[EDITOR’S NOTE: This story was written before global lockdowns made dining out virtually impossible. But since delivery is still okay in some jurisdictions, and pizza boxes can be disinfected with Lysol wipes, the topic is still apropos.]
When it comes to comfort food, nothing is quite as awesome as a hot, cheesy pizza. In fact, fast-food, delivery pizza has not only become entrenched in American culture but throughout the world. Today’s leading pizza chains have therefore expanded their operations globally in their efforts to dominate the market. But while many pizza chains now exist, only two reign supreme…Domino’s and Pizza Hut. And both infamous pizza-makers have all intentions of ultimately winning the pizza wars.
In looking at the pizza market, a few things stand out. For one, more than three-quarters of all sales are in the delivery and take-out segment of the industry. Secondly, Domino’s and Pizza Hut account for about 70 percent of this market segment. And despite having positive growth, the pizza industry is highly competitive, with only 1.7 percent market growth in recent years. All of these highlight how challenging it is for any single company to win the pizza wars. And it also indicates the struggles Domino’s and Pizza Hut and other companies face in the years ahead.
Both Domino’s and Pizza Hut are well recognized through the globe by all types of customers. Both offer fast delivery and takeout services. Both have expanded their menus to include hot wings and other items. And both have embraced new strategies in a cut-throat market that demands innovation and creativity. But at the end of the day, only one will be crowned the winner of the pizza wars. Therefore, looking at where both Domino’s and Pizza Hut have been and are headed are a worthwhile endeavor.
The Past Decade – Different Approaches to Growth
Over the last few decades, the winner of the pizza wars wasn’t a big secret. Prior to 2017, Pizza Hut dominated the market in pizza sales and was hailed as the market leader. But that has since changed with Domino’s exceeding Pizza Hut in revenues that year despite having 2,000 fewer stores. Notably, Domino’s shifted gears in 2010 by revamping its pizza recipe and adopting its “Oh Yes We Did!” campaign. In contrast, Pizza Hut has embraced a more innovative and collaborative approach during that time. As a result, Pizza Hut now offers unique pizza combinations and partnerships with other types of fast-food chains. Both strategies have had their advantages, which is why Domino’s and Pizza Hut continue to be market leaders. But it would appear that Domino’s approach has allowed it to gain greater ground in the pizza wars.
Can “Fortressing” Continue to Favor Domino’s?
In addition to the aforementioned strategies, Domino’s has also adopted a fortressing strategy. This strategy refers to increasing store presence on the ground so that store units create a “fortress” around potential consumers. The risks of such a plan could result in franchisees competing too heavily among one another and undermining growth. But unlike Subway, Domino’s is only allowing existing franchise owners to purchase additional units. This will permit advancing growth without the risk of cannibalism. And it also allows Domino’s to reduce food delivery times and improve customer take-out access. Domino’s and Pizza Hut will then have comparable numbers of stores. And Domino’s expects this can help them further distance themselves as the pizza wars’ leader.
“Why fortress? Because proximity matters. It allows for better service. You’re closer to your customer. If we don’t grow our stores or split our territory for better service, someone else is going to.” – Russell Weiner, Chief Operations Officer at Domino’s
Franchise Relations and Technology Also Favors Domino’s
Both Domino’s and Pizza Hut have thousands of franchises across the globe. But when it comes to franchisee relations, Domino’s has an advantage. For one, Domino’s requires a cash-on-cash payback within 3 years for its franchises. Thus, this demands that an interested franchisee must believe in the company to commit to such a plan. In fact, Domino’s goes to great lengths to build this trust. Not only has its recent market performance enticed potential franchise owners. In addition, Domino’s has leveraged its use of data-driven technologies to inform and guide store owners. This transparency in addition to the company being technology-forward is attractive in today’s fast-paced, mobile marketplace. And it reflects another reason why Domino’s is poised to win the pizza wars.
“When we have that [3-year] payback, we’re going to grow. The opportunity to invest and get that money back within three years is really attractive, and we’re seeing a significant number of franchisees willing to put capital in the brand.” – Russell Weiner
Balancing a Market Strategy Between Quality and Scale
Both Domino’s and Pizza Hut choose to compete on both quality and scale to a degree. For Domino’s, that has meant changing its recipe, listening to customers, and investing in significant growth. For Pizza Hut, this has involved collaborative pizzas with companies like Taco Bell to entice new consumer tastes. This has been effective for both Domino’s and Pizza Hut, but it seems Domino’s is winning the pizza wars on both accounts. For one, Domino’s offers lower prices on most items compared to Pizza Hut. And in head-to-head taste tests, Domino’s is most often the winner. If this continues, then Domino’s is certainly the favorite to win the pizza wars.
“We all have the same headwinds. But with the scale that we have and the value we can offer, the headwinds in the industry are tailwinds for Domino’s.” – Russell Weiner
Recent Market Indicators for Both Companies
In terms of a snapshot today to determine which company is winning the pizza wars, the picture is pretty clear. Domino’s and Pizza Hut remain market leaders with Papa Johns a distant third. But trends for Domino’s and Pizza Hut appear to be going in different directions. Recent stock market performance shows that Domino’s stock approach $339 in late February, advancing significantly. In the meantime, Pizza Hut’s stock price fell nearly $15 to $89 during the same period of time. And with Domino’s CEO Ritch Allison projecting $25 billion in global revenues by 2025, confidence is high. While Domino’s and Pizza Hut both remain favorites, the better money is on Domino’s presently for winning the pizza wars.