19 January 2010 - The delivery of fast food from stores to home will continue to grow as consumers seek convenience and value. The US leader in the pizza delivery segment with about 18% share, Domino's Pizza, believes that its economic model, based solely on delivery and carry-out, continues to perform well despite the consumer's desire to lower his food budget.
"Being a delivery company we can map out the delivery and service areas that we can cover and that we can make commercially viable", said company CEO David Brandon at a recent investor meeting in New York.
The customer's search for value also continues to spur growth at Domino's as it has been promoting value meals for half the amount a casual pizza dining restaurant charges. "Domino's Pizza can feed a family of four for $25", said Brandon.
"In today's world consumers can now go online and don't to have to talk to a human being, they can use their Iphone application. There are easy ways to get food quickly delivered to the consumer and to where he wants to consume it. The benefit is always going to be there. It is going to be under a little bit more pressure when economic times are really tough, because consumers are going to pay a little bit more for that benefit. But we believe, as the economy is continuing to come along and improve, that the delivery positioning we have is very important and will generate a lot of growth in the future", said Brandon.
Last year, Domino's introduced the 'Pizza Tracker', an online application that allows customers to view the status of their order in a simulated "real time" progress bar. This technological innovation has helped towards satisfying the consumer's need for convenience.
2009 also marked a year of favourable commodity costs for Domino's Pizza. Cheese, for example, which represents about 35% of the cost of a Domino's pizza today, was less volatile. And, thanks to a multi-year purchasing agreement with its main supplier, the company has been able to anticipate.
Although Domino's Pizza has about 8,500 corporate and franchised stores in 60 countries, the company benefits from the fact that its stores require minimal square footage and that new stores are cost relatively cheaper to build with about USD 150-250,000 per new store.
The firm competes in the US pizza category, which is highly competitive and valued at USD 34 billion. However, the delivery and carry-out segments are also big markets, valued at USD 11 billion and USD 14 billion respectively. In this market, Brandon expects same store sales to grow 1-3%.
On the international stage, which accounted for 45% of Domino's USD 5.5 billion global retail sales in 2008, sales are also expected to grow at a 3-5% rate. Indeed, the company's international business enjoyed a 14% compound annual growth rate between 2004 and 2008.
The store count in Domino's top 10 international markets was 2,986 at the end of Q3 2009. Brandon believes that there is still a lot more potential in these markets and said that there was a store count opportunity of 5,200.
For its last reported financial quarter (Q3 2009), Domino's net income rose to USD 17.8 million, up 76.2% from USD 10.1 million a year earlier.