Pizza Hut Simplifies Prices With $8, $10, $12 Pies
By Paul Ziobro
Source: Dow Jones Newswires – 07/27/10
Pizza Hut is dramatically cutting pizza prices over the coming weeks with a simplified menu that sells pies for $8, $10 or $12, as it tries to slow a resurgent Domino's Pizza Inc. (DPZ).
The Yum Brands Inc.-owned (YUM) chain cut the price of all medium pizzas to $8 and large pizzas to $10, both with up to three toppings. Upgrading to specialty pizzas like the "Meat Lovers" or "Super Supreme" pies or adding up to two more toppings will cost an extra $2 per pie, Chris Fuller, a Pizza Hut spokesman, said Tuesday.
The new prices, which roll out to two-thirds the U.S. this week, slice at least $3 off the price of all pies. Medium cheese pizzas that had on average cost of $11 will now be $8, while large cheese pizzas will be $4 cheaper at $10. Some cuts are bigger. For instance, large pizzas with three toppings had on average cost $19 at Pizza Hut, but will now go for $10.
The $8, $10, and $12 pizza prices will be a permanent shake up of Pizza Hut's prices, though the chain has offered lower prices on some items, like a recent limited-time deal of $10 for any pizza, which winds down this week. The price cuts potentially put sales at risk, but Pizza Hut hopes it can attract enough customers to soften the blow. "I think we'll see that the traffic and overall volume will increase enough to offset the guest check total," Fuller told Dow Jones Newswires.
Pizza Hut's menu restructuring is trying to correct what Yum Chief Executive David Novak has complained were unsustainably high prices at the largest U.S. pizza chain, with more than 7,500 locations.
The pizza industry has trying to gets its prices back in check lately, amid an environment where consumers demand value. Pizza chain executives admit that they were too aggressive in price increases earlier this decade, causing them to lose ground to other fast-food chains and frozen pizzas.
Domino's is leading the resurgent pizza category, on the backs of a revamped pizza recipe in introduced last year with new crust, cheese and sauce. Domino's, the No. 2 pizza maker, has been selling two medium, two-topping pies for $5.99 each since adding the new pie in December. Domino's hasn't tipped its hand as to when that deal will change. Tuesday, Domino's reported a 56% increase in second- quarter profits as U.S. same-store sales rose 8.8%.
Papa John's International Inc. also has responded to the aggressive promotions with any large pizzas for $10 each.
Pizza Hut regained a voice in the value game with $10 promotion for any pizza with unlimited toppings, started last December, which helped same-store sales rebound, rising 8% in Pizza Hut's latest quarter.
It will start advertising the new prices this week, Fuller said, and all U.S. Pizza Huts should have the simplified prices by the end of August.
Pizza Hut plans to extend simpler prices to sides soon as well, giving items like wings, breadsticks and pastas a round number to try to entice customers add to their order. It hopes to take the guesswork out of prices for customers, and reduce its reliance on coupons.
"It's a paradigm shift for the industry," Fuller said.
Pizza Hut becomes the latest restaurant looking to make prices easier to decipher and remember, following the success of the privately held Subway sandwich chain's $5 footlong deal. More recently, Denny's Corp. this year added a menu with items priced at $2, $4, $6 and $8.
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