Pizza/pasta restaurants/takeaways January 2011

Issues in the Market What are the latest developments in the pizza/pasta restaurant/takeaway market and how is this reflective of trends in the wider eating out market? What price incentives would appeal to pizza/pasta restaurant takeaway users? And how concerned are these diners about the number of calories they are consuming? © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Summary Consumers remain cautious and confidence is fragile, although ‘experience’ is still top of their spending agenda. Operators in the pizza/pasta restaurant/takeaway market are becoming more proactive in addressing issues to do with brand differentiation and market positioning, but at present the dine-in market in particular is suffering from stagnation. The emphasis is on operators to reassert their place in the overall eating out market, with points of differentiation increasingly important, especially as operators look to wean consumers off price promotions. However, the takeaway/home delivery sector is continuing to gather pace as it leverages the opportunities offered by new and social media to increase communication with, and ordering channels for, consumers. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Internal Market Environment With the economy hovering between recession and recovery, 2010 proved another difficult year for the UK’s eating out market with factors such as rising inflation and lingering reliance on price promotions continuing to impact on operators’ margins. 2011 will continue to be challenging for foodservice operators; for example, the early drop in percentage growth in the run-up to Christmas 2010 reported by the Peach Business Tracker is worrying for an industry which historically sees a fall in the first few months of the year anyway. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Broader Market Environment Consumer confidence remains volatile and has even dipped towards the end of 2010 as consumers worry about the impact of the government’s Spending Review and are fearful of a double-dip recession. Operators therefore need to focus on building trust with consumers, who are arguable growing more sceptical as some operators adopt tactics such as stealthily increasing prices or reducing portion sizes in order to protect their own margins. Experience is the key draw for consumers, with eating out remaining the top spending priority, and days out showing the most growth between 2009-2010. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Competitive Context The recession boosted people’s appetite for comfort foods such as pizza and pasta, as the public turned to filling, value-for-money meals. The in-home dry pasta market has seen continued innovation, particularly with products that target children (eg Annabel Karmel’s Make It Easy Organic Baby Shell Pasta Shapes, suitable for babies from seven months). Restaurants should build on these recognisable and trusted children’s retail brands to create more age-specific children’s menus, something which is largely missing from the market at present. This is particularly relevant for the pizza/pasta restaurant market which has a strong family demographic. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Strengths & Weaknesses Eating out continues to be a top spending priority. Operators have been using nutritional content as a marketing opportunity, eg Prezzo’s ‘Light Options’ menu. The Saturday Night Effect continues to drive sales of takeaways. Advances in technology have contributed to sales in the takeaway market in particular. Weaknesses There continues to be a hangover from the market’s over-reliance on discounting in recent years. Brand differentiation continues to be a problem in the market, however, it is clear that some operators are working towards rectifying this situation. The market needs to modernise to keep in line with changes in the eating out market as a whole; for example emerging fast casual/quick-service formats. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Who’s Innovating – Redesigns and Modernisations Following a period of heavy discounting, the focus in the pizza/pasta restaurant market is now firmly on brand development and modernisation. For some brands this means expanding their menu ranges to tap into wider meal occasions such as breakfast and lunch, whilst for others this has meant an extensive rebranding exercise along with redesigned interiors. PizzaExpress In late 2010 PizzaExpress launched its ‘new generation’ outlet in Richmond; the ‘Living Lab’. The new store has trialled new menu/serving formats such a Neopolitan-style kiosk opening onto the street serving food from 8.45pm, as well as breakfast and patisserie range, ‘po-boy’ sandwiches and monthly seasonal pizza specials. The brand has also employed a number of experts from different fields to explore issues such as music (eg iPod docking stations in seating booths), use of space, customer service techniques, and interior design. Zizzi Following a number of trials in 2009, Zizzi is now in the ‘implementation phase’ of modernising its restaurants including menu development and interior design. The new store designs aim to emphasis individuality and reflect ‘local character and personality’. In November 2010 it launched Zizzi Sessions, whereby diners can ‘sing for their supper’. Its parent company, Gondola Holdings, is also exploring similar trials with Zizzi’s sister brand ASK. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Who’s Innovating - Other The pizza/pasta takeaway market continues to enthusiastically embrace new and social media both in terms of ordering and in terms of communicating with customers. For example; Geo-location sites allow operators to target consumers with price promotions more specifically. (Domino’s partnered with Foursquare in May 2010, which is though to have contributed towards the 29% increase in Domino’s online sales in Q2 2010). Domino’s launched a cash rewards application via its Facebook profile in early 2010, an innovation which helped the brand win Best Retail and Home Shopping Campaign at the 2010 Campaign Media Awards. Emerging advertising options such as QR codes are also slowly starting to be utilised by the restaurant industry, although this still remains relatively niche. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

