Pizza makers are benefitting from tightening purse strings, a fact Australian-owned chain Eagle Boys is banking on as it pursues aggressive expansion plans into Adelaide.
“Pizza is one of those industries that will typically benefit in a recession when times are tough,” said Scott Hamilton, the chain’s national marketing manager. “People tend to turn to pizza; you can feed a family comfortably for less than $20.”
Brisbane-based Eagle Boys first fired up the ovens in Albury, News South Wales, in 1987. The American-modelled franchise is now Australia’s third-largest pizza maker, with around 250 shops across the country making more than 15 million pizzas a year.
Majority owned by private equity firm NBC Capital after a May 2007 management buy-in, Eagle Boys continued its rapid growth last financial year. It opened 51 new stores and posted sales growth of 21.9 per cent and revenue of more than $125 million.
The move into Adelaide, supported by a $7 million national advertising campaign, comes on the back of the July 2008 purchase of Pizza Haven – then Australia’s fourth-largest pizza maker – and funds held over from Eagle Boys’ sale of its New Zealand chain to Pizza Hut in 2000.
“We felt that going in through the Pizza Haven acquisition was the right strategy,” Hamilton said.
“In total there were 34 stores in that acquisition. Our plan for Pizza Haven is to fully convert that brand into the Eagle Boys banner. We’re well over halfway in our conversion process.”
Along with former Pizza Haven outlets in Berri, Port Augusta and Port Lincoln, stores in Semaphore and Seaford have already taken on the glowing, pink Eagle Boys style. The company’s expansion plans, however, are not limited to store conversion.
“We are keen to grow into Adelaide quickly. We’ve identified a number of opportunities beyond the existing sites – probably 11 or 12 we’d like to move into very quickly,” Mr Hamilton said.
Despite impressive results and the potential for recessionary-fuelled growth, it seems reasonable to question the wisdom of expanding into the hyper-competitive pizza industry. Recall the pizza wars – and squeezed margins – of only a few years ago.
Eagle Boys believes it has hit on a winning formula, though: offering gourmet products at a low price point and being innovative in its business model.
“There’s a lot of chain pizza activity in the market and quality independent offerings,” Hamilton said, brushing aside the competitive nature of the industry to focus on what he sees as Eagle Boys’ competitive advantage.
“Our product is comparable quality to gourmet but we offer everything people love about a chain – great value for money, very quick and local. But the product is so much better than a chain.
“Our product is not seen on par with a Domino’s or a Pizza Hut product now. Consumers understand that our pizza is bigger and our ingredients are better. We’re distancing ourselves from those two players. We see a niche in the market that we believe is going to be very lucrative.”
Much of Eagle Boys’ success has come about from the introduction of new store models while other pizza players have remained static. These have included Australia’s first drive-through pizza store, micro stores offering express pizza in busy locations such as airports, and store models adapted for smaller regional towns.
“We’ve got a variety of business models that suit various different markets. We’ve got a store model that can operate in a market with as few as 2000 people,” Hamilton said.
While Eagle Boys aims to differentiate itself from the competition, the company’s aggressive expansion can only provoke a response from other pizza players. It seems that the next pizza war is looming on the horizon.
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