Rising dough in the pizza industry

By Economist.com

THE fast food business has seen better days. In 2014 , annual global revenue at McDonald’s fell for the first time in 12 years, prompting the burger chain to appoint a new chief executive to turn things around. As consumers become more health conscious, cheap fast food seems to be losing its appeal. But there is a striking exception to this downward trend. Even as they buy fewer takeaway burgers, people seem to have a growing appetite for pizza, from both independent pizzerias and pizza chains. As revenues at McDonald’s have fallen, for example, those at Domino’s Pizza have continued to rise: in March 2016, the pizza chain reported strong domestic sales for the last three months of 2015, and its 88th consecutive quarter of growth in same-store sales growt h for its international division. What accounts for the growing popularity of pizza?

Pizza has long been a favoured form of inexpensive fast food in Italy, where people started putting tomato on flatbread some time in the 18th century. In the early 20th century, Italian immigrants popularised pizza in America. Demand boomed after the second world war thanks to returning American soldiers, who had gained a taste for pizza in Italy.

Today, pizza is benefiting from the trend towards healthy cooking. People assume that pizza, with fresh toppings including vegetables, must be healthier than a burger. (In fact, a medium-sized vegetarian pizza can contain as much as four times as many calories as a Big Mac.) Pizza has also benefited as consumers reined in their spending after the financial crisis; ordering a pizza delivery is cheaper than going out to eat, so pizzerias have benefitted as people have traded down from going to restaurants. And as economies have recovered after the crisis, takeaways have stayed popular as household budgets remain squeezed.

But the secret ingredient that keeps consumers hooked on pizza is menu innovation. Pizza chains are constantly coming up with alluring (and, in some cases, disgusting) new variations of their product – such as pizzas with crusts stuffed with bacon and cheese – to maintain consumers’ interest and loyalty. Cleverer still, these novelty pizzas are difficult to cook at home. No wonder pizza accounts for a growing slice of fast-food consumption.

Update: This blog post has been amended to remove the news peg.