From the Editor’s Desk: January/February 2008

For years now, we have hammered away at the Canadian
Dairy Commission for their continual shortsightedness when it came to
dairy prices and consumption patterns.

Be More Than Price

For years now, we have hammered away at the Canadian Dairy Commission for their continual shortsightedness when it came to dairy prices and consumption patterns.

And while we acknowledge it’s always fun to attack a government-backed cartel, we recognize our message is also one of “preaching to the choir.”

Every pizzaiolo in Canada – from the small independent to the largest franchise chain – knows that there is little that can really be done when it comes to fighting cheese costs. Until Canada’s dairy system is changed from a supply-management structure, the CDC will continue to have the power to set industrial milk prices at whatever level they see fit.

This year is no different. With world dairy prices at record highs, it would be way too much to ask for the CDC to cut the restaurant industry a break. Why should they? High domestic prices allow them to flout the World Trade Organization rules and subsidize low international trade prices.

But, regardless of the CDC’s recent decision, Canadian pizzaiolos must look to their own business practices to regain a more profitable margin over food costs. Canadian pizza prices, in some markets, have not changed in over two decades. It may be more sustainable for the large chains to regionalize the price wars, but they do not have the same creative flexibility – nor the opportunity – to enhance the customer experience.

An “everything-by-the-book” strategy can be exploited by the savvy independent facing tough competition from the chain operations. Marketing plans designed in the corporate office can be undone by the street smarts of the neighbourhood favourite.

All it takes is a willingness to go beyond the obvious. Cheese prices, regardless of how inexplicable they may be, can’t be beat. But victory doesn’t always come from forcing the status quo to a breaking point.

Profits can only be increased through a greater understanding of your market demographics, your marketing plan and increased sales. Forcing a price war – which almost always means accepting less for your own product – plays into the hands of the franchise competition, which can easily wait you out through a regionalized strategy, not to mention others who willingly accept subpar prices for a subpar product.
From the outside, this is even one glaring flaw that the CDC and greater dairy industry in Canada has failed to note. Despite billions spent on advertising and marketing campaigns over the years, dairy consumption in Canada has declined steadily since 1994 – more than 16 per cent. The future doesn’t look any better, with a predicted decline of another 12 per cent over the next 12 years.

They don’t know their own market demographics. The realization of better financial results will also not come from simply allowing the CDC to squeeze your profit margins again this year. Their own strategy is going to force consumption even lower due to continual retail price increases as well.

The Canadian pizza industry must re-evaluate what it wants from the consumer. It’s true the consumer is more price-conscious than ever before – especially with a healthy Canadian dollar. But, they are more quality-conscious today, and are willing to accept a differentiation on prices for products they deem worthy. Yes, cheese prices are up. Now how about your menu? •