Pizza And Pasta Market Bites Back In Britain

Pizza Hut, the UKs largest pizza chain, last week opened one of the first of 25 restaurants as part of a £5 million programme to take advantage of recovery in the £785 million UK pizza and pasta market.

PizzaExpress, the fast-growing pizza chain, also expects to open at least 25 restaurants this year.

A similar drive is under way with pasta restaurants. City Centre Restaurants and Whitbread are planning a rapid roll-out of their Caffé Uno and Bella Pasta chains.

After a period of stagnation, the British appetite for pizza and, especially, pasta has returned. It has been the fastest growing segment of the fast food sector in the past 12 months, according to Stuart Price, food and drink analyst at KPMG, the accountant.

 

The taste for Italian-style food is also reflected in the supermarket. Retail sales of fresh and dry pasta rose 66 per cent to £176 million between 1991 and last year, while frozen and chilled pizza sales almost doubled over the same period to £492 million, according to Mintel, the market research group.

But after a period of rapid growth in the late 1980s and early 1990s, the pizza market was badly hit by the recession and by competition from improved quality pizzas in supermarkets. In a bid to maintain sales volumes, the high street chains "� Pizzaland, Pizza Hut and Deep Pan Pizza - embarked on steep price discounting. Pizzaland, the high street chain owned by BrightReasons, at one stage offered customers buying one pizza another for 1 pence.

Jim Winship, director of the Pizza and Pasta Association, the trade body, believes the pizza price wars harmed the industry. The discounting devalued the perceived value of pizzas. Product quality also dropped in a bid to cut costs. Consumers didnt say anything but they voted with their feet.

The price wars led to a fall in profitability and contributed to the demise of Pizzaland. Whitbread, which co-owns Pizza Hut in the UK with PepsiCo, bought BrightReasons 180 pizza and pasta restaurants last year for £46 million. By doing so it has eliminated a competitor and found high street outlets for its restaurants brands. It is converting 25 of the groups 107 Pizzaland outlets into Pizza Hut but the lions share of the conversions will be to Bella Pasta, the brand which Whitbread also acquired as part of the BrightReasons purchase.

The pasta restaurant market is growing more quickly than the more mature pizza market, partly because it is starting from a lower base of fewer restaurants.

The pizza market has recovered in the past year but has been driven mainly by take-away and home delivery. Some established restaurant operators, principally Pizza Hut, have branched out into home delivery and into kiosks selling pizza slices to take advantage of the growth in these areas. Sales have also been helped by innovation.

Stuffed crust pizza - injecting mozzarella cheese into the usually uneaten crusty ring of the pizza - is one of the first new ways of presenting pizza in years and has proved popular.

Much of the pizza growth has been driven by openings in new geographical areas - principally the Midlands - rather than organically, raising questions about its sustainability.

Jon Prinsell, president of Pizza Hut, believes there is still substantial demand in the UK, particularly compared to countries such as Australia and the US. The company, which has 350 UK outlets, expects to have 500 within three years and 1,000 in 10-15 years.

But Price believes competition in the mid-market will remain fierce and that the main beneficiaries of growth will be at the top of the market.

PizzaExpress did not enter the price war but relied on quality. With an average spend of £8.40 per head, it is by far the most expensive of the high street chains yet has been increasing profits and outlets rapidly.

Winship believes the key to growth will be innovation and better quality pizzas so customers no longer equate a pizza with a soggy mess in a box.