Pizza may supplant burger as king – restaurant marketing

Pizza may supplant burger as king – restaurant marketing – editorial

Charles Bernstein

Pizza may supplant burger as king

When Donald N. Smith joined PepsiCo as president of its restaurants group (Pizza Hut and Taco Bell) a decade ago, he asserted a conviction that some day pizza would surpass burgers as America’s most popular dining-out food. This was quite an admission for an executive who had risen to chief operations officer of McDonald’s and then was president of Burger King for three years.

It raised eyebrows in the industry, where the belief was almost universal that the burger — entrenched as king for so many years–simply could not be overtaken, even if burgers were slipping a bit. Coincidentally, Smith ended up with Godfather’s Pizza as part of his company in a deal that was initiated before he arrived as president of Chart House Inc. and switched the name to Diversifoods.

Today, as chairman of both Perkins Family Restaurants and Friendly Restaurants, Smith is mostly an observer of the burger and pizza wars but no doubt must feel that his prediction of pizza supremacy may be nearing fruition.

The clincher on the possible emergence of pizza as the No. 1 selling item comes from none other than McDonald’s itself. Never one to miss an opportunity, McD is rolling out four varieties of pizza pies in a dinnertime test at 15 units in the Evansville, Ind., area. Besides potentially driving up the average ticket by pricing the pizzas from $6 to $10, McD could substantially boost its dinner business. McD knows a popular item when it sees one.

Actually, McD has tested several versions of pizza over the past few years. There can be no question that McD has the capability to produce a quality McPizza, just as it has been so successful with Chicken McNuggets.

Incidentally, chicken is also gaining on the burger although not with the same momentum as pizza.

It is not nearly as tough as some might imagine for McD to get into the business today, with modern ovens and equipment able to produce fresh-cooked pizza within six minutes. While Pizza Hut does not like to call itself fast food, McD would continue to do so.

The ultimate irony is that McD itself could become the driving force for pizza to surpass burgers in the industry. Still, McD is not likely to ever forget its burger origins and the fact that burgers got it where it is today.

Overall, burgers have at least a 3-to-2 sales-ratio lead over pizza. But pizza sales are already growing by 10 percent annually while burgers’ rate of increase has slowed to 7 percent. And there actually are more pizza units than burger units.

The Big 3 of pizza are Pizza Hut; Domino’s Pizza, the undisputed home delivery champion; and Little Caesar’s, the carryout leader. But there are literally hundreds of other pizza chains, including Godfather’s Pizza, Round Table Pizza, Pizza Time Theatre, Noble Roman’s, Sbarro, Pantera-Pizza Inn, and Shakey’s (which just named Gene Stone president). The latter two companies are suffering but could rebound under new managements.

Profit margins at the stronger pizza chains are well above average as pizza has an excellent cost structure.

Burgers are mostly a chain business, grinding out the numbers. Pizza is far more adaptable to the mom-and-pop operator, who accounts for almost half of the total $20 billion pizza volume today. These smaller operators, with annual unit volumes in the $100,000 to $300,000 range, are likely to become even more important factors. Regional pizza chains, possessing intensive marketing clout, also loom as formidable.

With the couch-potato syndrome and people growing far more comfortable simply ordering in, pizza has another advantage as an ideal take-out and home-delivery item. Pizza also has been able to project a healthier image than burgers, and that is a crucial factor to many customers.

Since these are key trends for the 1990s, it would not be a total shock if pizza indeed does overtake burgers as America’s most popular food.

Where youngsters once were brought up on burgers, pizza seems to be taking over that role in a cultural transformation. While the burger is indeed still the king, pizza is the queen and is bidding to take over the king’s role.

Donald N. Smith’s crystal ball of a decade ago may have been more perceptive than people realize–even if it still may take another decade before pizza truly becomes No. 1.

COPYRIGHT 1989 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

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