The NRN 50: The big cheese

The NRN 50: The big cheese

Last year was brutal for pizza operators like Ron Berger, chief executive of Figaro’s Italian Pizza [3], but you’d never hear it in his voice. Foreign demand for dairy products sent cheese prices through the stratosphere, and domestic droughts parched wheat fields and propelled flour prices to record highs.

But in the week between Christmas and New Year’s, when most chief executives are in holiday hibernation mode, Berger was on a scenic-route pass through the Joshua Tree National Park in Twentynine Palms, Calif., en route to taste a competitor’s product. His ebullience for pizza never wanes.To him, 2008 is a new chance to prove his belief that Salem, Ore.-based Figaro’s, which specializes in ready-to-eat pies or raw pizza for baking at home, is the market’s best.

“Here’s the perfect example of our pizza’s versatility,” Berger says.“Someone’s having a Super Bowl party, only instead of ordering 10 pizzas at a time from one of our competitors and then watching them get cold, they call us and order three baked and seven unbaked. You bake some throughout the game when you want them and put any you don’t bake in the fridge.”

That’s versatility, and it’s a major reason pizza has become a $32 billion juggernaut in the American foodservice market. Beyond the many ways pizza has evolved over its century here, the segment has embraced technology and adapted to changing lifestyles in ways many food peers can’t.

When harsh Michigan winters kept customers from fetching their own pizzas in the 1960s, Domino’s [4] Pizza founder Tom Monaghan delivered it to their doors. When patrons tired of late deliveries and tepid pies in the 1980s, Papa Aldo’s—later to become Papa Murphy’s Take ’N’ Bake—sold them ready for baking at home. And after hearing, “Hi, Gino’s Pizza. Please hold!” about a hundred times too many, Papa John’s [5] customers gave its never-harried online ordering service a try in 2004.

Pizza has survived numerous “health food” crazes, including the carbohydrate-shunning Atkins diet, by creating lowercarb options—including crustless pizzas, if there can be such a thing—that still drove sales and drew devotees.

Also, amid the emergence of fast-casual concepts like RedBrick Pizza [6] and zpizza [7], the humble pie got a chic makeover with healthful toppings sold at higher price points.

The pizza industry has even survived itself. No other segment has worked so hard to crush its own profits through price discounts. Market share used to be won on product or service, but price now is a common tipping point for many pizza customers.

While such price wars played into the hands of large chains with ample purchasing power and capital to sustain thinner margins, waves of cheap, predictable pies served to the masses helped spur an artisan pizza movement among independent operators.

Customers wait in line for hours in the Phoenix sun to taste impossibly thin woodfired pies made at Pizzeria Bianco [8], while at Una Pizza Napoletana in Manhattan, customers can’t seem to get enough of Anthony Mangieri’s three-pie menu.

Caioti Pizza Café [9] owner Ed LaDou, who died of cancer Dec. 27, is widely credited for starting the California pizza movement, when he created the groundbreaking pizzas served at Wolfgang Puck’s Spago [10] in the 1980s. LaDou also gave birth to California Pizza Kitchen [11]’s first menu and its often-copied barbecue chicken pie.

In a 2005 interview, LaDou called pizza “a plaything for me back then, something I could make do almost anything I wanted.” Sales of gourmet pizzas everywhere prove customers enjoy playing along with him.

For all of pizza’s simplicities, the industry that’s grown around it has become decidedly high-tech. At Louisville, Ky.-based Papa John’s, computer-controlled conveyor ovens save energy by not burning at full power until they receive orders directly from an integrated POS system.

“What restaurant food is cooked in such a wide variety of ovens?” says Tom Lehmann, a director at the American Institute of Baking, where he teaches a weeklong course on pizza production. “Pizza companies want speed and consistency, and that’s driven manufacturers to develop some ingenious tools to do that.”

Pizza companies have pioneered online ordering, and operators say, online check averages are 10 percent higher because customers find menu options they’d never learn about in the course of a hasty phone call.

“Online ordering is becoming a huge benefit,” says Vic Cassano, president of 36-unit Cassano’s Pizza in Kettering, Ohio.

The company’s one-number call center greatly reduced store-level stress, he says, but now the Internet is taking pressure off the call center.

“Anytime you can allow a computer to handle a task, you’ve lowered the tension some,” Cassano says.

In 2007, both Domino’s and Papa John’s rolled out cell phone text-ordering services. Papa John’s chief executive Nigel Travis anticipates texting will account for 3 percent of all its orders in the next few years. Domino’s spokesman Tim McIntyre says the Ann Arbor, Mich.-based chain’s text initiative is one part of a multipronged strategy designed to serve an emerging techno-demographic.

“We call them our ‘fast and simple’ customers, people who tend to be under 30, single, multitasking to the extreme and connected 24 hours a day through cell phones,” McIntyre says. “Virtually everything this group wants can be had at the click of a mouse, and we wanted to allow them to do that with pizza.”

Advances in pizzeria point-of-sale systems are credited by some as giving pizza operators unrivaled ability to market to customers. Marketing guru Kamron Karington realized the promise of a high-tech POS shortly after buying a struggling pizzeria in the 1980s.

“I knew early on I could teach anyone to bake pizzas, but if I was going to build a business, I had to get marketing fast,” says Karington, who grew his company to four pizzerias before selling it and later penning “The Black Book of Pizzeria Marketing.” “Every retailer would kill to have the data a pizza guy gets when a customer calls for delivery: the address, the phone number and exactly what they like to eat.”

Karington believes pizza folk also understand the value of guerilla marketing better than other restaurateurs.

La Nova Pizzeria in Buffalo, N.Y., has mastered that tactic. The two-store company grosses nearly $9 million in annual sales, and its spokesman, Ben LaMonte, credits much of that to La Nova’s grassroots marketing. The restaurants turn customers into walking billboards by giving away at least 200 logoed T-shirts weekly.

“We don’t do much traditional advertising,” LaMonte says. “Instead, we’re highly involved in the community, we’re very hands-on, and we see more value in that.”

Donatos Pizza has come a long way from its humble carryout-delivery birth in 1963. In the past three years, the 180-store chain has rolled out 41 take-and-bake kiosks and a fast-casual pizzeria complete with drive-thru windows, upscale salads and sandwiches.

Company spokesman Tom Santor says Columbus, Ohio-based Donatos always is changing its operations to meet shifting customer needs. That adaptability, he adds, has made the concept increasingly attractive to new franchisees.

“What’s funny about the Donatos story is that when [founder] Jim Grote asked his dad for a loan to get started, his dad told him pizza was a fad, that it wouldn’t last,” Santor says.

Despite his doubts, Grote’s father gave his son the cash anyway.

“Look where it is now,” Santor says. “Some fad, huh?”