CHICAGO Even though the pie of pizza segment sales may not be growing, some specialized chains have been able to carve out a bigger slice of it thanks to their differentiation, according to the latest research from consulting firm Technomic.
In its “2009 Technomic Top 100 Limited-Service Pizza Chains Restaurant Report,” released Thursday, the Chicago-based firm found that the fastest-growing chains in the heavily saturated pizza segment are ones with highly focused positioning.
“Most successful pizza chains have staked out highly defined market positions that allow them to stand out from the pack,” Technomic executive vice president Darren Tristano said in a statement. “The key to growth in the slow economy will be differentiation. Top players will have to understand the competition, successfully identify emerging trends, and find and execute a strong position in the market.”
Technomic's report identified several trends or niches powering certain restaurant chains to high rates of growth, including a healthful and environmentally friendly positioning for Pizza Fusion and a focus on the Hispanic demographic for Pizza Patrón. Technomic also recognized Papa Murphy’s for leading the take-and-bake pizza niche and pointed out Little Caesars as a leader in value for that chain’s $5 Hot-N-Ready Pizza.
For all the smaller chains’ strong rates of growth, however, those upstart brands are not likely to reach nationwide megachain status for a while due to the pizza segment’s heavy saturation, Tristano said in an interview.
“It’s very unlikely you’ll see a chain grow to the size of a Pizza Hut in the next 10 years,” he said. “ZPizza has done a great job, and it’s still just at 100 units or so, and even a Pizza Patrón has limited markets to go after. The more differentiated you are, the less opportunity there is. The pizza segment is saturated, and it’s not likely to increase by 50 percent or double.”
Don’t tell that to executives at growing pizza brands, however.
“Most of the time that’s true,” Andy Gamm, director of brand development for Pizza Patrón, said of a chain’s growth opportunities being limited by its defined focus. “But our point of differentiation, our laser focus on the Hispanic demographic, represents the largest niche audience out there. We have an opportunity to be a nationally recognized brand even with our narrow focus.”
Pizza Patrón currently has 92 units open and 14 under construction in six states.
Even if competitors make inroads on Pizza Patrón’s point of differentiation — and they have, Gamm said, as more chains put money into Spanish-language advertising or specialized hiring in trade areas with large Hispanic populations — the brand plans to own its niche by serving it even better.
“For us, the question is are you selling to the Hispanic community, or are you serving it,” he said. “Unless you make the extra commitment at the community level, you’ll find it really tough to be successful in this business.”
Pizza Fusion’s founder and president Vaughan Lazar echoes Gamm’s sentiment, and he said his chain’s commitment to organic food and green business practices are core brand values that can stand up to any competitor trying to mimic them.
“If you put yourself in a market just to be different, you’re setting yourself up for failure down the road,” he said, “but if you’re in the right place at the right time and answer a need, it’s a whole different story. We didn’t do these things just to be different; it wasn’t our angle.”
Consumers are more sophisticated these days, Lazar added, and they can tell when a brand isn’t being genuine in green practices or any other differentiation efforts.
Pizza Fusion has 21 restaurants in 10 states.
Tristano said that big pizza players Pizza Hut, Domino’s and Papa John’s aren’t standing pat, either. Pizza Hut has moved toward more catering with its Tuscani Pastas line, Domino’s is differentiating itself with Oven Toasted Subs and Pasta Bread Bowls, and Papa John’s continues to market its “Better ingredients, better pizza” positioning.
However, Tristano said, the big three’s biggest opportunity for unit growth will be outside the United States.
“When you hit the level of maturity that those brands have, you have to look to other ways of growing,” he said. “As a result, they’ve been growing much more internationally, playing in a global market instead of just the U.S. market.”
According to Technomic, the limited-service pizza segment had sales growth of about 0.4 percent in 2008, totaling $29 billion.
The fastest-growing pizza chain of Technomic’s Top 100 in terms of sales was Little Caesars, whose 2008 sales of $1.06 billion represented a 13.4-percent increase over 2007. Papa Murphy’s was second in terms of growth at 7.9 percent, followed by Pizza Hut and Papa John’s with increases of 3.9 percent and 3.2 percent, respectively. The other pizza chain in the Top 100 with positive sales growth was CiCi’s, at 2.6 percent.
Contact Mark Brandau at [email protected].