Great Pizza Article in Wall St. Journal Today Must Read

Looks like they’re feeling the heat from us… :slight_smile:

Pizza Chains Cook Up Ways
To Battle Old, New Rivals
May 30, 2007
The tussle between national pizza chains these days is over who’s got the best “hand-tossed style” crusts. But some of the claims may amount to little more than pie in the sky.

It turns out that those pizzas aren’t really hand-tossed.

Domino’s Pizza Inc. and Papa John’s International Inc. admit they shape their dough into pies on countertops. Throwing it in the air can result in a thin center that, when baked, leads to an unstable pool of toppings in the middle, a Domino’s spokesman says. Papa John’s says it hand-stretches dough “for consistency’s sake.”

A spokesman for Pizza Hut, the nation’s largest chain and a unit of Yum Brands Inc., wouldn’t say how it turns dough into “hand-tossed style” pies, which it is heavily promoting. But a recent visit to one of its shops found the crew employing stretch techniques as well.

“If we tossed them we’d probably get them too big,” one employee remarked.

So why the sleight-of-hand over the term? Partly to give the product more perceived authenticity and individuality, so consumers don’t think of their pizza as something stamped out by a machine.

More importantly, it is a way to try to create news in what has become a mature, low-growth business more often marked by deals and copycat products than by innovation.

And like so much pepperoni, competition continues to pile on. Subway, the nation’s largest sandwich chain, began adding pizza to its menu recently. Others are, too. To attract more dinner-time patronage, last year Panera Bread Co. created a pizza-like, thin-crust item it calls Crispani. And Dunkin’ Donuts, a unit of Dunkin’ Brands Inc., is testing pizza in some of its many stores.

It is not just other big players that worry pizza executives. Often it is the pizzeria down on the corner – where sometimes they really do toss their pie dough – that is stealing customers.

“Our industry has seen a shift where all of the national brands have lost market share and seen significant reductions in traffic growth at the expense of regional and local pizza shops,” Domino’s Chief Executive Officer David Brandon said on the company’s recent earnings conference call.

His counterpart at Papa John’s, CEO Nigel Travis, says the smaller rivals not only tailor products to local tastes but also “focus more on quality than on cutting prices.”

He blames sluggish industry performance on “a lack of innovation in the category … We all need to work harder coming out with newer products. We’re certainly working very hard on it,” Mr. Travis said.

Papa John’s, the No. 3 chain behind Pizza Hut and Domino’s, also is seeking to make purchases more convenient by promoting online ordering. And it looks for ways to reward returning customers in what Mr. Travis regards as a “fairly disloyal category.”

Limited-service restaurant pizza in the U.S. is a $30 billion business, of which the national chains have about 41%. Among the Big Three, Pizza Hut last year held an 18.1% slice, Domino’s 11.3% and Papa John’s 6.9%, according to Technomic Inc., an industry consulting firm.

Pizza long has been characterized as “price-is-right” food. Chains frequently discount, or offer multiple-pie specials. Given higher gasoline and other prices, that’s likely to continue.

“Customers are more demanding, and more value conscious,” Domino’s Mr. Brandon said on the company’s recent earnings call.

But Pizza Hut, for one, may be trying to break the deal habit. “We’ve done some pretty silly discounting. We’re trying to get rid of it,” Yum CEO David Novak said earlier this month.

Without elaborating, Mr. Novak said the chain was testing “approaches that we think will give us more enduring value over time.”

Even so, Pizza Hut’s Web site features several coupons. Indeed, the site has a tab labeled “Deals.”

Pizza Hut needs to do something. Its same-store sales numbers have slipped in recent months, and the chain got some more discomforting news in the latest University of Michigan’s survey of consumer satisfaction. It showed a 5.3% decline for the brand in the past year.

Domino’s, the world’s leading pizza-delivery chain, also had a difficult 2006, experiencing negative comparable sales. In part, Mr. Brandon blamed franchisees for paying more attention to protecting their bottom line rather than being innovative in stimulating sales when competition intensified.

Many ended up “micromanaging labor cost down, which often times creates reductions in quality of service…and way too often by cutting local-store marketing activities,” he said.

During a recent convention in Las Vegas, Domino’s executives exhorted franchisees with this mandate: “It’s your job to own your neighborhood.” That means going door-to-door distributing fliers, and doing whatever else is necessary to get people’s attention. Once you have it, “win them back with great product and exceptional service,” they were told. “That’s the best kind of marketing,” the message concluded.