As news circulates about the once much-loved pizza restaurant struggling with debt, how did such a stalwart of the casual dining scene get into this position?
onefourzero investigated how consumers saw the brand and discovered a worrying correlation between demand for the brand and discounting promotions, leading us to question if Pizza Express has been the architect of its own downfall.
Why is Pizza Express in this situation?
It’s been widely reported that Pizza Express has made losses over the last two years as its operating profits were offset by interest payments on its £1.1bn debt.
Bought by the Chinese private investment firm Hony Capital in 2014, the company paid £93m in interest payments in 2018, reporting a pre-tax loss of £55m that same year.
After runaway growth in the casual dining sector between 2010-2016, the mid-market, and especially the Italian-themed market, has become oversaturated and the competition is fierce.
Casual Dining Crunch
The “casual dining crunch” has taken its toll on many.
Against a backdrop of rising costs and unstable consumer confidence, those who don’t offer anything new are in trouble, being good is no longer good enough.
One issue lies within changing consumer demand, reports show that consumers opt for exciting experiences, merging casual dining with entertainment. This trend has favoured the emergence of dining halls and food markets at the expense of chains such as Pizza Express, who seem to have lost touch with their customers.
Pizza Express has failed to appeal to and retain a loyal consumer base, whilst it has committed to changing its image by improving existing stores and revamping its menu, it has failed to compete with competitors such as Franco Manca, who appeal to changing customer appetites with their range of sourdough pizzas and green cola.
The real cause: death by discounting?
Irrespective of Pizza Express’ efforts to change their perception, discounting has become a key driver of their demand. Ultimately this undermines their own value proposition and risks weakening the brand.
Whilst Pizza Express enjoys strong branded search demand, 4 of the top 10 queries relate to discounting – 27% of the volume.
Furthermore, when compared to the competitive market, our research revealed Pizza Express shows that queries relating to discounting far outstrip similar casual dining offers:
Does all of this suggest that Pizza Express is no longer seen as special enough in the eye of the consumer?
For brands such as Wagammama’s and Franco Manca, cost-saving is a marginal consideration for consumers. This situates Pizza Express in a difficult position between balancing the price demands of their clientele with the growing costs of rent and business rates, which is why they now find themselves in trouble.
These issues should spark concern for other retailers as to the impact of discounting on brand perception and whether the immediate boost to demand from discounting provides problems in the long term.
Is it the end for Pizza Express?
It has been a difficult time for the casual dining sector – chains such as Prezzo, which shut down 94 of its restaurants last year, and Jamie Oliver’s, which filed for insolvency in May this year, have failed to thrive in the casual dining market.
Will Pizza Express face a similar fate?
The chain has until August 2021 to repay £465m of secured bonds and until 2022 to repay £200m of unsecured debt so there is a significant mountain to climb.
If they are to succeed they need to remind customers why they fell in love with the chain in the first place, and confidently communicate their value to people rather than relay on discounting to drive footfall.
Only time will tell if they succeed.