Underpriced and Pressured by Frozen Products... Pizza 3 Companies' Sales Plummet

Consecutive Price Increases Push Large Pizza to High 30,000 KRW Range
10,000 KRW Range Single-Serving Brands and Frozen Pizzas Gain Popularity

Photo by Asia Economy DB

[Asia Economy Reporter Moon Hyewon] Major domestic pizza franchises are experiencing a sharp decline in sales as they are being outcompeted by low-cost pizzas with a ‘cost-effectiveness’ strategy.

According to the Financial Supervisory Service's electronic disclosure system on the 21st, Cheong ODPK, which operates Domino's Pizza, reported sales of 223.5 billion KRW last year, down 4% from 232.8 billion KRW in 2020. During the same period, Korea Pizza Hut's sales dropped 19% from 119.7 billion KRW to 96.6 billion KRW, and Mr. Pizza's sales decreased 31% from 46.7 billion KRW to 32.1 billion KRW.

The sharp decline in sales of major pizza companies is largely due to the fact that the price per large pizza is mostly set in the high 30,000 KRW range. Since the beginning of this year, the pizza industry has seen significant price increases due to the global logistics crisis, crude oil supply shortages, and high exchange rates. As a result, Domino's Pizza raised prices twice, in January and August, while Pizza Hut and Mr. Pizza each raised prices once.

Consumers have ultimately started seeking alternatives such as frozen pizzas or single-serving pizza specialty brands that compete with affordable prices. Frozen pizzas are gaining influence by leveraging the advantage of being about one-third cheaper than franchise pizzas. The domestic frozen pizza market size has been steadily growing, from 71.5 billion KRW in 2019 to 96.6 billion KRW in 2020, and 126.7 billion KRW last year.

Ottogi, which holds over 40% market share in the domestic frozen pizza market, recently surpassed 100 million cumulative sales and achieved cumulative sales of 270 billion KRW. Since May 2016, Ottogi has consistently introduced various types of frozen pizzas, including round pizzas, square pizzas, spoonable cup pizzas, and single-serving pizzas, gaining attention as an alternative to branded pizzas in the era of high inflation.

Affordable single-serving pizza brands priced around 10,000 KRW, such as GoPizza, Cheongnyeon Pizza, and The Born Korea’s Baekboy Pizza, have also been rapidly growing since entering the domestic pizza market.

Baekboy Pizza surpassed 80 franchise stores in October, just six months after starting its franchise business in May, and aims to open 100 stores within the year. GoPizza, a single-serving pizza specialty brand that opened its first store in Daechi-dong, Gangnam-gu, Seoul in 2018 and currently operates about 180 stores domestically and overseas, has grown into a pizza franchise valued at 150 billion KRW with over 45 billion KRW in cumulative investment. It plans to increase the number of stores to at least 300 to 500 next year.

As more businesses in other sectors, such as chicken, start selling pizza together, competition in the pizza market is becoming increasingly fierce. Genesis BBQ Group opened a food and beverage store in Songpa-gu, Seoul on the 6th that sells not only chicken but also wood-fired pizza and bakery items. The pizzas are handcrafted wood-fired pizzas, with five varieties including spinach salad and Margherita available.

An industry insider said, "With the era of 40,000 KRW per pizza including delivery fees arriving, more consumers are feeling the burden of franchise pizza prices," adding, "In this high inflation era, affordable single-serving pizzas are expected to gain more attention as an alternative."

This content was produced with the assistance of AI translation services.