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A report commissioned by Deutsche Bank has revealed that Australian company Domino’s Pizza Enterprises are introducing smaller pizzas in an attempt to cut costs. During a briefing on Thursday, analyst Michael Simotas said: “Domino’s is planning to reduce the size of its pizzas to provide additional cost relief.”
The strategy would be trialled ahead of the introduction of increased wages due to weekend penalty rate changes. The pizza franchise has already voluntarily increased rates for drivers and in-store staff to benefit its workers.
However, Domino’s has refuted Deutsche Bank’s suggestion that all their pizzas will be reduced in size, instead claiming that their development kitchen is working on an enhanced menu which offers small-pan pizzas in addition to the standard 8-slice pizzas, as well as new sides and desserts. One can assume that these pizzas will be smaller than those in their current rectangular “Chef’s Best” range, which only have 6 slices.
The announcement comes a day after the news that Domino’s has not renewed their contract with Coca-Cola Amatil, opting instead for their cheaper rival Pepsi/Schweppes. Mr Simotas estimates that this will reduce Coca-Cola’s Australian production by a million cases, or roughly 3%. In another blow for the soft drink giant yesterday, the supermarket Woolworths announced that they would not be stocking the new Coca-Cola No Sugar. Meanwhile, Domino’s franchisees stand to save a huge amount. From September, Pepsi will be the only cola served by Domino’s, with the contract locked in for several years. Similarly to fried chicken restaurant KFC, the new drinks range at Domino’s will include Pepsi, Pepsi Max, 7Up, Mountain Dew, Solo, Sunkist, Cool Ridge water, and Nexba’s Next Gen.
The change in beverages is predicted to be smooth after trial results were positive, however, the success of smaller pizza options is uncertain.
“Domino’s has already conducted trials on selling Pepsi products and is about to conduct trials on the smaller pizzas, but we see some risk to consumer perception from both of these initiatives,” Mr Simotas said.
One thing is for certain, cutting costs by cutting down pizzas will definitely be less desirable for Australian customers.
Domino’s Chief Executive Officer Don Meij has consistently stated that the company has been preparing for wage increases over the years. Their strategies to maintain profits have included a 10% Sunday surcharge, GPS driver tracking, and a 10-minute turnaround time delivered by hotter, faster ovens which allow franchisees to cook and serve pizzas more efficiently. Domino’s have also implemented DRU (Domino’s Robotic Unit), which helps customers to order quickly online and according to their website will “one day soon” deliver pizzas as an “autonomous delivery vehicle”.
Pizzas delivered by drone do sound incredible, but smaller pizzas do not.
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