Crowdsourcing Helps Domino’s Pizza Serve Up Rise in Profit
Mobile Application Pizza Mogul Allows Customers in Australia to Design Their Own Pizzas
Domino's Pizza Enterprises Ltd. in Australia offered the Mega Meat Lovers pizza, a creation by a Pizza Mogul participant known as Pizza Master. The Mega Meat Lovers was topped with bacon, beef, chicken, ham, pepperoni, pulled pork and Italian sausage. PHOTO: DOMINO?S PIZZA ENTERPRISES
SYDNEY—Crowdsourcing its menu and rolling out dozens more stores from Sydney to Tokyo helped Domino’s Pizza Enterprises Ltd. serve up a supersized increase in first-half profit.
The Sydney-listed company—which holds the master-franchise rights to the Domino’s brand in Australia, New Zealand, Japan, France and the Netherlands—also upgraded earnings guidance for the full year, sparking a 21% rally in its shares.
Last year, Domino’s launched a mobile application called Pizza Mogul allowing customers Down Under to design their own pizzas, market them on social media, and, in what it called a world’s first, pocket a cut of the sales.
The campaign expanded the company’s marketing reach on social media platforms such as Facebook . And by paying customers a fraction of the sale price of each pizza, the company is encouraging participants to advertise Domino’s products to their friends, lifting the company’s profile without increasing marketing expenses.On Wednesday, the company said more than 55,000 people had signed up to the campaign since it was launched in July, adding 160,000 pizzas to its menu. “We are seeing huge amounts of user-generated content being produced by our passionate pizza lovers and this goes beyond our expectations,” Don Meij, Domino’s chief executive, said in a statement.
Domino’s net profit for the six months through December rose by 67% to a record 29.1 million Australian dollars (US$22.6 million) on the back of a 29% surge in revenue. The company didn’t provide specific numbers measuring the size of the contribution from Pizza Mogul, which has only been rolled out in Australia so far.
Earnings in Australia were also aided by a discount promotion that offered pizzas with simple toppings for A$4.95 each, Domino’s said. In Europe and Japan, meanwhile, profit was boosted by a growing store count and labor-cost control.
“They’ve got the fastest-growing online [pizza] store, and have this tech business flavor to them that’s helping to drive their popularity,” said Roger Montgomery, chief investment officer at Montgomery Investment Management. Still, Mr. Montgomery said that with the company’s’ shares now trading at a heady 50-to-55 times earnings, new investors could be biting off more than they can chew.
Brisbane-based Domino’s began life as a local business called Silvio’s Dial-A-Pizza. It bought the Domino’s franchise rights from its U.S. counterpart and rebranded itself during the 1990s. Shares in the company have increased eightfold since 2009, as management rolled out hundreds of new stores to cut down pizza delivery times, while embracing a digitally focused marketing strategy.
In Japan, it boosted first-half sales by launching a series of “smartphone only” promotions, alongside Facebook campaigns. It also recently launched in Australia a new “pizza tracker” enabling customers to map the progress of their pizza delivery on television screens.
