The Able Kitchen Food Report – Vol. 2 Issue 1

2009 promises to offer mixed blessings for pizzerias. The number three pizza chain Papa John’s has already said it expects comparable-store sales to be flat to negative for the upcoming year, while Pizza Hut and Yum! projects comparable-store sales to increase about three percent, bolstered in large part by its Tuscani Pasta offerings. On top of expected less foot traffic in 2009, food operators are preparing to deal with two minimum wage increases, which will raise the lowest hourly wage to $7.25 by July. Now for the good news, commodity prices have fallen dramatically, with cheese nearly $1 lower than this time last year, falling to as low as $1.29 per pound on the Chicago Mercantile Exchange from a high of $2.29 in May. The price of wheat and most pizza toppings has fallen as well. Able Kitchen talked to industry experts about the top five expectations to impact pizzerias in 2009.

1. Commodity costs to moderate. According to the 2009 industry forecast, gas prices and other commodities affecting consumers’ wallets will moderate back in 2009, giving consumers more disposable income. The Department of Agriculture also has reported the moderation of dairy costs. Dairy costs in the last couple of years have been driven up by diminished supplies, commodity investments and overseas demand; however, dairy production is expected to recover in areas which were hit by drought conditions in 2008. Also the supply for wheat in is expected to increase in 2009 for the U.S. and most of Europe.

2. Casual and upscale dining falter. The National Restaurant Association is expecting downward growth for the casual and upscale dining sectors. The financial downturn and tighter credit will add to the pressure as the financially strapped consumer eats out less. Pizzeria operators are expected to benefit as consumers trade down from upscale dining to a less expensive alternative.

3. Social Networking on the Rise. Recently social-networking sites like Facebook and MySpace begun to play an important role in the restaurant industry. In late 2009 they will be so interconnected to location-based networking that any restaurant could become a success – or a failure – merely by connecting with the right platform. Papa John’s signed up more than 170,000 fans in its first week and Pizza Hut’s Facebook page had signed up more that half a million fans.

4. Healthy and Sustainable Trends Green and Organic are in. 2009 will be the year businesses really begin to meet the demand for sustainability and quality that yields healthy and enriched ways of consuming food. We expect to see higher demand for healthier offerings, if they haven’t already done so. New hot pizza offerings include Vegetable pizza and BBQ or Buffalo Chicken pizza.

5. Aggressive pricing and strong promotions. Pizza players are likely to increase discounting in 2009 as they seek to grab a bigger slice of the pie. Gas is down, wheat is down, cheese and meat are down, toppings are down, so they can be a little more aggressive with their pricing. In general when times are rough three things happen: introduce new products, lower prices and boost your media.