New pizza recipe did wonders for Domino's sales

http://www.usatoday.com/money/industries/food/2010-05-05-dominos05_ST_N.htm

New pizza recipe did wonders for Domino's sales
5-5-2010
Domino's new reformulated pizza included changes to every element of its core pizza: New crust, new sauce, new cheese.
By Bruce Horovitz, USA TODAY

Just four months after a desperate Domino's (DPZ) tossed its much-mocked pizza recipe out the window and rolled out a spicy new one, the chain reported on Tuesday what CEO J. Patrick Doyle calls a "historic" leap in sales at locations open at least one year.

That gain of 14.3%, Doyle says, ranks as one of the largest quarterly same-store sales jumps ever recorded by a major fast-food chain. Even more impressive, the turnaround is taking place at a time when the $22 billion pizza-delivery business — quashed by the recession and vastly improved frozen-pizza technologies — fell 3%, researcher Technomic estimates.

Domino's was painfully aware of its old pizza recipe's bottom-of-the-barrel reputation. It even ran a self-flogging ad campaign earlier this year in which it let a consumer rant about its former crust tasting like cardboard and its sauce tasting like ketchup.

Domino's instant turnaround is almost without precedent in the fast-food industry, says Christopher Muller, hospitality professor at Orlando's University of Central Florida. "No one in the industry thought it was going to be this successful," Muller says. "This changes the pizza landscape."

Rolling out all-new crust, sauce and cheese, Muller says, "was like the world poker championship. Domino's put everything on the table."

The move was made in the midst of a CEO change, as well. Doyle was named CEO in January, just days after the new recipe began to roll out. He says the recipe was a needed move. "It proves that if you do the right thing, then look people in the eye and tell them the truth about what you've done, they'll respond."

Jeremy White, editor of trade magazine Pizza Today, agrees: "Domino's is really kicking it right now."

But not all is perfect. Domino's stock rose more than 70% over the past year, but it took a hit Tuesday, closing down $2.04 at $14.02, a drop of 12.7%. Some had expected Domino's numbers to be even stronger after the massive amount it spent promoting the new recipe and the discounting it has offered over the past quarter.

Meanwhile, Papa John's, which likes to brag about being the pizza taste leader — and whose domestic same-store sales fell 0.4% in the first quarter — is unimpressed with Domino's gains. "It's not surprising that they drove trial on a new product," says spokesman Chris Sternberg.

But Doyle believes it's much more than trial. "Not only did folks try the pizza — they're coming back," he says.

Doyle concedes, however, this kind of same-store sales results can't continue forever. "If we did this every quarter for seven years, we'd be bigger than U.S gross domestic product."

PIZZA SALES RANKINGS

Top five pizza chains in sales volume for 2009:

Company U.S. sales
Pizza Hut $5.0 billion
Domino's Pizza* $3.0 billion
Papa John's $2.1 billion
Little Caesars* $1.1 billion
Papa Murphy's Take 'N' Bake Pizza $0.6 billion

* = estimate; Sources: Technomic, company reports