Pizza is a popular food in South Africa, we have national franchise brands (some of them franchisers of international brands), we have popular restaurants, we also have many independent shops in all provinces
The pizza business has one of the highest margins and markups in the fast-food industry. The dough base with its topping of cheese and other toppings is both cheap and quick to make.
In this business, there are opportunities in the supply of raw materials (cheese, base and other toppings), equipment (pizza ovens). And of course the pizza-making business.
Instead of looking at the various businesses and business models like we usually, let’s keep things open-ended by looking at the various components that make up this business.
We will first take a look at the pizza-making business in a fast-food setting. When planning a business I prefer the modular building-block approach.
The three main components in this business is the style, how its made and where its sold. These three when combined will constitute your overall business.
Starting with components
You can start with one of the three, (1) style/recipe, (2) oven or (3) sales channel (this can even be an app these days) and you can start from there.
- You can have a good recipe, Italian style, New York-style, and you can say how am I going to make it, where am I going to sell it.
- You can start with an oven, get the recipe and find a place to sell it.
- Or you can start with the sales channel, maybe you know someone with a pub and they can add pizza to the menu which you can make. You have a busy sales channel and your friend has food which makes people thirsty to buy more drinks.
In fact, where you start will dictate which path you take (and ultimate pricing). For example, if you are doing exotic recipes, with expensive ingredients (style) then you going to want to go woodfired (how it’s made) in a restaurant setting (where its sold).
For example, if you going to sell in a pub as a quick snack, then you better off going with a simpler style, perhaps use the slice model and use an electric oven (which is faster than woodfired).
The thing about using the building block approach is that it allows you to stay realistic and achieve your goal instead of dreaming. If you start with all three at once and don’t have the capital to pull it off then you just dreaming. But when you start with one thing, you can ask yourself, how can I take this to market, how can I achieve this, then you are led by heuristics it is not going to be your perfect dream business but it may and will become real if you perservere. But if you start with I want to open a fancy restaurant to sell my saffron and salmon pizza made in Italian pizza ovens. That is going to cost a lot of money and unrealistic for many.
The pizza style is essentially the overall recipe, there are many styles out there Neapolitan, greek, Chicago, New York etc., there are less known like the tavern-style. The menu will just be the difference in toppings or even base. Also, some differences in the way that they are cut. We have also seen a popular pizza style made in local restaurants and shops that deviates quite a bit from traditional pizza. It’s the homemade style that is quite heavy in toppings, some people describe it as putting food on a cheesy base. It resembles Indian style pizza. But pizza does not have to be complex or woodfired to be delicious. One of my fondest childhood memories was eating “Margherita” pizza with garlic salt at the St. Elmo’s Sliceaway at the V&A Waterfront and you could actually see the slice going through the conveyor oven.
How its made
Now pizza can be made in many ways, woodfired, electric oven, pans, pizza stones it can even be in just a normal oven or heated in a microwave. However, almost all the big players that use electric ovens have custom made ovens and that is one of their competitive advantages, not just for the speed, but some recipes will suite some baking styles. If you making the base in a certain way, you need to bake that pizza in a way that cooks the base and the topping in a consistent manner.
Where its sold
Broadly speaking pizza sales channels fall into three broad categories: diner, take-away and delivery with some using one, two or deploying all three.
Starting with a pricing strategy
If you have a low-cost business model, then you will look at a simple recipe(s), conveyor belt pizza (electric oven-baked) with a busy sales channel like a shopping mall. This will be a low-margin (in pizza terms) high-volume business. An electric oven will be faster than a wood oven and simple recipes are quicker to make.
If you making a premium product then you looking at more exotic recipes, wood-fired pizza in a more restaurant type setup. This will be a higher-margin premium business model.
The low-cost landscape in SA
In South Africa the most popular low-cost pizza brand is probably Romans, they even have rectangular boxes as they often have their two specials. Recently they had two single topping pizzas for R100. What does a pizza like that cost to make at scale? R10, R15, R20? I mean its a piece of dough plopped with cheese and a topping and maybe some sauce, fed through a conveyor oven caught on the other side and cut and how long does it take to make?
Any low-cost model depends on high volumes, a low-cost model does not suit a woodfired oven or complex recipes. If you making R30 profit on a pizza then you need to produce and sell one every few minutess or so and hopefully, sell two at a time like Romans does. Often in low-cost kitchens, they have more than one person making and the oven can take multiple pizzas side-by-side.
The pizza slice business
The pizza slice business is when a pizza is sold by the slice, instead of a whole round pizza sold at once, the (often large) pizza is cut into slices, usually ten slices on a large pizza, sometimes 8 for larger slices.
There are some considerations if you doing slices only, whole pizzas are often bought by families or groups, and slices are bought by individuals as a quick snack or as a single persons supper. So where you sell is important, the slice business is suited close to offices or workplaces and even in bars. You also have to remember you are selling one slice at a time, compared to selling a whole one, that pizza will take longer to sell, you need a busy place to sell it but also sell it at a premium (compared to a whole pizza).
The question is, can pizza slice only be a viable business?
You can’t really go low-cost like with whole pizzas, but how the low cost would look is simple electric oven pizza sold in a location in which you can sell it at a higher than usual price. Like a bar, stadium, places where you have a captive audience where they can’t just slip out and buy something to eat. So instead of selling one pizza for R100, you sell ten slices for R20 each.
The differential or premium pizza slice model can also work but will require more expertise and more capital. A larger premium slice that must be unique (as in tasty), woodfired and sold in a more exclusive setting.
The raw or frozen pizza business
Pizza is often sold raw or frozen in supermarkets. This is part of the frozen food business.
The B2B Business
The B2B business in this industry is supplying the pizza makers with raw materials/ ingredients and equipment.
Supply of raw materials/ingredients
There is an opportunity in this industry to sell the pizza ingredients, both in bulk and ready-made ingredients such as bases, grated cheese and pre-cut toppings, the same way that there is in the raw potato chip business to takeaways and restaurants. We know that this business uses a lot of cheese.
Supply of equipment
There is also an opportunity to supply the ovens used, both electric and woodfired and even custom made.
In theory, there is an opportunity in the pizza delivery business but you will be competing with well-funded apps staffed by a legion of foreigners working for who knows how much.