[This article was written by Violeta Bojkovska.]
The technological evolution marked by high-end convenience and fast consumerism has been transforming the pizza industry for the last couple of decades. Today, you can buy an authentic Chicago Deep Dish pizza in Texas, or a New-York style pizza in Boston. Every single pizza dish (along with an order of garlic knots) is one tap away. It’s easier to order a pizza than to reach a new level on Subway Surfers or Candy Crush Saga.
The accessibility doesn’t end there, on the contrary. You have a massive array of options to choose from, organized for you by restaurant location, pizza style, topping preference, even diet, like gluten free. In fact, according to the Pizza Power Report for 2020, you get to choose from 77,724 pizza joints. The industry itself is worth $46.34 billion in the U.S. and $154.8 billion worldwide. If we put these numbers in the bigger, restaurant industry framework that was worth around $863 billion in 2019, the pizza industry alone in the U.S. takes up approximately 5.3 percent of the market.
It’s evident that service-enhancing technology has come out on top, and it might have saved this industry from collapsing during the worldwide Covid-19 pandemic. In this analysis, we’ll see how technology transformed (and quite possibly saved) the pizza industry in the U.S.
Pizza Apps & Big Pizza Chains
This technological enlightenment era has been influencing the pizza industry for a long time. Case in point, one of the first “commodities” ever sold online was pizza. PizzaHut created its first tech experiment, PizzaNet, back in 1994 in Santa Cruz to test the waters and access the value of the World Wide Web. As it turns out, the company’s got the right idea, and online orders are pretty much the norm 26 years later.
Nevertheless, the true potential for driving digital orders came with the introduction of the mobile app. As a new digital distribution system, the first 500 apps made a debut in July, 2008, in the Apple App Store. PizzaHut launched its first app, “The Hut,” on July 15, 2009, just one year later. Domino’s launched its first iOS app in 2011, and its ordering app for Android phones in 2012.
The rest of the big pizza chains followed suit, and the innovation didn’t stop there.
- Domino’s marketed it’s tracking software in 2008, and the “30 minutes or free” campaign became even more popular
- Little Caesars Pizza launched the Pizza Portal™ pickup in 2018, which was inspired by the company’s HOT-N-READY model.
- Papa John’s started with SMS text orders in 2007, followed by a nationwide digital rewards program in 2010. The company also was the first to offer mobile-optimized gift cards in 2014.
The big pizza chains combined garnered $27.8 billion in sales in 2019, and that’s mainly because of their technological advances focused solely on making the customer experience faster, easier, and more pleasurable. However, out of 77,724 pizza restaurants, only 36,151 are owned by a big franchise. What’s happening with the other 41,573 restaurants?
Third-Party Services & Independents
The independents or mom-and-pop restaurants are a more diverse and heterogeneous group with a smaller slice of the market. In fact, the group’s total earnings for 2019 are at $18.53 billion divided between 41,573 shops. And the slice keeps getting smaller because they have to compete in a market that doesn’t only value quality, but also convenience, expedience and above all else, technology and marketing – especially during a worldwide pandemic.
Hence, the era of third-party service apps like GrubHub, UberEats, Slice, DoorDash, and numerous others began, and it looks like it’s not going anywhere. Small pizza restaurants needed some help with technology, and these companies provided the means and the opportunity for them to compete with the big pizza chains for market share.
The allure of these apps has many aspects from technological advancements to delivery capability, but the real power lies in the marketplace. Once a pizza owner signs on, his online visibility and digital orders can increase pretty quickly. In fact, third-party delivery users average 10% more restaurant visits per year than non-users.
If, as a customer, you like to try a different cuisine from a different restaurant every night, it’s only logical that you’re going to pick an app that provides you with all those options in one place. The numbers are showing that customers are willing to pay more for added convenience, and that’s easy to see if you consider the power moves that are reshaping the industry.
Power Moves in the Industry
Just Eat Takeaway, a European food delivery company, acquired Grubhub in a $7.3 billion deal, beating out Uber in the process. For the Just Eat Takeaway company, this acquisition turns Grubhub into a base of operations in the U.S. – allowing them to hold 34% of the total food delivery market in the country.
If you can’t buy Grubhub, you might want to cut a deal with Postmates for $2.65 billion. Which is precisely what Uber did. The company combined UberEats and Postmates, which now gives them 37% of the market. A representative of Uber stated that this merger (or acquisition, in legal terms) will provide customers with more options and faster delivery.
Slice, on the other hand, is a provider focused solely on pizza restaurants, and the company’s app is bringing mom and pop shops into the marketplace. The Slice app is designed as a one-stop-shop for pizzeria owners and customers alike. Customers can enjoy convenient access to the local pizza shops in their area, and it provides owners with a digital ordering platform and a full digital marketing service to give them visibility in an otherwise saturated market. The startup was founded in 2010, and this year the company received a $43 million investment from the KKR group. It was also on the CB Insights and Fast Company’s Unicorn list for 2020.
The pizza giants are facing some disturbances as well. Pizza Hut’s biggest franchisee filed for bankruptcy at the beginning of July, and it was disclosed that the company was $903 million in debt.
The Covid-19 Pandemic
The Covid-19 pandemic disrupted almost every market projection for the year, and for companies it has very quickly come down to survival of the fittest. The companies that have installed a tech fail-safe – online ordering, no-contact delivery, curbside pickup – might be able to weather the storm. Those that haven’t are more vulnerable than ever.
But, people haven’t stopped eating pizza, they just changed their delivery method. In fact, from all the industries, the pizza industry was among the lucky ones. With a traffic decline by only 8 percent year-over-year. It might be because pizza is iconic, or it might because it’s safe, easy, and above all else, affordable; one large pizza can still feed the whole family. And technology is the reason the pizza industry is going to survive the Covid-19 pandemic.
Violeta Bojkovska is a passionate content writer and avid content consumer. She’s a short story author, guest post blogger, and a firm believer in the startup “zebra culture.” She loves to write about food, travel, technology, and startups.