Retailing On Pizza Hut

Published Date: 02 Nov 2017

Introduction

Pizza Hut is one of the flagship brands of Yum! Restaurant Int. which also has KFC, Taco Bell, A&W and Long John Silver’s under its umbrella. It is the world’s largest pizza chain with over 12,500 restaurants across 91 countries.

Pizza Hut was started in 1958, by two brothers Frank and Dan Carney in Wichita, Kansas. They had the idea to open a pizza parlor. They borrowed $600 from their mother, and opened the very first Pizza Hut. In 1959, the first franchise unit opened in Topeka, Kansas. Almost ten years later, Pizza Hut was serving one million customers a week in their 310 locations. In 1970, Pizza Hut was put on the New York Stock Exchange under the ticker symbol PIZ.

In 1986, Pizza Hut introduced delivery service, something no other restaurant was doing. By the 1990's Pizza Hut sales had reached $4 billion worldwide. In 1998, Pizza Hut celebrated their 40th anniversary, and launched their famous campaign "The Best Pizzas Under One Roof." In 1996, Pizza Hut sales in the United States were over $5 million.

The first Indian outlet was opened in June 1996 in Bangalore. In India, Pizza Hut has 139 restaurants across 36 cities. Pizza Hut has been voted the "best family restaurant" for the second year running at the 2007 Tommy’s Parent Friendly Awards. "Pizza Hut is known for quality, innovation and category leadership.

PIZZA HUT INDIA

Background

Pizza Hut entered India in 1996, and opened its first restaurant in Bangalore. Since then it has captured a dominant and significant share of the pizza market and has maintained an impressive growth rate of over 40 per cent per annum. Pizza Hut now has 95 outlets across 24 cities in India; and employed nearly 4,000 people by end of 2004. Yum! has invested about US$ 25 million in India so far; this is over and above investments made by franchisees.

Yum! Brands Inc is the owner of the Pizza Hut chain worldwide. A Fortune 300 company, Yum! Brands owns Kentucky Fried Chicken, Pizza Hut, Taco Bell, A&W and Long John Silver’s restaurants worldwide. Yum! generated more than US$ 25.9 billion in worldwide sales in the year 2003, and has more than 33,000 restaurants in over 100 countries.

Pizza Hut is believed to have close to 50 per cent market share of the organized pizza-retailing segment in India.According to an article in Financial Express, the market size of the pizza segment is around US$ 87 million and currently growing at the rate of 15 per cent to 17 per cent per annum. According to Pizza Hut sources, most of their outlets are financially successful, encouraging further expansion. In India, the average investment for each outlet is US$ 275,000-335,000 and is borne by the franchisee

.

Products of Pizza Hut

Pizza hut provides a combination of products according to the

need of local and foreign customers. These poducts are:

Pan Pizza

Stuffed Crust Pizza

Hand-Tossed

Thin 'N Crispy

More4ALL

Cheesy Twisted Crust

Other food items

Calzones ("P'zones"),

Buffalo wings,

Pasta,

Breadsticks,

Cinnamon sticks,

Mozzarella sticks

SWOT analysis of pizza hut

Is a restaurant chain and international franchise based in Addison,

Texas, USA (a northern suburb of Dallas) specializing in American-style pizza along with side dishes including (depending on location): buffalo wings, breadsticks, and garlic bread. Pizza Hut is the world's largest pizza restaurant chain and is a subsidiary of Yum! Brands, Inc., whose restaurants total approximately 34,000 restaurants, delivery-carry out units, and kiosks in 100 countries. The chain was founded as a pizzeria in 1958 by the Carney brothers - Dan and Frank. Borrowing $600 from their mother, the brothers purchased some second-hand equipment. The then Wichita State University students took a family pizza recipe, rented a small building, and opened the first restaurant at a busy intersection in

Wichita, Kansas. The oldest continuously-operating Pizza Hut in the world is in Manhattan, Kansas, in a shopping and tavern district known as Aggieville.

