Pizza market insights: Pizza operators still have opportunities to grow their slice of the pie
By Vince Sgabellone, Industry Analyst, Canada Foodservice, The NPD GroupFeatures Business and Operations Trends
Delivery has been growing in leaps and bounds and this service mode has helped to sustain the restaurant industry during this challenging time.
As an early adopter of delivery, the quick-service restaurant (QSR) pizza segment has been defining the space for years. Operators in this segment were also early adopters of online ordering and mobile-app technology. As such, QSR pizza operators were well-positioned at the start of the pandemic and have fared better than average during this time.
The pizza segment accounted for more than one-third of total restaurant delivery orders before the pandemic (The NPD Group/CREST® 12me Feb’20). In the most recent CREST data (12me May’21), the pizza segment remains the largest but has now dropped to about one-quarter share. This trend began many years ago and accelerated rapidly during COVID-19. The changing restaurant delivery marketplace leaves the QSR pizza segment vulnerable in several ways.
It’s the segment that relies most on delivery to reach its guests. According to The NPD Group/Future of Foodservice July 2020, delivery is forecast to continue growing and the QSR pizza segment will outperform the overall market recovery. As consumers return to their old routines and begin returning to restaurants, the QSR pizza segment will need to work hard to maintain its dominance in this space.
It’s the segment that relies most on digital-ordering platforms. Third-party aggregators are responsible for most delivery orders in the Canadian foodservice market and as more consumers discover the convenience of these digital-ordering platforms, the once trend-setting QSR pizza operators risk being left behind with their self-branded delivery apps. One tried-and-tested method of encouraging app usage is loyalty programs. These programs have primarily been the domain of the QSR coffee operators, but the pizza business is ideally situated to make use of this marketing tool.
Pizza is the number 1 menu item for delivery. But maybe not for long. Pizza used to be included in half of all delivery orders as recently as 2018. But now, CREST data reports that French fries are in a dead heat for the top spot and rising quickly. Despite this upheaval, the typical QSR pizza delivery order has not changed much. QSR pizza operators need to consider ways to refresh their menu with new items and new flavour combinations.
The segment generates some of the highest dealing rates in the industry. While this could be a double-edged sword for some operators, the QSR pizza segment has managed to take full advantage of these deals by growing order size and lifting their average eater checks.
One tailwind that will help to propel the QSR pizza segment forward is slice sales. Many of the operators in this segment rely on this volume at lunch and snacking dayparts. As consumer routines normalize in the coming months, so will slice sales. These sales tend to generate lower tickets and a higher frequency of visits, which is a winning combination for loyalty programs.
If you are like me and the one-quarter of Canadians who responded to a recent NPD study, then you have likely increased your ordering of restaurant meals for delivery this past year. This same study also indicates that this behaviour will continue for the foreseeable future. The delivery landscape has changed forever and in response, the QSR pizza segment continues to innovate with tech-based solutions such as pizza vending machines, touchless pickup and pizza subscriptions.
Looking further into the future, we see some brands testing out the possibility of delivering with driverless cars and flying drones. This evolution will be necessary for the segment to keep up with the market and hold on to its hard-earned slice of the delivery market it helped to create.
Vince Sgabellone has worked in many different roles across the food and food-service industry. From sales to marketing, distribution to product development, from manufacturers to operators. He has been an industry analyst with The NPD Group for more than a decade, helping his clients to understand the market, the competition and the consumer.
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