Can Pizza Hut keep topping the sector?

Pizza Hut may be expanding its outlets but the programme spells disaster unless its new chief can reverse sliding sales.

New Pizza Hut UK marketing director Bill Ogle arrives amid falling restaurant sales and the threat of the company being overtaken by rivals.

Last year, the chain launched a £100m programme to build 100 new restaurants, but it is taking a major gamble against a background of declining sales.

Rivals such as Pizza Express are closing the gap on Pizza Hut’s number one status in the £730m market (Mintel 1997). And TelePizza, the Spanish-based delivery service which acquired London’s Hippo Pizza last year, is considering a restaurant chain.

One City observer says: “However Pizza Hut dresses up the downturn in sales, it must be worried about how its rivals are challenging the number one spot.”

But that will not be Pizza Hut’s only concern about its commitment to building 60 new outlets this year.

Last week, Pizza Express founder Luke Johnson was forced to issue a profit warning for the Belgo restaurant group he chairs. Belgo’s problems were caused by over-extension in the US – which should serve as a warning to Pizza Hut for its UK plans.

As US marketing director, Ogle saw Pizza Hut restaurant sales rise five per cent between 1997 and 1998. But at the same time parent company Tricon Restaurants International – spun off from PepsiCo in October 1997 – was experiencing problems.

The company closed 600 US Pizza Huts to pay off a $4.5bn (£2.7bn) debt accrued when PepsiCo sold its restaurant division. It has also sold a number of restaurants from its other chains – Taco Bell and Kentucky Fried Chicken – in the US and Europe.

Now, in stark contrast to his US experience, Ogle has the task of proving Pizza Hut can still earn a crust in the UK, even though the operation – run by Tricon as a joint venture with Whitbread – recently revealed disappointing results.

Latest figures from Whitbread, released in May last year, show a slight drop in like-for-like sales, which were down 1.2 per cent on the previous year. Interim results for the six months to August 1999 also showed like-for-like sales down by about one per cent.

A Whitbread spokesman claims the company remains optimistic: “We believe the fall was because of low consumer spending.

“Pizza Hut is still market leader in both eat-in and take-out pizzas. We’re confident there will be an increase in consumer spending this year and restaurant sales will also rise.”

Analysts agree that the pizza market is profitable and expansion plans are worthwhile. One says: “All the pizza companies are making reasonable progress. Pizza Hut will fare well from rolling out its new outlets and it looks likely to achieve growth.”

Ogle would not comment on whether he will be reviewing Pizza Hut’s creative ad account, which is handled by Abbott Mead Vickers.BBDO here and BBDO globally. But he says he has no intention of globalising advertising with a more US flavour.

Past campaigns here have featured celebrities including Caprice and former Newcastle United and Chelsea manager Ruud Gullit.

Ogle says: “The Pizza Hut brand has global tenets, but people in the UK have different understandings of that brand. Local consumers deserve their own advertising.”

Ogle brings a wealth of marketing experience and was seen as a “big-hitter” in the US. Before spending five years at Pizza Hut as West US marketing director and US national marketing director, he was a marketer with Procter & Gamble, also for five years, and has worked on brands at Sara Lee. He took charge of strategic brand development, promotions and franchising.

He says his move is part of a “cross-pollination” programme to spread Pizza Hut’s best regional ideas worldwide.

“The UK is one of our biggest markets. This is an opportunity to learn more about consumers here, but also to bring in some of my own strategic knowledge to build the brand,” Ogle explains.

“The core market in the US is similar to the UK. Pizza Hut provides a relaxed atmosphere for families and I hope to bring things which have worked in the US to this country.”

Ogle refuses to be drawn on plans to revamp the chain – but claims “dramatic” restaurant and advertising innovations will reverse sliding sales. “We have some exciting ideas which will be announced in the next few months. We’ve had consistent growth in the past and hope these plans will lead us back to that,” he adds.

He claims concentrating on Pizza Hut’s own brand is more important than looking over his shoulder at rivals.

But Pizza Express has increased in value from £18m, when it was listed on the stock market in 1993, to £570m last year. With more than 220 outlets nationwide and global expansion plans, the chain celebrated a 28 per cent rise in profits to £28.7m in the year ending June 1999.

Ogle has to marry Pizza Hut’s expansion with a sales turnaround. The company must hope that in Ogle, it has chosen a man who has not bitten off more than he can chew.

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