USA | Pizza consumer foodservice

Company Watch: Pizza Hut rebranding to Pasta Hut – a healthy move?
25 Nov 2008


Global pizza restaurant chain Pizza Hut announced the temporary renaming of 30 of its outlets to Pasta Hut in the UK, effective from 6 October 2008. This move has generated a buzz, but opinions are divided as to whether such a gimmick can boost sales.With an estimated 33% value share in 2008, Pizza Hut remains the undisputed leader of chained pizza restaurants in the UK. However, aggressive expansion by smaller players such as Prezzo, Strada and Deep Pan Pizza has contributed to the erosion of Pizza Hut's share (down from 38% in 2001).

In order to bolster sales, Pizza Hut is in the process of revamping its image and this daring rebranding is part of that initiative. The renaming to Pasta Hut has been confined to the UK, and carried out on a much larger scale than the temporary name change in the US in April 2008. The move was accompanied by a television and newspaper advertising campaign. A separate website has been created for Pasta Hut on which there is a poll for consumers to vote for or against a long-term name change, thus making them feel part of the decision-making process. This marketing strategy has generated both a buzz and strong debate about the effectiveness of such tactics.

Ongoing efforts to shed unhealthy image and move upmarketWhen the company announced the temporary renaming of 30 of its outlets to Pasta Hut, the move was positioned as part of its ongoing commitment to healthier food. Some 12 new pasta dishes will be added to the menu. While Pizza Hut has not made explicit claims about pasta being healthier than pizza, it has simultaneously improved its salad bar and added more vegetables to children's meals.
This ties in with steps that Pizza Hut had already taken towards a healthier menu such as reducing the salt in its meals to bring it into line with recommended government levels. It had already removed trans-fats from its menu at the end of 2007 and is still in the process of making more dishes low-fat or virtually fat-free.The campaign is also seen as an attempt to move upmarket and attract a wider consumer base. One of its new television advertisements features young mothers lunching together on bowls of pasta. Expanding its range beyond pizza will enable Pizza Hut to attract an older and more sophisticated consumer, but without losing those consumers its pizzas are aimed at.
This will enable it to compete more effectively with its more upmarket competitors which already have a wide range of pasta dishes on their menus. It means that Pizza/Pasta Hut can offer something for the whole family – more indulgent fare for younger family members and healthier offerings for older ones. This is in line with the US move, which firmly placed Pizza Hut as a family option.

Early indicatorsIt is not possible at this stage to speak with any certainty about growth in till receipts as a result of the move. However, results are through for the smaller Pasta Hut US renaming earlier in the year. There, both sales of pasta and overall traffic grew as a result of the move, and, according to a company spokesperson in the UK, before the re-naming, pasta dishes accounted for 3-4% of Pizza Hut's revenue, but are on course to reach a 10% share by the end of the year. Tougher times call for bolder measuresPizza Hut needed to do something dramatic to break free from being pigeonholed as a pizza restaurant.
Changing the name, albeit temporarily, is a bold move. Difficult times are ahead for CFS outlets as eating out becomes one of the first casualties of the financial crisis. So, a move that attracts a wider consumer base by aiming more upmarket whilst retaining its “family friendly/budget” feel can only be seen as a strategic move, however gimmicky the press may find it. An economy outlet that offers a more upmarket product range is well positioned to mop up higher-income families feeling the pinch that would normally dine out in more upmarket outlets. With all CFS restaurants looking for ways to weather the storm of economic recession, expect more high-profile marketing campaigns. It is unlikely that other restaurant chains will choose temporary or even long-term rebranding, but marketing and new product development will play an even more important role in difficult times.

Restaurants will need to be canny in order to safeguard profit margins in the coming months. In this case the margins on pasta and pizza do not differ widely, although cheese price hikes can impact pizza mark ups. However, as food prices increase at different rates, restaurants may need to push products that will bring in higher margins. In addition, no one can afford to ignore the trend towards healthier eating. An introduction or shift to smaller menu portions may also be on the cards as a way to both safeguard revenues and promote healthier eating.Ratna Sita Handayani, Research Analsyt, Ratna.Sita@euromonitor.com