Why Pizza Hut is transitioning into a delivery-first brand
Food delivery has been much sought after during the pandemic. According to a Research and Markets report, the online food delivery market in India is expected to reach $21.41 billion by 2026, up from $4.66 billion in 2020. This has prompted Pizza Hut, which has always focussed on the dine-in experience, to ramp up delivery capabilities and expand its fast-casual delco (delivery + carry out) store formats. The pizza chain claims to have surpassed its pre-Covid sales in July, 2021.
Pizza Hut currently operates 500 stores in India. Having witnessed a surge in delivery orders during the pandemic, the QSR chain accelerated its efforts to become a delivery-first brand. “In the pre-pandemic time, our sales through deliveries was about 35%; and as of now, 60% of our total sales comes from deliveries,” says Merrill Pereyra, managing director, Pizza Hut India subcontinent.
Through its fast-casual delco (FCD) model, Pizza Hut plans to enter tier II and III markets, and expand further into tier I cities alongside. The brand had 72 stores across India operating on the FCD format before the pandemic; this has now grown to 112. Globally, too, the brand has put delivery in focus, especially in regions such as the UK, Canada, Japan, New Zealand, South Africa and the Middle East.
While the pizza chain had started contactless delivery services last year, it now offers a real-time order tracker and location zone optimisation to enable customers to order from their nearest Pizza Hut outlet. “Last year, our takeaway business surpassed even 2019 numbers, and that prompted us to launch on-the-go takeaway as well,” Pereyra adds. Last year, the company launched value deals like BOGO or Hut Treat Meal (for group orders), in addition to introducing ‘My Box’ for solo consumption as “people were wary of sharing food”.
In order to position itself as a delivery-first brand, Pizza Hut has launched a campaign titled Dil Khol Ke Delivering, and plans to use digital media prominently. “Music, cricket, news and gaming have emerged as performing genres for us,” Pereyra notes.
Apart from its own website and mobile app, Pizza Hut is present on restaurant aggregator platforms. To sweeten its offerings, in August this year, the brand tied up with HUL and added Kwality Wall’s ice creams and desserts to its menu. With this addition, the company expects its average order value to increase by 10%.
During the pandemic, pizza as a food item has been a runaway hit. “Pizza is a very delivery-friendly item. Domino’s already has around 70% of its sales coming from delivery. Also, Covid-19 restrictions are not going away completely, so it’s better that Pizza Hut takes it forward with the delivery and carry-out format,” says Ankur Bisen, senior partner and head (consumer, food and retail), Technopak Advisors.
However, Pizza Hut has always positioned itself as an affordable casual dining restaurant. Hence, one big challenge for the brand would be to convey this shift effectively to its consumers — that it is now a delivery brand, and as accessible and delivery-friendly as its fellow US-origin rival, Domino’s. “It’s a big move for Pizza Hut to position itself as a delivery-first brand; it is fundamentally changing its business strategy,” says Rajat Tuli, partner, Kearney.
This would entail having a more prominent digital presence, analysts say. The company would now have to consider what SKU combination works best, how to improve restaurant ratings, manage reviews and keep a check on the delivery experience, including packaging, delivery time, etc. “Pizza Hut should keep in mind that it would now be competing heavily in the online world where ratings of the restaurant, promos and discounts matter for the price-conscious consumer,” Tuli adds.