Pepsico’s Pizza Hut unit is launching an all-out counterattack Monday with Big Foot--a 21-slice, 2-by-1-foot pie priced at between $9 and $11. Not to be outdone, Domino’s Pizza said Tuesday that it will counter with the Dominator--at 30 slices for a comparable price, an even cheesier weapon.
With these new products, the pizza chains will be escalating the fast-food war on two fronts: pizza and hamburger. For years, pizza had been advancing steadily on the hamburgers’ market share. By unleashing more combo and two-for-one deals in 1992, the hamburger segment posted greater growth in nationwide customer traffic than pizza, for the first time in years.
In greater Los Angeles, however, pizza chains remained on the offensive in 1992. Pizza was the only fast-food chain segment to show improved sales.
“All the armies of the big three are gathering reinforcements and mounting for battle,” said Gerry Durnell, editor of the trade journal Pizza Today.
Pepsico’s Pizza Hut remains the overall leader, with Little Caesar’s and Domino’s Pizza hot on its trail. Together, the three chains carved out 48% of the nationwide $18.2-billion pizza market last year.
Sales at Pizza Hut’s nearly 7,300 U.S. units rose by 35% the last five years, in large part because of the company’s entering the delivery arena. Rival Domino’s, the self-proclaimed king of home delivery, saw its sales decline; Little Caesar’s sales ballooned by 54% although it offers only carry-out service.
“Pizza is the food of our time, without question,” said Harry Balzer, vice president of the NPD Group Inc., a market research firm that tracks eating patterns. “This country wants a live-in cook, and pizza is the next best thing.”
Little Caesar’s was the first pizza chain to establish a “value niche” with its two-for-one deal in 1974, made famous in its “Pizza! Pizza!” ad campaign. In recent years, Pizza Hut and Domino’s have responded by discounting some premium varieties.
In March, Little Caesar’s took the offensive again with its Big, Big Cheese campaign, which offered a 24-slice pizza for $8.88.
Pizza Hut is only steps behind. Marketing chief Bob Perkins predicted Big Foot will generate $1 billion in annual revenue by 1995, which would amount to 23% of the chain’s $4.3 billion in 1992 revenue.
In Southern California, the value-priced pizza war will mean good things for recession-burdened consumers, said Bob Sandelman of Brea-based Sandelman & Associates, a consultant to the fast-food industry.
The heightened pizza war will also bring jobs to the Southland. Pizza Hut said Monday that Big Foot’s arrival will create 2,000 jobs in the Los Angeles area, positions the company expects to fill by June at 280 locations. In San Diego, Pizza Hut will add 1,000 positions at 65 locations. The new jobs will range from delivery drivers to cashiers.
For Domino’s, pressure to stay with its chief competitors pushed the company to unveil the Dominator two months earlier than originally planned. The Dominator is the company’s first foray into the carry-out business.
Domino’s said the Dominator will also result in “considerably more” hiring at franchised locations throughout Southern California.
Like Big Foot, the Dominator will be a rectangular pie. One big difference: Pizza Hut will deliver, Domino’s won’t--an irony, considering Domino’s has always been a delivery outfit and Pizza Hut did not begin going door to door until 1986.
Domino’s has said it does not want to deliver the Dominator out of fear that the product would eat into sales of its pricier pizzas.
Jean-Paul Sarte once wrote that when the rich wage war, it’s the poor who die. In this case, likely he would have been referring to the smaller chains and independents that made up the remaining 52% of the pizza market last year.
At least one analyst predicted that there will be enough business to go around. “History has shown that as a result of all the hype, everybody gains,” Durnell said.
More likely, the losers will be in other segments of the fast-food industry, analysts contend. The public’s appetite for pizza is being stimulated by pizza’s low cost and the availability of delivery, said Ron Paul, president of the restaurant-industry consultant Technomic Inc.
“The value-priced category will have staying power as long as there continue to be families and supermoms in the population,” Balzer said. “And that’s a long time.”
A Bigger Slice
Led by Pizza Hut, Domino’s and Little Caesar’s, pizza chains managed the largest gain in market share last year in Southern California”'s fast-food market. January, 1992 Burger chains: 51.1% Chicken chains: 8.9% Mexican food chains: 20.0% Pizza chains: 13.4% Other: 6.6%
January, 1993 Burger chains: 50.7% Chicken chains: 8.7% Mexican food chains: 17.4% Pizza chains: 15.5% Other: 7.7%
Source: Sandelman & Associates