Papa John's other problem besides the NFL: Its pizza is 'overpriced'
Louisville-based Papa John’s International is ending its long-term sponsorship deal with the NFL, but the company has a more fundamental problem: Many consumers think its pizza is too expensive.
LOUISVILLE, Ky. (WDRB) -- Louisville-based Papa John’s International is ending its long-term sponsorship deal with the NFL, a move that’s not surprising after John Schnatter, the company’s founder, in November blamed the league’s leadership for declining TV ratings and faltering pizza sales.
But the company’s disappointing 2017 results aren’t entirely because of football advertising, Papa John’s executives acknowledged on Tuesday. In fact, there’s a more fundamental problem: for many consumers, a Papa John’s pizza is just too expensive.
“There is a perception that we are overpriced,” Papa John’s chief marketing officer Brandon Rhoten said on a conference call with stock analysts on Tuesday. “And because that perception exists, even the people who prefer our brand -- our loyalists -- use our competitors when times are tight. So, we need to fix that.”
Papa John’s CEO Steve Ritchie did not directly answer an analyst’s question about whether the chain’s recent promotion of a pizza for $5.99 – a significant discount from Papa John’s menu prices – will be a permanent offering.
But Ritchie said the company’s turnaround efforts include a new marketing campaign with “some value focus.”
An emphasis on lower prices would be a shift for Papa John’s, which has long prided itself on maintaining a “premium” position over competitors Domino’s and Pizza Hut, with consumers willing to pay a little more for the Papa John’s slogan, “better ingredients, better pizza.”
“Everybody wants to own our position or a Chick-fil-A position: a quality position,” Schnatter told analysts on a conference call in 2012.
But Papa John’s is rethinking its marketing and advertising strategies as a part of wide-ranging plan to reverse stagnant sales.
“‘Better ingredients and better pizza’ have always been core to our brand and have separated us from the pack,” Ritchie said on Tuesday's call. “However, over the last few years, consumers have viewed quality as simply part of our tagline without a real connection to our products.”
Papa John’s reported flat sales in North America, its biggest market, in 2017. Rival Domino’s, meanwhile, said last week that domestic sales surged by nearly 8 percent in 2017.
Papa John’s warned of more trouble ahead Tuesday, saying North American sales have “remained depressed” in 2018 after falling by 4 percent in the final three months of 2017.
Ritchie, who took over after Schnatter resigned as CEO in December, said it will take time for the company to realize the benefits its turnaround efforts, including technology investments, data analytics, potential additions to the Papa John’s menu and diversifying the company’s advertising channels.
“While I’m not pleased with the company’s most recent performance, I am confident that our brand and our people provide the foundation we need to reignite customer enthusiasm for Papa John’s,” Ritchie said Tuesday.