New products pop up as pizza leaders seek a larger slice of the pie

Nation's Restaurant News, June 25, 2001 by Gregg Cebrzynski

Cheese prices increased by about 10 percent, and the competition among the leaders in the pizza category probably rose even higher than that.

Pizza Hut, Domino's and Papa John's all came out with new or almost-new products during the past year as they tried to capture larger shares of the market through new ads and promotions to support their product rollouts.

Little Caesars, meanwhile, made little news in the wake of its major market contraction and widespread store closures in 1999. It began its last fiscal year looking for a new ad agency and still had not found one at year-end.

But higher cheese prices and an economy far less robust than it has been in recent years are not expected to have a harmful effect on pizza sales.

"We're very positive on the pizza segment; it's the fastest-growing [category] in the fast-food segment," says Tony Howard, a restaurant analyst with Hilliard Lyons, Louisville, Ky.

Total sales were sluggish during the last year, but same-store sales averaged between 2 percent and 4 percent, he says.

"Some of the problem has been that competition has increased," Howard says.

That was evident in the product-rollout activity among the category leaders.

Last fall Papa John's came out with a thin-crust pizza that fit into the "almost-new" category. It was a revamped version of a thin-crust pie the chain rolled out in 1996. The new one has a crisper crust and more abundant toppings.

Papa John's goal was to boost the sales mix of thin crust from 5 percent to at least 15 percent. The product relaunch was supported with a multimillion-dollar ad campaign that aired nationally during the Olympic Games in Sydney, Australia.

At about the same time, category leader Pizza Hut spent $40 million on the launch of The Insider, which featured a six-cheese blend between two thin crusts that are covered with sauce, more cheese on top and a choice of toppings.

It was the chain's largest product introduction since the 1999 debut of the Big New Yorker, which helped drive record same-store sales.

In April, Pizza Hut then came out with Twisted Crust pizza, featuring a crust made from its seasoned breadstick dough.

"The leader probably should be a pioneer," says marketing expert Al Ries of Roswell, Ga.-based Ries & Ries. "A good strategy for the leader is to pioneer in new products to broaden the category."

Foodservice consultant Jerry McVety gives high marks to the chain's product launches.

"It always appears to me that Pizza Hut is the strongest, in that they seem to do the best job," says McVety, president of McVety & Associates in Farmington Hills, Mich.

Domino's made news on two fronts. It launched CinnaStix, a breadstick sprinkled with cinnamon and sugar, in January, and reintroduced the popular Roma Herb pizza for a limited time. In connection with the relaunch the company reverted to focusing on what had been one of its core strengths -- delivery -- with a new ad campaign.

By introducing CinnaStix, Domino's ended a nearly six-month drought of new-product launches. The chain says the lack of new products during the latter half of the 2000 fiscal year contributed to a decline in samestore sales.

Roma Herb was revived because of the success it had the first time around during a six-week promotion in 1996. Domino's claims it sold more than 1 million of the pizzas during the first two weeks after the reintroduction.

The chain made some improvements to the pie for the relaunch. The Parmesan cheese and herb blend, which had been sprinkled around only the edge of the pizza, was spread across the whole pie.

The new version was offered during an eight-week promotion that was supported with new ads focusing on delivery. The chain replaced its "Bad Andy" campaign, which focused on product freshness, with national TV spots under the theme "Get the Door. It's Domino's."

Domino's vice president of brand management, Walt Sulmeisters, calls it a "back-to-basics approach" coupled with new-product news.

However, marketing expert Ries says the chain's focus on delivery doesn't go far enough.

"I think they're headed in the right direction," he explains, "but I'm not so sure there shouldn't be a little meat on the bones."

By that, he says, Domino's should follow the lead of Federal Express, which promises not only overnight delivery but also delivery by a certain time. Ries acknowledges that Domino's at one time did offer delivery in 30 minutes, a program that led to unfortunate vehicle mishaps, but he says the chain can refine the program.

"They need something that's a little more substantive than just saying, 'We're delivery experts,'" Riese explains. "With all the money they spend on advertising, most people already know they're delivery experts."

Consultant McVety also believes Domino's is taking the right approach by focusing on delivery.

"They need to play to that strength," he says. "Domino's delivery is key."

At the same time that Domino's and Pizza Hut were touting their menu innovations, Papa John's broke TV spots poking fun at all the new products that unnamed pizza chains were introducing.