Pizza players eye extra dough with wing sales: Pizza Hut, Papa John's latest to spice up concepts with hot items

Nation's Restaurant News, Oct 25, 2004 by Amy Garber

As the ultracompetitive pizza category seeks to drive growth by offering new side items, two major players are betting that their revised strategies for chicken wings will help sales take flight in the months ahead.

Segment leader Pizza Hut, which has sold wings for more than a decade, is heating up its emphasis on the product by quietly but rapidly expanding an internal concept dubbed "Wing Street" that was created specifically as a co-branded partner for its restaurants.

Meanwhile, Papa John's, amid pressure from franchisees eager to reverse two years of sagging sales, is expanding its menu to include chicken wings, even though the chain's founder, John Schnatter, publicly decried use of the product for years. Schnatter, who also is chairman and chief executive of Papa John's International, was not available for comment, but Bill Van Epps, the company's chief operations officer, explained that "times have changed, and the competitive marketplace has changed. It is clear that today's consumer wants more choice."

National television commercials for the wings, which will be available in two varieties--spicy buffalo and mild chipotle barbecue--are expected to break Nov. 8.

But Papa John's, with 2,550 U.S. units, faces a new kind of competitor in Pizza Hut's Wing Street, a branded line of chicken wings with flavored sauces and other side items.

Dallas-based Pizza Hut, which owns and franchises 6,314 U.S. units, recently ramped up growth of its nearly 2-year-old Wing Street concept. Although officials insist the concept remains a test, Pizza Hut has added Wing Street to more than 200 locations this year, according to parent Yum! Brands Inc., which also owns KFC, Taco Bell and other chains.

The nation's largest pizza chain, which last year generated $5 billion in domestic systemwide sales, posted a 6-percent jump in U.S. comparable-restaurant sales at its corporate units in September.

Yum, a proponent of multibranding, created a similar concept more than two years ago called "Wing Works," but as of last month it had been paired with only 26 KFC restaurants and one Pizza Hut.

While the company declined to comment on Wing Street, some Pizza Hut stores that feature the brand offer bone-in and boneless wings in flavors like Cajun, spicy barbecue, teriyaki, honey barbecue and garlic Parmesan. An order of 10 wings sells for $5.99, 20 for $10.99 and 40 for $19.99. A ranch or blue-cheese dipping sauce is available for 35 cents. The Wing Street menu also features sides like fried mozzarella sticks and apple pie. Customers can combine offerings from Pizza Hut and Wing Street into one order.

Pizza Hut rival Domino's Pizza, the nation's second-largest pizza chain, has sold chicken wings since 1993.

"They were an instant hit, and they remain a mainstay of the menu," said Domino's spokesman Tim McIntyre.

Although Domino's rolled out a boneless white-meat product dubbed "Buffalo Chicken Kickers" two years ago, there has not been "any kind of meaningful cannibalization" of wing sales, McIntyre said. The Ann Arbor, Mich.-based chain, which does not release the sales figures of various products, currently is promoting its new Doublemelt pie, which has as its base two thin crusts layered with a cheese-and-herb sauce and is topped with a blend of six cheeses. A medium sells for $9.99.

For years Louisville, Ky.-based Papa John's touted a simple menu focused on pizzas, but in the face of stiff competition and sluggish sales it slowly has expanded its offerings.

Two years ago Papa John's introduced white-meat chicken tenders, marking its first national menu expansion beyond pizza and bread sticks.

When that product launched, Schnatter said, "I've never been a wing guy, so when our customers asked for a chicken side item I told our R&D team to find something better."

But franchisees have been asking for wings as a way to reverse sagging same-store sales, which were negative in fiscal 2003 and 2002 and flat for 2001. The chain, which several years ago lost its status as a Wall Street favorite, last reported an increase in annual same-store sales in 2000. Papa John's U.S. systemwide sales in 2003 were nearly $1.72 billion.

Admitting that same-store sales this year "have not met our expectations," Van Epps said, "we are putting a plan into place to make sure that improves." He said Papa John's "started to turn a corner" in September when U.S. same-store sales increased 1.2 percent.

Van Epps said since he was named to his current post in January one of his goals has been to expand the menu.

"We looked at alternatives and found that wings are almost like French fries in the burger business," Van Epps said. He added that the "technology in terms of flavor coatings has improved significantly in the past five years, so we saw this as an opportunity. The product meets our 'better ingredients' positioning." Previously, the wings Papa John's considered "were not as large as we wanted," he explained.

Unlike Pizza Hut's wings, which are fried in-house, Papa John's product arrives at the restaurants frozen but fully cooked and presauced.