2015 Top 100: Pizza segment analysis2015 Top 100: Pizza segment analysis

The leading seven pizza players in the U.S. managed to get a rise out of domestic systemwide sales during the Latest Year, even as unit growth at home remained generally flat for the segment.

Highly targeted marketing and cutting-edge technology put to use by some of the pizza chains helped lift the Top 100 Pizza segment to an aggregate 4.3 percent increase in sales from the Preceding Year. Total sales tallied $17.4 billion, up from $16.7 billion the Preceding Year.

Unit growth for the group, however, barely budged. The average unit growth rate was less than 1 percent in the Latest Year, following the Preceding Year rate of just above 1 percent. Little Caesars Pizza is the one bucking that trend, with U.S. unit growth hitting 5.2 percent in the Latest Year and 6.3 percent in the Preceding Year. All others showed unit growth rates below 2.7 percent in the Latest Year.

“Overall the pizza category is mature and growth is relatively slow,” said Darren Tristano, executive vice president of the Chicago research firm, Technomic.

Rankings in the Pizza segment remained relatively unchanged from past years. Pizza Hut retained its position as the largest operator with 7,863 stores and $5.5 billion in sales at the end of the Latest Year. But the Plano, Texas-based division of Yum! Brands Inc. continued to slip in some areas. Pizza Hut’s sales were down from the $5.7 billion in the Preceding Year, driving the chain to post the category’s only negative result in sales growth — down 3.5 percent. Pizza Hut’s estimated sales per unit declined 4.2 percent.

“Pizza Hut continues to lose share in the industry,” Tristano said. “The brand struggles with consumers. It’s recreating marketing and product to be more Millennial-centric, which may be confusing to existing customers.”

Pizza Hut re-launched its menu in November to include premium ingredients, reduced-calorie pizzas and new customization options. David Gibbs, who was promoted to chief executive that same month, called it the biggest change in the company’s 56-year history. Late last month, Pizza Hut also said it would drop artificial flavors and colors in its U.S. pizza items.

While analysts wait to see what effect the menu and branding changes will have on Pizza Hut’s performance, another pizza operator has been reaping the benefits of menu changes it had made five years ago.

Ann Arbor, Mich.-based Domino’s led the segment in ESPU growth for the Latest Year, with a 7.7-percent jump over the Preceding Year. Comparatively, the average growth in ESPU for the segment was 4.3 percent. CiCi’s Pizza, the only all-you-can-eat pizza buffet concept in the qualifying Top 100 grouping, posted an ESPU growth rate of 7.4 percent in the Latest Year, just slightly behind Domino’s. That was a marked improvement for the Coppell, Texas-based chain, which posted an ESPU growth rate of 2.3 percent a year earlier.

Domino’s complete revamp of its recipes in 2010 — announced with a bold advertising campaign — has helped lead the chain to positive same-store sales for six consecutive years, said Tim McIntyre, vice president of communications.

More recently, Domino’s dropped the “Pizza” from its brand signage to emphasize a broader menu that includes items like specialty chicken. The chain has also fully embraced digital ordering methods, including mobile apps that enable customers to order via social media platforms, such as Twitter.

“We believe we’re doing well because we’ve been focusing on the same old boring stuff — great service, great food, breakthrough marketing and technology innovation,” McIntyre said.

Pushing menu improvements, food quality and limited-time offers are standard operating procedures for most players in this segment, Tristano said.

Louisville, Ky.-based Papa John’s has continued to focus on quality as a differentiator and grow in markets where they are already established. The brand has succeeded with LTOs such as a cheese steak pizza and chili corn chip pizza.

Meanwhile, focusing on value-oriented customers with $5 pizzas has helped propel Detroit-based Little Caesars to the Pizza segment’s No. 1 in growth of U.S. systemwide sales and U.S. units.