Pizza Industry in Canada

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1. History From its origins in the Naples-region of Italy, pizza has become a mainstay in the North American diet. Pizza arrived in the United States in the early 1900s thanks to a large population influx of Italian immigrants. The popularity of pizza in the United States grew with the return of American troops to the U. S. after being stationed in Italy during World War II. Upon their return, the troops brought home to the U. S. a demand for the dish they had enjoyed in Italy, which expedited the mainstreaming of pizza into American cuisine, and some years later to the one Canada.

Because of this boom in demand, pizzerias began their expansion between the mid-1940s and early-1960s. Companies that were founded in this timeframe that would become mainstays and market leaders in the pizza business include Pizza Hut, Little Caesars, and Domino’s. Currently, the quick service market for takeout and delivery pizza is an especially saturated sector in Canada, as declared by Background Food service consultant Douglas Fisher. “I think it’s a really price-sensitive market and it’s really tough to penetrate it,” he said. Key brands Little Caesar’s

Pizza Company located in more than 20 international markets (presence in five continents). It is the world’s largest carry out pizza chain, with presence in Canada since 1969, with the opening of its first restaurant in Canada, in Waterloo, Ontario. Little Caesars added more stores in the world in 2009 than any other pizza chain. Pizza Pizza Founded in 1967, Pizza Pizza is an industry pioneer and Canada’s number one pizza chain. With the 2007 acquisition of Pizza 73, a leader in western Canada, Pizza Pizza operates more than 600 traditional and non-traditional estaurants coast to coast. Domino’s Pizza Pizza Hut Background Despite the popularity of ethnic cuisines, pizzas and other types of fast food remain popular areas for franchises. According to PMB, 85% of Canada’s population declare to have consumed pizza in the last month. The most consumed takeout/delivery brands are in order of importance: Pizza Hut, Pizza Pizza, Domino’s and Little Caesar’s. The pizza industry in Canada is so important that the month of October, has been designated National Pizza Month which has been celebrated in Canada since 2005 .

Product innovations Traditionally, pizza franchises have only offered pizza and closely related items like breadsticks and other Italian dishes to their customers. But in recent years, many pizza carryout have increased their menus’ diversity by launching new product lines to further compete with other lower-cost food chains in a bid to retain or gain customers. A favourite amongst a demographic similar to pizza eaters, chicken wings, is one of the foods that have found its way onto the menu of many pizzerias, like Domino’s did.

It’s important to note that the expanded menu options aren’t restricted to just food. Recently, a number of Pizza Hut locations began applying for a license to sell beer. Overview of marketing efforts in the industry Previously, coupons and promotions were sent via large mailing lists and were not targeted at a specific audience. Pizza companies are able now to take advantage of analytics provided by social media outlets to gather important marketing insights to fine tune campaigns.

Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association says “more than eight out of 10 operators declare social media is becoming a more important marketing tool. ” And there is much more acceptance of restaurateurs emailing and texting their consumers. “Social media has become very important to the [entire restaurant] industry and social media users are much more active and likely to connect with restaurants online and post reviews,” he concludes. 2. Current Market Situation

The Canadian pizza industry worths $3 billion, where 35 percent is from take-out segment. It is a very diverse industry with stable demand and with one of the highest mark-up of any item of food. The recent financial turmoil has sharpened the downturn among sit-down restaurants that started more than two years ago. So far, large fast-food chains have managed to withstand it, in part because they benefited from consumers trading down to cheaper meals. “Quick service restaurants, which have a lower average check, tend to be somewhat more optimistic than higher average check operations,” said Riehle.

Consumers have become more budget-conscious over the past several years leading to some diners to trade down from more upscale restaurants to options including pizza establishments. Industry Segments There are three main types of pizzerias: * Full service: A full service pizzeria is a sit-down restaurant where the food is served to the table. Many full service pizzerias also offer take-out and delivery services. * Limited service: A limited service, or fast food, pizzeria usually doesn’t offer table service. Instead the customer will order, pay and collect their food at the counter.

There may be casual diner-style seating available. * Non-traditional location: These pizzerias offer products and services at non-traditional locations including office buildings, shopping malls, stadiums, airports, zoos, convenience stores and similar retail facilities. Non-traditional locations will ordinarily only offer take-out and/or delivery services, but may have sit-down facilities depending on the location. Environmental Factors Social The increased focus on healthy eating that has overtaken the marketplace in recent years expalins the addition of healthy items, like salads, to pizzeria menus.

