How Little Caesars Lost The Pizza Wars
[Update: Little Caesars disputes the figures in this item. See below.]
In 1994, Little Caesars was the number-two pizza chain in America with $2.1 billion in annual sales. Last year, it was number four, with $1.2 billion. What happened?
In a detailed article in Ad Age, columinst Al Ries dissects the fall of Little Caesars. His diagnosis: Muddled marketing messsage, and the fumbling of a great campaign by marketers who feel compelled to keep tinkering with the marketing to demonstrate their supposed creative greatness, rather than simply building on a great existing campaign.
Back in the day, Little Caesars was instantly identifiable by its snappy marketing slogan. You probably know it by heart. Say it with me now: "Pizza! Pizza!"
Beautifully simple slogan that conveyed an enticing message -- you get two pizzas for one price at Little Caesars. The chain was about great value.
Today, Little Caesars is about many things, but the iconic branding has vanished. The original slogan is all but lost in a din of multiple marketing strategies -- adding delivery, introducing bigger pizza sizes, running promotions around bowl games, and touting its win as best value in quick-serve dining in a national study.
No doubt Little Caesars still is a good value. But along the way, that message stopped reaching many customers.
Besides letting its great slogan fade into obscurity, there were other factors that led to Little Caesars' decline, too.
Stopping the promotion machine. It's hard to remember the last time a big, national TV campaign hit the airwaves from this chain, where they used to be a ubiquitous, continuous marketer. Whatever their slogan, they need to market relentlessly if they want to compete with sector leader Pizza Hut, which is now more than four times their size. Ries notes 80 percent of pizza is still sold on a promotion -- less promoting and offering coupons means less sales. Simple as that.
Not keeping up with food trends. The days when buying cheap pizza in bulk to feed the gang was appealing have waned. That's why Little Caesars has been eclipsed by Papa John's (PZZA), which has the slogan, "Better Ingredients. Better Pizza." More of America is older now, and focused on eating great-tasting food, rather than eating vast quantities of food.
In '94, Papa John's was one-quarter the size of Little Caesars -- now, Papa John's is nearly twice as big. That happened in part because better-quality pizza is where it's at now, which is why Domino's recently upgraded its pizza quality.
Letting "value" equal "junk." Little Caesars could have stayed relevant by improving its food quality and keeping to its pizza-pizza pricing structure. It could be delicious and still a great value, but didn't change to keep up with current tastes.
Poor franchise management. Little Caesars is privately held, so it's difficult to tell why this is, but the chain's per-unit sales are dismal -- $472,000, Ries reports, compared with $750,000 for Papa John's. So it's not just shrinking sales -- the store owners also obviously aren't getting rich, and that means a death spiral of sinking morale. Hard to know if some markets are oversaturated with fast-pizza places, if the chain has more newbie franchisees than competitors, or if they're not getting strong enough support from headquarters. But something's wrong there.
UPDATE: Little Caesars disputes Ad Age's figures, which I've used in this post and which were originally published in an annual report on restaurant chains by Nation's Restaurant News. A Little Caesars spokeswoman said the chain's 1994 worldwide sales were "about $1.4 billion," but wouldn't provide other revenue figures. The spokeswoman said the chain's worldwide sales are up "substantially" since 1994 and they have grown for nine years in a row.
SECOND UPDATE: Here are the original Nation's Restaurant News figures:
NRN says Little Caesars hasn't contacted it to dispute the figures.
A Little Caesars spokeswoman declined a request for an interview on this subject, although an external PR person for the chain did send me this odd, handcrafted "fact sheet" about Little Caesars, which I've converted to PDF from its original MS Word format.
Photo via Flickr user dano
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