From US to China, Pizza Hut Tries to Restore Its Missing Brand Mojo

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Pizza Hut China

Once a pioneer, Pizza Hut has become a middling pizza brand, and parent Yum! Brands is working on a number of fronts to change that.

The venerable No. 1 pizza brand in America has seen Domino’s nibbling at its lead, with robust sales increases and the pole position in digital ordering. Meanwhile, Pizza Hut sales declined by 3.5 percent to $5.5 billion in the US in 2014. New Chipotle-style fast-pizza places with really hot ovens—such as Blaze Pizza, in which LeBron James is a partner—are also eating some of Pizza Hut’s lunch.

And even in China, where Yum! brands Pizza Hut and KFC have gained huge market share, problems have been shaping up for Pizza Hut in part because of the cooling economy there. To top it all off, now Chuck E. Cheese, a second-tier competitor better known for its mascots and kids’ games than its food, is bragging that its Thin & Crispy Pepperoni pizza recently beat Pizza Hut in a nationwide taste test.

“Changing their positioning with consumers is going to be really tough,” Bob Goldin, vice chairman of restaurant industry researcher Technomic, told Bloomberg. “Pizza Hut is just kind of in the middle. The middle is a tough place to be.”

Or, as Yum! CEO Greg Creed recently told investors, “We’re still significantly lagging the performance of our nearest competitors and we clearly have much urgent work to do for this brand to fulfill its potential.”

Naturally, Pizza Hut isn’t just sitting still. It’s always experimenting with new flavors, new toppings and new forms of its basic pies. And now at two locations in Texas, Pizza Hut is experimenting with operations and its brand look. Gone from the model stores are the iconic red roofs (which Pizza Hut actually has been gradually phasing out for a while). Inside is a bar, stone-clad walls and flat-screen TVs.

Pizza Hut

The pilot outlets are larger so the kitchens can accommodate the greater portion of the pizza business that now is going to home delivery. And ovens can cook pizzas at 575 degrees Fahrenheit in just three minutes, or about 25 percent faster than the older versions.

“Our goal is to have restaurants that are easy to operate, accessible and inviting,” David Gibbs, Pizza Hut’s CEO, told Bloomberg. “The new concept is designed for speed.”

Even as Pizza Hut is trying to regain its mojo in the US, however, economic headwinds in China are stressing the brand.

Pizza Hut

Creed noted that a “macro softening” is under way in China as well as increased competition from “online ordering aggregators who are delivering for mom and pops [and] are in a death battle for supremacy with heavy discounting, and the malls look more like fancy food courts than shopping centers.”

Specific to Pizza Hut, he admitted, “Recent promotions have not performed at historical levels” even though the chain has continued to revamp about 25 percent of its menu there every six months. For example, a new premium-priced steak product debuted at what, in hindsight, was the exact time the Chinese economy started to weaken.

Yet, Creed said, “The simple facts are that the economy there is still growing and there is every reason and no excuses to why we should not perform better.” And with Pizza Hut getting “back to what made us great five-star pizza, pasta and wings at three-star pricing,” he said, “our best days are still ahead across China.”

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