Rising cheese prices not yet pressuring some smaller pizza chains

Nation's Restaurant News,  July 23, 2007  by Gregg Cebrzynski

• E-mail
• Print
• Link

Cheese prices are increasing, and though such major players as Pizza Hut and Papa John s Pizza have raised the prices of their cheese-only pizzas, some smaller chains have not been forced to take the same action.

"We have had, and continue to enjoy, stable cheese prices," says Evan Evans, vice president of field marketing and corporate communications for Papa Murphy's Take 'N' Bake Pizza. "We have frankly felt zero cost pressure from a cheese commodity standpoint."

Papa Murphy's is primarily a franchised chain. If any franchisees have found it necessary to raise prices recently, Evans says, the likely cause for that is a higher minimum wage in their markets.

The chain is coming off another year of strong sales growth in a category that is "flat to down," he says, and Papa Murphy's expects to continue to prosper this year.

"We are clearly stealing share [of market], and that makes us very happy," Evans says.

As a sign of consumer demand for take-and-bake pizza, he says, Papa Murphy's is preparing to open its 1,000th unit and has expanded its popular deLITE line of pizzas and rolled out the Taco Grande Pizza systemwide after a successful product test.

Hungry Howie's Pizza is monitoring cheese prices, which rise and fall in cycles and should not necessarily result in higher pizza costs for consumers, says Jeff Rinke, vice president of marketing.

"We went through a similar thing a few years back, and we just were very conservative with the [promotional] offers we put out there," Rinke says. "We didn't necessarily increase prices because the market has a way to correct itself. We have to put a price point out there and live with it. We'll re-evaluate this coming fall, and by then we're hoping and projecting that cheese prices will start to correct themselves."

But because rising cheese prices, higher minimum wages and still-high gas prices are threatening profit margins, Hungry Howie's plans to change the focus of its four yearly promotions, which in the past emphasized low price points.

"We're going to start leaning away from price pointing and go with product innovations and develop new products," Rinke says.

Hungry Howie's also will continue expansion of its system this year.

"We're on a pretty good clip and will open at least 50 new stores this year," Rinke says.

The chain plans to expand into five new markets: Arkansas, Idaho, Oregon, Washington state and West Virginia.

Donatos Pizzeria continued its expansion last year with the opening of new prototypes in Indianapolis and the Ohio cities of Cincinnati, Dayton and Columbus, as well as eight additional take-and-bake pizza kiosks in Kroger grocery stores in Ohio and Michigan, says spokesman Tom Santor. It also opened a Research & Development Center and Bakery in Columbus.

Notable new-product introductions last year included Ciabatta Pizzas and Baked Ciabatta Sandwiches.

Donatos also has a new president, Jane Grote Abell, who assumed that role from her father, Jim Grote, in May. He will continue as chief executive and chairman.

Round Table Pizza introduced what it calls the "next level of flavor experience" with the rollout of a new Pepperoni Artisan Pizza in October. The pizza is made with a thin, crispy cornmeal-dusted crust, a sweet organic-tomato sauce, lean pepperoni, marinated roasted tomatoes, caramelized onions, and Roma tomatoes. The pizza is topped with fresh mozzarella and fresh basil.

Godfather's Pizza is entering a new phase of product development this year. In April the chain opened new headquarters in Omaha, Neb., which includes a "virtual c-store" allowing research and development staff to test recipes and preparation techniques for use in convenience stores, truck plazas and airport foodservice areas. gcebrzyn@nrn.com