Pizza Power 2013 State of the Industry Report

Make plans for 2013 with PMQ’s report on the pizza industry—both domestic and worldwide—along with a forecast for the coming year.



(page 4 of 4)

Outside the United States

Your priority should always be your store and immediate area, but taking a few minutes to look farther away—a lot farther away—can provide new insights and a broader perspective on the industry. We’ve watched over the past few years as the pizza industry has expanded rapidly in many foreign lands, and it’s easy to see the attraction. In a different country, you’re the new guy in a fairly new industry. It’s similar to opening a pizzeria in the States back in the 1970s—before the market became saturated and everyone was excited to discover what you had to offer.

As some chains close units here at home, they just as quickly open new stores overseas. Pizza Hut has locations in more than 100 countries; Domino’s operates in more than 70; and Papa John’s has stores in 32. Some even have more international stores than United States-based units. Other U.S. chains that have expanded internationally include Little Caesars, California Pizza Kitchen, Chuck E. Cheese’s, Uno Chicago Grill and Sbarro, to name a few.

Four nations—Brazil, Russia, India and China—stand out as emerging markets. They are being watched so closely that market research firm Technomic has gone so far as to create a quarterly newsletter focused solely on them called BRIC, which delivers information about new business developments in all four countries. A closer look reveals why these countries are hot growth centers for the pizza industry as well.

Brazil

While the pizza toppings in Brazil may not be what we’re used to here in the States (think fruit, corn, potato sticks, ketchup, mustard and mayo) and often come with little or no sauce, Brazilians are adopting some Italian pizza tendencies due to immigrating Italians. One popular style in Brazil features a thin, crispy crust that’s topped with a slightly sweet sauce, shredded chicken and catupiry cheese (similar to cream cheese).

U.S. chains have been a welcome addition to the Brazilian pizza landscape, helping consumers do away with ketchup and mustard packets. According to Technomic, Domino’s Pizza Brazil recently expanded into food courts, with its Domino’s Express concept offering pizza by the slice and potato snacks.

Russia

Pizza chains, including Pizza Hut and Sbarro, first appeared in Russia in the 1990s. Now you’ll find Papa John’s and Domino’s as well. The largest Russia-based franchise is IL Patio. Pizzerias in Russia often compete with Asian food restaurants and, to counteract this competition, will frequently offer Asian cuisine on their menus. Thick-crust pizzas tend to be more popular among Russians, but more pizzerias have been offering the thin crusts that many find in Europe.

As one of the leading restaurant brands in Russia, Sbarro offers a menu of more than 500 items, including international favorites and items tailored to the market (such as fish soup, borscht and pulled-pork pasta), according to Technomic.

                                                      

China

Because the Chinese diet does not traditionally include dairy, it can often be difficult for some pizza restaurants to enter the market without proper market research. Such was the case initially with Domino’s, according to Gretel Weiss, editor-in-chief and publisher of FoodService Europe & Middle East. The concept of delivery had not yet taken hold in the country when Domino’s first appeared, although it’s now gaining traction as McDonald’s and KFC have begun offering 24-hour delivery in some areas. Eating out is regarded as a sign of wealth in China, and consumers want to go somewhere for a sit-down experience. Weiss notes that Pizza Hut got around these issues by introducing pizza via casual dining restaurants and making its salad bar—rather than the pizza—the star menu item.

PMQ China publisher and editor-in-chief Yvonne Liu says pizza has become more popular in China over the past few years. “Pizza Hut has developed more than 500 stores in China since its first appearance in 1989 and is still the top brand in terms of number of stores and sales,” says Liu. “International chains—such as Papa John’s from the United States, Mr. Pizza from South Korea, and the Pizza Company from Thailand—are also doing well and remain confident in the Chinese market.”

Liu says that, in addition to the success of the international chains, local Chinese chains are also finding success. “Shanghai-based brand Babela’s Kitchen, with more than 150 stores nationwide, is ranked the No. 1 national brand, followed by Beijing-based Origus and Big Pizza, with more than 100 stores respectively,” Liu notes. “Also actively competing with the major players are regional brand Meiwen from Tianjin; Europa from Shenyang; City 1+1 from Changchun; Pizza Marzano and Melrose from Shanghai; Fizz from Shaoxing; and Pizza Bee.”

As the pizza category expands and choices grow, Chinese customers are becoming more sophisticated—they’re not satisfied with just one brand or type of pizza. “Some independent pizzerias, with their signature pizzas, can be attractive to some customers,” Liu observes. “Still, the younger generation are the main customers; they can easily accept foreign food and like to try different things. Thus, the marketing is mainly targeted toward younger customers under 40.”

India

Although pizza isn’t a food you’d traditionally find in India, according to Weiss, bread, tomatoes and cheese are an integral part of the national diet. So, as with other international markets, pizzerias have tailored pies to fit local tastes, with one of the favorites in India being the Peppy Paneer pizza, which is topped with chunks of paneer (an unsalted cheese) and red, green and chili peppers. Since the population is also tech-savvy, Domino’s began offering online ordering to its Indian customers in late 2010 and has already seen more than 10% of sales coming in through the Web.

Pizza Hut, excited about India being a major growth engine for Yum! Brands, last year separated its India business into a stand-alone segment, which it had done with only China in the past. Chairman and chief executive David C. Novak said the company was at the same stage of development in India as it was in China at a similar juncture in its life cycle.

Similarly, Domino’s currently owns 500 stores in India and has plans to reach 800 stores by 2016. You’ll also find Papa John’s, Little Caesars, California Pizza Kitchen and Sbarro earning a slice of the pie in India.

Summing Up

All in all, our research suggests that the pizza industry fared well in the past year, and all indications point to another strong year ahead. Independent operators continue to thrive, holding their own against the big chains. Innovations abound throughout the industry, another positive sign for a healthy industry. Across the United States, pizzeria owners continue to adhere to cherished traditions of pizza making while embracing new ideas and technologies. And, best of all, the consumer’s love for pizza endures from generation to generation, ensuring that the world’s most popular food will remain popular for a very long time.  

Liz Barrett is PMQ’s editor at large.

PMQ's 2013 Pizza Industry Enterprise (PIE) Award Winner: Little Caesars

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