According to a National Restaurant Association (NRA) survey, seven out of 10 consumers say they are trying to eat healthier. In response to this trend, pizzerias have taken steps to cut trans-fat from their food and begun providing options to patrons such as low-carb, gluten-free items and organic food options. Technological Technology certainly impacts the Pizza industry too, for instance, when integrating new technology to order pizza. The major pizza players are offering online ordering and some are now offering text ordering from mobile phones, PDAs and other web enabled mobile devices.

Another example is that of course there’s an app for pizza. Several companies have developed applications in the past few years to reach consumers no matter their location in order to capitalize on the growing population of smartphone users. Pizza Hut created the industry’s first mobile app (for the iPhone) in 2009, and announced in May 2011 that they were updating their original iPhone app and introducing two more free mobile ordering applications for Android smartphones and the Apple iPad.

Pizza Hut has been followed into the market by others like Domino’s, which in June 2011 generated over $1 million in sales from its new mobile app in the first week of its availability. Competitive The Canadian pizza market is extremely competitive. When having a franchise, the franchisee may face competition from other businesses within the area, other franchisees, or from other outlets or channels of distribution that the franchisor may own. Economic Commodity prices, such as gas and grain prices have an important impact on the rate of growth the pizza industry will experience in the near future.

If the commodity prices rise, pizza companies may have to consider raising prices to offset the increases, or find ways of absorbing the extra production costs. Prices are typically higher in Canada than the United States, and the pizza sector in particular is currently being hit with by a double whammy of rising flour prices and rising cheese prices. Regulatory A variety of regulations, laws and ordinances govern the operation of any restaurant business. The following is a list of regulations that directly impact the pizza industry: * Food Safety * Sanitation * Nutritional Labeling * Minimum Wage, Tips and Overtime * Child and Teen Labor Immigration * Taxes Sustainability With an increased focus on green initiatives in the restaurant industry as a whole, pizza operators are introducing energy efficient equipment such as high speed ovens. Environmental responsibility has also made some companies to innovate in packaging. Thats the case of western Canadian pizza delivery operator Pizza 73, who created the double-decker pizza box. A bigger box may not at first sound like a stellar example of packaging sustainability, but for them, this unique two-tiered boxes have more than paid their way in terms of effective marketing and corporate environmental responsibility. These boxes are an example of how you don’t have to sacrifice performance, convenience or great taste for sustainability,” says CMO Pat Finelli, explaining that the two-tiered layers inside the boxes enable customers to receive two pizzas, a pizza-and-wings combo meal, etc. , in one compact container—saving considerable water and energy that would be required to manufacture extra boxes. Both the pizza and wing boxes are made from 100 per cent recycled recycled materials, according to the company, with 94 per cent of their content derived from post-consumer recycled fibers. Seasonality

Pizza companies experience seasonal fluctuations in Franchise Sales, which are inherent in the full service restaurant industry in Canada. Seasonal factors such as better weather allow Pizza restaurant to open their patios and generally increase sales in the second and third fiscal quarters compared to the first and fourth fiscal quarters. Tourism is also a seasonal factor positively impacting the same time frames. 3. Competitive Analysis Little Caesars Brand Positioning and Personality Little Caesars makes dough fresh in the stores, and uses fresh, never-frozen cheese and sauce made with vine-ripened tomatoes.

This company offers strong brand awareness including one of the most recognized and appealing characters in the country, Little Caesar. Little Caesars philosophy is to give back to the community by supporting many charities, family causes, and youth sports. Attributes, benefits and values Little Caesars’ philosophy is to provide customers with fresh, high quality products at great value, with unmatched convenience. Additionally, Little Caesars has a long history of giving back to the communities where they do business, and where there is a need.

The Little Caesars Love Kitchen and Little Caesars Veterans Program are reflections of that business philosophy. The Little Caesars Love Kitchen was established in 1985 to provide quality meals to people in need. The big-rig pizza kitchen travels across the United States and Canada, meeting the needs of the hungry, the homeless and disaster survivors. The Little Caesars Love Kitchen has fed more than two million people in he US and four Canadian provinces. Also exemplifying their strong tradition of giving back is the Little Caesars Veterans Program. The program provides qualified, honourably discharged veterans with a business pportunity when they transition to civilian life or seek a career change. Promotional and ad activity Little Caesars made the “buy one get one free” concept a marketing mainstay in the fast food industry with its introduction of Pizza! Pizza! But, while Little Caesars owns the “Pizza! Pizza! ” trademark in the U. S. , the unaffiliated Pizza Pizza restaurant chain owns the Canadian trademark. As a result, Little Caesars cannot directly use its well-known slogan in Canada, but has used “Two Pizzas! ” along with “Delivery! Delivery! “, “Quality! Quality! ” or other such double-word tag lines in advertising and on packaging in Canada.

