Friday, 18 April 2008

Rising Wheat Prices Hit Pizza Growth

The days of big slices coming off pizza prices are gone as fast-food chains absorb rising input costs.

But the pizza companies have other ways to hit your wallet and waistline this year.

Australian fast-food chains including Domino's Pizza and Eagle Boys are promoting quality, menu variety and value-for-money offerings to tempt customers as family budgets tighten.

They're being held back from savage pizza price discounting wars because they're negotiating a massive rise in prices of key ingredients including wheat – its price has more than doubled in a year – and cheese and meat for toppings.

Food industry experts say that because Australia's economy needs to slow to avert inflationary pressures, this probably will mean slowing growth for the fast-food chains.

But they should weather the storm OK because consumers might opt for fast food instead of trips to more expensive restaurants.

The challenge is to keep traffic high using value-based promotions, luring customers with menu variety and pushing more profitable menu items such as desserts.

Brisbane-based Domino's put strategies in place late last year to protect its profits from a rise in local commodity prices.

It's lifting its proportion of franchises, expanding online ordering and has split its menu.

It offers standard, cheaper pizzas and has a more expensive range with extra and higher quality toppings.

It also has introduced desserts.

"We knew last year commodity prices were going to be strong," Domino's chief executive Don Meij says.

"People thought we'd just lift our prices. Instead we decided to offer better quality.

"You can still buy a standard pizza for the same price or you can pay more for better quality."

Eagle Boys, also Brisbane-based, is highlighting the size and quality of its pizzas. It said it constantly was investigating new menu items to complement its traditional offerings.

The new products had all launched with great success, providing a wider variety of options for customers.

Focus groups had confirmed that, although product innovation in pizzas was important, "quality holds far greater importance and is definitely more top of mind for consumers".

Queensland Courier Mail

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