Pizza Hut: targeting the premium pizza market

Pizza Hut recently launched their new "signature range" of premium pizzas. In this interview with their GM Graeme Houston we find out what their goals are for the year and what changes they are implementing in their business.

QSR Media:    $15 price point - how did you arrive at this figure?
Graeme: Pizza Hut was looking at challenging the premium pizza market with a similar product but velocity price point was critical, when we surveyed the market we found that prices were closer to $20 for a similar pizza and we wanted to deliver a better product for less than this .We choose not to compromise on any of the quality of the ingredients, from the garlic olive oil from Cobram estate to the chunky Tandoori chicken, steak slices and post cook drizzles like the balsamic glaze all combine to deliver an amazing pizza

QSR Media:   Tell us a little bit more about the investment in digital and online ordering?
Graeme: We have invested heavily in online for many years, 2009 was the step change year for us when we implemented our new online ordering web site and we have seen volumes double almost every year since to a point now that close to 40% of all our sales are coming through this channel. We were also the first to develop the iphone app for ordering pizzas and are constantly enhancing the customer experience. We’re very excited about some of the developments we have in development.
Combined with this has been the shift in our media spend towards the digital channel, as the sales have grown we have shifted some of our spend on traditional media activities towards things like online advertising, facebook, electronic mails, and search. These are constantly evolving fields but we see very encouraging results.

QSR Media:    What is your expectation of the new range?
Graeme: We are looking at challenging the premium pizza market with a premium product at an affordable price so that more consumers can access it more often. We have had an elevated range of pizzas on our menu for a number of years and without advertising it at all it has performed well, with the introduction of the new pizzas and significantly enhancing the current range we anticipate that this range will settle at 25% of our mix.

QSR Media:   How did you arrive at the six new flavours?
Graeme: In order to challenge the premium pizza market, we researched the most popular flavours that we call “exotic mainstream”, flavours that everyone can identify with but are more elevated or premium than their normal pizza experience. We have seen customers taste profiles change and evolve over the years and I think reflects the very cosmopolitan population that makes up Australia ,this range has been developed to meet these changing tastes.

QSR Media:   You have a 500 store objective, what areas are you targeting?
Graeme: We have a number of trade zones that we are just not represented in and this is clearly our first objective, WA is one region that we have significant upside and are actively expanding.

QSR Media:   You have mentioned Pizza Hut has been working hard on processes and people, tell us a bit more about what's been happening behind the scenes.
Graeme: In 2011 we created a separate dedicated leadership team for PH, this has enabled the team to make some big changes to big things, for eg, we rolled out a brand new Micros POS system in 2011 across the whole estate, taking us from our 20 yr old legacy system to the 21st century, we have enhanced our online training systems, providing more video training than ever before, our operating KPIs have strengthened in 2011 and we have seen this translate to better service levels for our customers across the board, we have been working very hard to establish differentiated layers in our business, from our aggressive value layer of Mia that is available all day every day for $5 to our new “signature“ range that we have just launched.

2011 has been a busy year and we feel very excited about the platform that we have established for the future

QSR Media:    The new stores you are opening, are these corporate of franchised?
Graeme: We continue to believe that the franchise model is the best for the Australian market and all of our development will be with franchise partners, it is very hard to replicate the ownership factor that you get with an owner operator... we find that they are just better at understanding their customers and looking after them.

QSR Media:    What are your goals for 2012?
Graeme: Our biggest goal is to continue to expand our store count with an additional 20 units, we have opened 5 already this year so are well on our way. Online is a huge opportunity and we are targeting 50% sales this year and with the enhancements that we have planned we are very confident that this channel will continue to expand.