Little Caesars is known for its many innovations in the fast food industry. It was the first pizza restaurant to serve pizza in minutes at lunch, to have a drive-through/carryout window, and to open in a stadium. Share of market Figures are not available in free market reports but PMB reports that 6. 2% of the population chose Little Caesars’s every time they consider consuming pizza. 1% consider it most often and 5. 2% consider it sometimes. Price Little Caesars offers the Hot-n-Ready $5. 00 pizza deal (carry-out only). Launched in 2004 and still in effect, Little Caesars blasted the market to boost same store sales.

As we dove deeper into the situation we noticed that franchisees were ok with this strategy change. Food costs went up to 37% of sales (average in the pizza industry is around 30-31%) but sales increased enough to offset any profit margin erosion. Furthermore, labor at Little Caesars is quite slim so they are able to undercut the market and do so effectively. Little Caesar’s pizzas price range is $5. 00-$8. 50. Combos: $8. 98-$11. 48. All these prices plus tax. Distribution Little Caesars is aggressively pursuing expansion in both the domestic and international marketplace and can now be found on five continents.

SWOT Strenghts * Robust franchise plan * Strong value proposition ($5 pizza) * Constant research and development of new products * Innovative marketing programs. * Short waiting time for customers to have a hot pizza Weaknesses * Not leading the Canadian market * Weak focus on taste and quality * Weak innovation pipeline Opportunities * Since it’s the fourth competitor in Canada, take advantage of all non-franchise pizza establishments focusing on price and quick service. * Reinforce its differentiation versus competitors Threats Lose market share due to competitor’s stronger awareness * Lose market share versus truly Canadian brands as Pizza Pizza. * $5 Pizza offering may not be enough to maintain attractiveness vs competitors. 4. Competitive Analysis Pizza Pizza Brand positioning and personality Pizza Pizza is the Canada’s most recognizable and successful pizza chain. In 2007 it became Canada’s number one pizza chain in terms of sales. Over its 40 year history, Pizza Pizza has established a strong brand name and reputation as the leader in Ontario in the pizza component of the quick service restaurant (‘‘QSR’’) segment.

Attributes, benefits and values Pizza Pizza is a company with strong social responsibility. Through the years, the company has been a loyal supporter of community groups, helping to organize fundraisers, sponsoring events and supporting local projects at the corporate and franchise level. An example of this is that throughout October, the National Pizza Month, they call on Canadians to help them raise money in support of Children’s Miracle Network hospitals, through a one-day fundraiser called Cheese for Charity. They also implement the Slices for Smiles charity program.

Regarding its benefits, Pizza Pizza does offer a choice of more than 30 different toppings ranging from classic pepperoni to grilled zucchini; its new gluten-free dough has garnered worldwide attention. Brand’s attributes include the Dough Dude, their lovable and friendly mascot, who delights children and families at major venues, Pizza Pizza restaurants and special events sponsored by Pizza Pizza. Promotional and advertising activity Pizza Pizza owns one of the most uniquely recognizable advertising jingles in the industry, featured prominently in all their constant marketing campaigns.

Accomplishments leading to the company’s growth include introducing the country’s first one-number telephone ordering system. PP was also the first pizzeria in Canada to sell pizza by the slice and the first to establish its own training centre, the Pizza Pizza University, which trains more than 3,500 students every year. Furthermore, since its inception, Pizza Pizza has adopted many innovative concepts including networked call centres, delivery guarantees and the monitoring of restaurants through a live web-feed.