UK pizza/pasta restaurant/takeaway market, 2005-15 Market Size & Forecast UK pizza/pasta restaurant/takeaway market, 2005-15 Source: Mintel The overall pizza/pasta restaurant market remains relatively stagnant: whilst takeaway/home delivery operators are steaming ahead, making full use of advancements in technology and building on consumer demand for convenience, the dine-in sector continues to lag behind.

Top pizza/pasta restaurant brands, 2010 Market Share Top pizza/pasta restaurant brands, 2010 Source: Companies’ Documents and Reports/ Mintel Rationalisation is still a key theme when it comes to outlet numbers in the eating out industry, and the pizza/pasta market is no exception. For example, Perfect Pizza reduced its outlet numbers from 110 to 104 by the end of 2010 as it sold of underperforming outlets. However, outlet growth is still achievable with Domino’s opening 57 new stores in 2010 and Prezzo looking to expansion in smaller towns.

Website Usage Total unique visitors for selected pizza/pasta restaurant/takeaway brands, June 2008-October 2010 Source: comScore/Mintel comScore data show that Domino’s has been steadily and increasingly gaining new visitors to its website. In comparison, the number of unique visitors to the Pizza Hut site has been in gradual decline in 2010. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Pizza/Pasta Venues Visited Pizza/pasta venues visited, November 2010 Base: 1,999 adults aged 15+ Source: Ipsos MORI/Mintel Mintel’s qualitative research shows that taste, not necessarily authenticity, ranks highest amongst consumer concerns when it comes to ordering from pizza/pasta restaurants/takeaways, particularly as the UK pizza/pasta market has been influenced as much by trends in the US as its Italian heritage. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Incentives for Eating at Pizza/Pasta Venues Incentives for visiting pizza/pasta venues, November 2010 Base: 1,123 pizza/pasta venue users Source: Ipsos MORI/Mintel Whilst younger consumers are the most enthusiastic about incentives such as free drinks, older generations are more likely to be attracted to special offer menus. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Attitudes towards Healthy Eating and Pizza/Pasta Venues Attitudes toward healthy eating and pizza/pasta venues, November 2010 Base: 1,123 pizza/pasta venue users Source: Ipsos MORI/Mintel Although four in ten pizza/pasta venue users don’t care how many calories are in each dish, Prezzo recently added a low-calorie line to its menus and PizzaExpress extended its Leggera range. The appeal for consumers seems to be as much about the dishes being light, rather than specifically low calorie. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Pizza/Pasta Venue Targeting Opportunities Disengaged (51% of users) They don’t count calories, they just avoid certain types of food Biased towards women, aged 65+, AB, retired Enthusiasts (23% of users) Advocates of calorie labels Not particularly attracted by free drinks/desserts offers, limited availability menus or cross-promotions with other venues Biased towards those aged 45-54, Wealthy Achievers, working parents/family 10-15’s Freebie Fanatics (26% of users) Looking to indulge when they eat out, but on a budget (upfront promotions eg BOGOF’s appeal) Biased towards men, aged 15-24, pre-/no family, DE Base: 1,123 pizza/pasta venue users Source: Ipsos MORI/Mintel

Helena Spicer Your contact Senior Foodservice Analyst mintel.com email: spicer@mintel.com mintel.com