On the Margin
Where are pizza chains getting their sales?

Where are pizza chains getting their sales?

This post is part of the On the Margin blog.

Sales have grown at the big, traditional pizza concepts. Domino’s Pizza, Papa John’s and Little Caesars, in particular, have had flourishing sales in recent years.

In theory, those concepts have taken business away from Pizza Hut, where sales have been sluggish. But Pizza Hut’s sales have been roughly flat this year, so while it might be losing market share it’s not donating much in the way of sales.

That has left independents as the big, apparent market share donor. And there’s something to that. In a business as commoditized as pizza, other elements such as service, speed, price and technology tend to take over as consumer considerations. Given the amount of work each of these chains has done to make their businesses more convenient, it’s difficult for smaller concepts and independents to keep up.

But there’s another potential source for those chains’ sales growth: Frozen pizza.

Consumers are eating less frozen pizza. According to Packaged Facts, the percentage of households eating frozen pizza dropped slightly between 2010 and 2014, and the percentage of households that ate a lot of frozen pizza dropped 15 percent.

That has been good for traditional pizza chains, in particular. According to Packaged Facts, sales at U.S. pizza restaurants increased 3 percent in 2014, to $41 billion. The market research firm expects that total to increase to $43 billion this year.

On average, same-store sales among traditional pizza concepts rose 5.7 percent in the second quarter. That includes Pizza Hut, where sales were flat. That doesn’t include Little Caesars, which is closely held but has been growing at an exceptional rate in recent years.

Unlike many other items sold at restaurants, pizza competes heavily with the items sold at grocery stores. In the pre-recessionary years, when Domino’s was struggling and Little Caesars’ comeback was in its infancy, improvements in frozen pizza took considerable share away from traditional pizza concepts — to the point that some of us wondered whether those chains were at the outset of a decline.

But now, with the economy improving and people going back to work, consumers are opting for higher-end options. And pizza chains have been aggressively providing higher-quality pizza in more convenient settings. That has turned the tables on the frozen pizza market.

Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze

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