They also have introduced numerous innovations such as whole-wheat, multi-grain dough, a gluten-free crust and the elimination of industrially-added trans fats from all menu items. Among their promotional and advertising activities, some of the most important are: * Developing trivias on their website and prizing * Implementing strategies to reposition itself as a ‘‘restaurant with delivery’’, highlighting its food quality, menu choices and eat-in dining opportunities. Executing a re-imaging campaign aimed at increasing retail sales and market share through improved brand visibility. This campaign involves relocating selected restaurants, upgrading restaurants’ interiors, adding cooking capacity, adding new signs to draw attention to the restaurants and providing more contemporary uniforms for restaurant employees. * Support the Pizza Pizza brand primarily with radio and print advertising such as flyers, as well as billboards at major venues such as Toronto’s Air Canada Centre and Ottawa’s Scotia Bank Place. Implementing point of purchase promotions and coupons. Sales promotions and contests, coupons and special discounts, cross promotions with strategic partners and limited-time menu offerings are also used to stimulate purchases and introduce new products. Tag Lines – Hot and Fresh Pizza – Always the best food, made especially for you. Share of Market Pizza Pizza maintains over 30% of market share in Ontario’s pizza industry. PMB brand consideration data shows this company is always chosen by 11. 3% of the population, 4. 7% considers it most often, and 6. % consider it sometimes. Distribution Pizza Pizza has expanded from its base in Central Canada to Alberta, so it now operates 616 locations across Canada, most of them in Ontario, where it is the strongest brand. Price Pizza Pizza offers several specials, some examples of them are: * Large Pepperoni Pizza $9. 99 * Family size pasta $13. 99 * Delivery Special $22. 99 * Crispy Wings $8. 29 SWOT Strenghts * fresh food ingredients that come from a central supply, reducing costs * highest awareness among the Canadian pizza industry Strong brand recognition due in part to their memorable phone number (967-11-11 in the Greater Toronto Area). * Number one market position in Ontario. * A proven track record of innovation. * Variety of classic to exotic signature pizzas. Weaknesses * Brand power outside Ontario is not as strong as it is there * Does not offer whole pizza as cheap as Little Caesar’s. * Limited healthy menu Opportunities * Offer more premium options (pasta) to compete head to head with Pizza Hut restaurant style. * Increase healthy options due to consumer trends (they only offer one small salad now). Reinforce Canadian origin Threats * Commodities price increase that will force them to increase prices too, increasing the gap price between them and Little Caesar’s * Emerging consumer trends of a more “gourmet” taste, not only good deals. 5. Competitive Analysis Pizza Hut History The two brothers, Frank and Dan Carney, the co-founders of Pizza Hut borrowed $600USD from their mother, bought some second-hand equipment and rented a small building on a busy intersection, then started their entrepreneurship on a relatively new market in their home town of pizza.

In 1985, Pizza Hut Canada has introduced the Priazzo, a premium pizza-like pie with an upper and lower crust stuffed with a variety of meats, cheeses, vegetables and sauce. The signature crusts are hand-tossed style pizza, pan pizza, stuffed crust pizza and thin ‘n crispy pizza. Some other signature product innovations from Pizza Hut are pasta and lasagna. They launched the P’Zone in 2002. It is the Calzone Pizza with savory toppings and cheese sealed inside a folded over 12” pizza crust. Pizza hut added salad to expand their respective menu. They give patrons the option of a salad bar at their restaurant.

Pizza Hut broadened the menu not just with the new toppings on the pizza but desserts and side dishes. They offer chocolate brownies and cinnaparts desserts. For side dishes, they offer breadsticks and signature garlic bread. The expanded menu options in Pizza Hut is not restricted to just food. Pizza Hut began applying for a license to sell beer at their restaurants. Pizza Hut is a division of YUM! Brands Inc. In 1999, Pizza Hut was merged with KFC and Taco Bell brands in Canada to create one of the largest fast food restaurants in the country. Pizza Hut also put nutrition information on their website.

From visiting the website, it quickly helps consumer to figure out which pizzas are the lightest, and which will give them arteries a workout. Brand positioning In 2006, Pizza Hut introduced a new design for WingStreet, its sister franchise owned by Yum! Brand. They aimed at attracting dine-in customers. Pizza Hut capitalized on consumer trends favouring more menu variety and higher spice levels. Wings, which also travel well in carryout and delivery situations. WingStreet offers varieties of fried chicken wings and sauces, plus a broader menu that includes other appetizers and sandwiches.

Many customers order pizza and side orders of wings to be eaten together. A new design included a bar offering beer, wine and frozen drinks, recorded music, and multiple televisions. This positioning reached a new market that is willing to dine-in with a lively ambiance restaurant instead of a family-style dine-in restaurant. In 2009, Pizza Hut planned to double sales and increase market share by adding pasta to its menu and co-branding the franchise as Pasta Hut. Pizza hut became the first national pizza chain to offer delivery of restaurant-quality pasta at very affordable prices. Brand personality

The personality traits associated with Pizza Hut are warm and upscale. It is linked the warm because it has a format of family-style dine-in. Pizza Hut also has kids deal where “Kids Eat Free at Pizza Hut”. 1 That shows a warm family with children. Pizza Hut becomes upscale Italian bistro. That is because it has a red roof. Attributes| Benefits| Values| * Delivery * Worldwide * Bistro * Stuffed crust * Family-style * Pan * Salad buffet| * Visit everywhere * express| * Convenience| Promotional and advertising activity There was a pizza chain’s racing-themed summer promotion launched in 2002.

