Pizza players of all sizes have long been in the delivery business, leveraging their own driver networks and logistics to maintain a top-of-mind edge for convenience-seeking customers who simply want to stay home for dinner.
Of course, the pandemic dramatically changed the environment, forcing every other category to add delivery and to do so mostly through third-party platforms. Some pizza brands remained reluctant because of cost constraints as well as the existence of their own mature channels. One exception was Papa Johns, which added third-party delivery aggregators in 2019.
The chain’s two largest competitors held out (Little Caesars added delivery partners in 2020, but didn’t have the channel prior). Notably, Pizza Hut forged a partnership with Grubhub in 2019, but it was for order processing versus actual pickup and delivery. It wasn’t until a historic labor shortage in early 2022 that Pizza Hut tapped third-party companies to actually facilitate deliveries. Domino’s determinedly took even longer to embrace aggregators, but the chain finally added an Uber Eats partnership last summer with imminent plans to expand to more aggregators.
“We need to make sure we're getting our fair share of aggregators in the delivery business,” Domino’s chief executive officer Russell Weiner said during his company’s third-quarter earnings call in October.
Seems we now have ourselves a ballgame.
That doesn’t mean Papa Johns is concerned, however. During the chain’s third-quarter earnings call last week, CEO Todd Penegor – who came on board in August – and chief financial officer Ravi Thanawala, reiterated their confidence in the chain’s delivery position. Thanawala said Papa Johns continues to see sequential growth in its third-party delivery business, despite the increasing competition.
“We’ve been watching the trends as competitors are rolled on to the aggregators, and we continue to believe what we're gaining our fair share, if not more. We continue to see growth year-over-year and we think that this category has room for us to continue to grow regardless of what competitor comes on,” he said.
“If you think about other folks picking up other platforms in third party, we've competed well on innovation, we've competed well on price,” Penegor added. “We have great partnerships. We’ll make sure we drive awareness with those partnerships. Innovation will play a role, and our premium positioning helps in that channel. I think we're in a good position to continue to compete no matter what the competition does in that channel.”
That said, Papa Johns is focused on its “playbook” to maintain an edge here – finding a balance between third-party and first-party delivery and ensuring the best deals and experience come from first-party channels. The chain tested several loyalty deals throughout the third quarter that generated more transactions into its first-party channel and is revamping its loyalty program in Q4.
“If we play our playbook, I think we can start to bend some trends on net-net between the two channels on what we’re doing in the delivery business. It’s going to be a great balance of making sure there is good value, not just price point, but value for the money – whether that’s the service experience, the food, the price – and we’re going to bring all those things together,” Penegor said.
“This is a multi-step process and we’re really tearing down the business to make sure we’re striking the right balance of serving consumers where they want to be served. Some of them are in 3P and some of them are absolutely in 1P,” Thanawala added.
As delivery competition intensifies, Penegor also believes the pizza category in general has an opportunity to drive even more penetration.
“Clearly we’re competing well in third party (delivery) and pizza’s got an opportunity to win even more share of voice and stomach in third party,” Penegor said. “I think there's a little bit on the awareness front. Folks are traditionally used to either calling the restaurant or ordering on the web or the app directly from a first party. So they're starting to learn that pizza is now available also on third party.”
Pizza, he adds, has an advantage over other players in delivery in that it offers a strong value proposition.
“When you think about what pizza can do, feed a family of four, an extra-large pizza, a side and a drink. It's a really affordable price even delivered with a tip,” he said. “So I do think folks will start to see there is real value in pizza.”
Contact Alicia Kelso at [email protected]