SWOT analysis of pizza hut

Strengths

• Part of the largest restaurant chain in the world

• Over 20,000 franchises around the world

• Brand leader in the UK

• Innovative range of pizzas under one roof

• Famous television advertising

• Food attracts people of various ranges from young to old.

• Sound financial situation and international turnover.

• 100% owned by yum!

• Pizza Hut sits on top of global full-service restaurant tree

Weaknesses

• Loyal customers are feeling that the satisfaction of the pizzas is declining.

• While Novak said Pizza Hut’s expansion into China is going exceedingly well, there is battling problems in New Zealand and Australia.

• There are complex computer systems and internal conflicts from franchisees.

• There is a lack of an organic pizzas, which will limit the target market

Threat

• Rising competition undermines Pizza Hut as consumers go for greater

convenience

• Rising cheese costs threaten margins

• Threat from Dominos pizza, also from Mc Donald’s who have tried to

introduce a new meal that is a Pizza called: McPizza.

Marcus Griffiths

Opportunities

• New Pizzas with different crust sizes and flavours.

• Pizza Hut expands Indian market menu and looks to old favourite to bolster sales in the US

• Pizza Hut targets upscale products and a downscale consumer base

Pizza hut strengths

Through pizza hut being the largest restaurant chain in the world, this obviously means they dominate their market, and can invest in new products, e.g. new pizzas. They have low competition, although they do have competitors such as dominos pizza, yet they have an advantage over these as pizza hut are a restaurant as well as a take away unlike dominos pizza, this means pizza hut may have more sales therefore more income, which may help pizza hut with any improvements or adjustments needed to the business. Pizza hut has a huge market segment, attracting more customers meaning a higher percentage in sales, which may lead to greater profits.

Pizza hut weaknesses

Loyal customers are feeling that the satisfaction of the pizzas is declining. This may lead to low customer satisfaction and a reduction in customers and credibility in the market, this may lead to customers converting to main competitors such as dominos pizza. While Novak said Pizza Hut’s expansion into China is going exceedingly well, there

is battling problems in New Zealand and Australia. This therefore meaning they are losing money in places such as new Zealand and Australia, this could be due to their culture and lifestyle, maybe meaning pizza hut need to introduce a more varied range of products to attract customers of all lifestyles and cultures. There are complex computer systems and internal conflicts from franchisees, this leads to de-motivation of staff. Lowering the quality of products (pizzas), service to customers, and could lead to a lack of new ideas. There is a lack of organic pizzas, which will limit the target market.

Pizza Hut Threats

Rising competition undermines Pizza Hut as consumers go for greater convenience; this will lower the amount of sales consumed by Pizza Hut as these sales are going to smaller companies who are charging less.

Rising cheese costs threaten margins, cheese is essential to the business as it is there primary good, there for they are unable to go with out it, this may lead to Pizza Hut eventually buying goods from abroad or buying cheaper brands. Threat from Dominos pizza, also from Mc Donald’s who have tried to introduce a new meal that is a Pizza called: McPizza. So Pizza hut will have to improve or maintain the quality of the pizzas in order to compete with Dominos and McDonalds, Marcus Griffiths to ensure that Pizza hut dominate this market. They will also have to keep their prices down and this may lead to them buying good from abroad where it is cheaper.

Opportunities

Pizza Hut can introduce new Pizzas with different crust sizes and flavours. This may attract new customers with new tastes and this may increase their sales. Pizza Hut has expanded into the Indian market menu and looks to the old favourite to bolster sales in the US. Pizza Hut has targeted upscale products and a downscale consumer base; this will attract customers who are more willing to buy these Pizzas.