The Team Player’s racing team had signed a two-year deal with Pizza Hut Canada to promote the pizza chain’s delivery service hotline. As part of the deal, Pizza Hut’s hotline would adorn two race cars. There was also in-camera TV coverage of three races in Toronto, Vancouver and Montreal. Team Player’s provided name and racing imagery to Pizza Hut for its advertising and products. In 2010, to deliver the message of the new campaign “Your Favourite. Your Pizza Hut”, the Pizza Hut employees were chosen through video submissions highlighting their personalities and desire to share Pizza Hut’s “Your Favourites” story. 2 Pasta Hut was being communicated across all promotional materials and through TV commercials along with 15- and 30-second radio commercials. The commercial was about putting Pizza Hut house under construction and renovate the name as Pasta Hut as they are going to change their name. Synopsis of current ads and tag-lines Pizza Hut’s current tag-line is “Your Favourites. Your Pizza Hut. ” The story behind is Pizza Hut customers know that they will get great tasting pizza, pasta or wings from them. But what keeps them loyal to the brand is a onnection between their food and the special moments in their daily lives. Whether it is family pizza night or a get together with friends; at Pizza Hut they believe every moment deserves to be a favourite moment. Pizza Hut’s current commercial is “Pizza Hut Lover’s”. It shows that they offer varieties of pizza. They target meat lovers, pepperoni lovers, veggie lovers and cheese lovers. Price Classic Pizza| Stuffed Crust| Tuscani Pasta| Chicken Wings| $8. 99(S)- $13. 99(L)| $14. 99(M) $17. 49(L)| $9. 99-$16. 99(family)| $9. 49(10)- $18. 49(20)| Calzone| Breadsticks| Garlic Bread| Caesar Salad| 9. 49| $4. 59(S w/o cheese) – $8. 99(L w/ cheese)| $3. 29(2)$5. 49(4)| $5. 49(side)$9. 99(family)| Distribution There are around 500 units of Pizza Hut in Canada. 80% of the unit is distributed in Calgary, Edmonton, Toronto and Surrey. SWOT Strengths| Weakness| * Adding beer on the menu illustrates that pizza franchisors are looking at every single to expand their operations and provide consumers with what they want in one place * Co-locate WingStreet to reach new market| * Flat sales and profits in recent years * Need for experienced managers to help growth| Opportunities| Threats| Growing demand for stuffed crust pizza * Broader awareness than the competitors because of the first mobile app in the industory| * Cheese and flour prices have risen and fewer people visit restaurants in a difficult economic environment. * Stopped serving food with tomatoes on as a precaution after a possible salmonella poisoning outbreak in the United States. | Perceptual map with analysis ——————————————– [ 1 ]. http://www. franchisedirect. com/foodfranchises/pizzafranchises/pizzaindustryreport2011trends4/80/295 [ 2 ]. Idem 1. [ 3 ]. Idem 2. [ 4 ]. http://www. rpizzaiolo. com/2008/04/09/papa-johns-looks-to-canada-for-bigger-slice-of-pizza-market/ [ 5 ]. http://www. newswire. ca/en/releases/archive/September2008/30/c9453. html [ 6 ]. http://www. pizzapizza. ca/PPLWeb/CommandServlet? command=screenscmd&screenID=about_home&menuId=251 [ 7 ]. http://www. newswire. ca/en/releases/archive/September2008/30/c9453. html [ 8 ]. http://www. franchisedirect. com/foodfranchises/pizzafranchises/pizzaindustryreport2011trends4/80/295 [ 9 ]. *Pizza Today Magazine, March 2007; **Nation’s Restaurant News, January 2007 [ 10 ]. Idem 1. [ 11 ]. Idem 10. [ 12 ]. Idem 9. 13 ]. http://www. franchisedirect. com/foodfranchises/pizzafranchises/pizzaindustryreport2011trends4/80/295 [ 14 ]. Idem 14. [ 15 ]. http://www. franchisedirect. com/foodfranchises/pizzafranchises/pizzaindustryreport2011trends4/80/295 [ 16 ]. http://www. canadianmanufacturing. com/packaging/sustainability-69/pizza-boxes-raise-bar-for-sustainability-2472 [ 17 ]. http://www. bpincomefund. com/documents/Financial%20Reports/2010/2010%20Annual%20Report. pdf [ 18 ]. http://www. littlecaesars. ca/news/our_story. asp [ 19 ]. http://www. franchisegenius. com/Little-Caesars-Franchise/ [ 20 ]. Idem 19.

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