Pizza industry growth model is changing
Market moving at 10% worldwide – Greek chains battling for their share.
The digital age is signalling significant opportunities and challenges for the pizza market, both in Greece, where the industry is recovering after the maelstrom of the economic crisis, and worldwide. According to a Business Wire survey, the global market is expected to exceed $233 billion by 2023, with an average annual growth rate of over 10% for the period 2019-2023.
According to international analysts, factors such as the increasing urban population, disposable income, consumer trends amongst the younger generation and the growth of the fast food market are expected over the next few years to mobilise capital on the global pizza market, currently valued at about $145 billion ($144.68 billion, according to Euromonitor International estimates for 2018).
Meanwhile, risk factors are also emerging, and include fluctuations in ingredient prices and operating costs, while pizza chains are facing challenges from the accelerating online pizza industry in developed economies, the growing demand for frozen pizza, the expansion of restaurants incorporating pizza on their main menu and modern dietary trends, such as gluten-free foods. The key to growing the businesses in the industry is marketing, while growth rates on the market vary according to various channels: delivery companies (Home delivery/Take away), full-service restaurants and fast-food establishments.
The European market is the fastest growing internationally, particularly in the countries of Eastern Europe. Besides, pizza and pasta dishes are considered mainly Italian food, with Naples as their origin. The Italian government protects traditional Italian pizza by law, but there is also the Canadian version with thicker dough and more ingredients. Nevertheless, recent research attributes the concept of pizza to the ancient Greeks, who called the food plakountas, a type of pie which in the Byzantine era came to be called a pita.
In Greece, the pizza market, which was worth about €400 million in 2008 according to market watchers, lost a large proportion of its value over 10 years of economic recession; players with the largest share noted losses around 40% to 50%, while many smaller companies were wiped off the food service map, unable to keep up with the tough competition when the market “pie” shrank. At the same time, pizza chains came under great pressure over the last decade, compared to other food service sub-markets, and were impacted when Greeks cut back on eating out in favour of having food delivered – a trend that is gaining momentum.
Pizza Fan retains the leading position on the Greek market. Fanatics Pizza, which owns the rights to the brand, has an annual turnover of more than €27 million and controls the largest share with a chain of 74 restaurants which it aims to double throughout the country.
Anatron, the master franchisee exploiting Domino’s Pizza in Greece with a network of more than 30 points of sale and more than 1/3 of them as corporate, is growing at a double-digit rate and realising annual sales of €16 million. Domino’s Pizza, the largest pizza delivery company worldwide, has found its footing after the challenges brought on by the domestic recession and is seeing its profitability rise; however, on an international level, things are not so trouble-free.
Pizza Hut has consolidated its position after brand operator Food Plus (KFC is also part of its portfolio) restructured the network of 16 restaurants. Food Plus has achieved its target for increasing sales (in 2018, they amounted to €16.2 million, up 7.6%), though it is still recording losses. However, it is looking at further improving its financials in light of the stabilising economic climate, and has undertaken a share capital increase of €550,000, the issue of a €2 million bond and securing an extension on repaying its bank loans. It should be noted that Yum International S.a.RL recently received a licence to operate Pizza Hut restaurants in Greece as franchises (sub-franchise).
L’Artigiano, a Greek company founded in 1993, has solidified its place amongst the multinational brands and industry power players, regularly investing in new products and services. It is steadily strengthening its market share through its chain of 19 restaurants, while sales, which are hovering around €2.5 million, are increasing at a double-digit rate.
As for Roma Pizza, its turnover is at about €1.4 million, slowing down in 2018 despite the company’s earnings after taxes of €129,540, following losses of €24,577 the previous financial year. The affiliated company Hellenic Food Industry S.A. reports sales of €573,000 for 2018, from €698,000 in the previous year, with equity at €1,390,097.31, compared to €1,418,316.83 the year before.
Though conditions in the pizza market are volatile, there is constant investment activity. Indicatively, Papa John’s is looking to develop a repositioning model, while existing corporate groups are also expanding into the pizza category. For example, the Vivartia Food Services Group, which in recent years has expanded its activities in the food service sector (e.g. through Forky, for home-cooked food, and It’s All Grεεk, for grilled food, and others), has ventured into Italian flavours with Forno Luca and Bistro Dei Cavalieri, an Italian bistro with home-made pizza baked in a wood-burning oven.
Nevertheless, interest in the pizza market is mainly concentrated in the delivery sector, which presents a particular challenge for food service entrepreneurs in general. The trend was verified by investment initiatives, such as the buyout of the Deliveras.gr platform in 2017 by the German Delivery Hero; it had already acquired e-food.gr, and then went on to buy the Turkish Yemek Sepeti. The latter had already bought out another Greek online ordering platform – Clickdelivery.gr.
Innovation and challenges
The greatest challenge looming in the future for the pizza industry, and food services in general, will probably come from technology. In early October, a robot was unveiled that can make 300 pies in an hour. Picnic, a start-up from Seattle, has developed pioneering technology with Robotics-as-a-Service (RaaS) solutions. It is the first smart, automated platform in the food and foodservice industry to be patented in the USA and soon to reach the market. It is easy to understand the huge cost savings this system offers, as it can make a pizza by simultaneously placing the ingredients on the dough; in other words, placing the pizza in the center and spreading sauce, cheese, deli meats, etc. on top. It is true that the industry has high costs related to top-quality ingredients, as well as considerable labour costs. The new technologies are raising expectations on the one hand, but they also place millions of jobs at risk.
As consumer habits change, the international pizza industry is being transformed. For example, Domino’s and Pizza Hut in Australia aggressively compete on prices. On the British market, Pizza Express (it has a presence in Greece as well) is negotiating loan restructuring, while Strada and Prezzo have closed hundreds of restaurants. Developments have also affected British Domino’s Pizza, which plans to get out of Switzerland, Iceland, Norway and Sweden. Meanwhile, Pizza Hut has decided to close 500 restaurants in the US and focus on delivery and carry-out.