Factors for Success

Offering value food

Employing economies of scale, Pizza Hut has made its offerings more affordable. Its delivery offer of US$ 4.4 for four personal pan pizzas has been very successful, helping it grow the business by 25 per cent. They have recently introduced a range of vegetarian personal pan pizzas for US$ 1.1. Most Pizza Hut restaurants are located in the metros and smaller metros. In taking long strides across the country, Pizza Hut is consolidating its position by opening more restaurants in the metros where it already has a presence as well as opening outlets in new markets.

Aggressive marketing and tie-ups with local and popular brands

Pizza Hut has increased its visibility by launching a well-received TV

campaign aimed at the young crowd. It has formed partnerships with

recognised brands such as Nestle and Pepsi. It also holds regular promotional campaigns targeted at children and uses these alliances to offer packages during these campaigns.

Developing the local supply chain

The local supply chain for Pizza Hut was developed by Yum! and currently 95 per cent of the ingredients they use are locally produced. They now import very few specialty items like pepperoni.

Leveraging the India Advantage : International brand with an

Indian heart

Pizza Hut is one of the first international pizza chains with purely vegetarian dine-ins at Chowpatty (Mumbai), Ahmedabad and Surat, which also serve Jain menus. Pizza Hut has even opened two all- vegetarian restaurants in the western state of Gujarat to cater to the Jain religious community, whose members prefer not to eat at places where meat is served.

Offering more than the international menu

International food chains typically offer only a few localized products in other parts of the world. However, Pizza Hut’s local menu is as large as the international one. According to Pizza Hut, the Indian food heritage is very rich, and hence Indians like local flavors. The Tandoori range of pizzas, which was developed locally, has a menu mix of over 20 per cent.

Indigenous sourcing of raw materials

Pizza Hut has reduced costs through indigenous sourcing of raw material. It has tied up with a local company Dynamix Dairy Industries Ltd (DDIL) for sourcing mozzarella cheese. The landed cost of imported mozzarella comes to US$ 3.3 - 3.5 per kilogram. The domestic price, however, works out to US$ 2.99 - 3.1 per kilogram. Pizza Hut is adding to the bottom line by localizing equipment as well as by paying attention to inventory replenishment, which has been reduced from 60 to 30 days.

Retail environment

Out of all the existing pizza chains such as Domino's, Smokin Joe’s, Papa John’s, Pizza Corner, U.S Pizza, Pizza Hut has a dominating market share of 48% of the total market share. However, this forced competitors to look for new methods of increasing their customer bases. They all try to come up with some newer, bigger, better pizza for a low price. But Pizza Hut has always had the first mover advantage. Their marketing strategy in the past has always been to be the first. One of their main strategies, that they still follow today is the diversification of the products they offer.

The market has become greatly competitive and the customer has become more discerning and adventurous. This however has not affected Pizza Hut's comfortable reign over the Indian pizza industry and the ever increasing number of loyal customers who have made it possible for Pizza Hut to aggressively extend its presence.

Pizza Hut is always adding something new to their menu, trying to reach new markets. For example, in 1992 the famous buffet was launched in Pizza Hut restaurants worldwide. They were trying to offer many different food items for customers who didn't necessarily want pizza. Another strategy they used in the past and are still using is the diversification of their pizzas. Pizza Hut is always trying to make a pizza into something slightly different so that customers will think it’s a whole new product. E.g., in 1983, Pizza Hut introduced Pan Pizza, which had a guarantee of being ready to eat in 5 minutes when dining at Pizza Hut restaurants. In 1993, they introduced the "BigFoot," which was two square feet of pizza cut into 21 slices. In 1995, they introduced "Stuffed Crust Pizza," where the crust would be filled with cheese. Currently, they are marketing "The Big New Yorker," trying to bring the famous New York style pizza to the whole country.

Recomendations

Pizza hut should focus on more advertisements

Should decrease the variety seeking buying behaviour

Membership or discounts cards for the loyal customers

Should sponser more concert and games in pakistan

Should make stores in universities and colleges

Should make online ordering system

Resources

www.google.com

www.pizzahut.com

www.scribd.com

www.wikipedia.com