Domino’s Pizza prepared the Australian share market for summer yesterday with the announcement that it would chase Australia’s $700 million cold dessert market with a new range of chilled treats.
Managing director Don Meij backed up messages about the company’s increased investment in technology at yesterday’s annual general meeting with plans to roll out a thickshake and ice-cream menu in Australia and New Zealand by July 2017, aiming to grab 10% of the competitive dessert market.
“Our test markets showed customers enjoyed these new products both as desserts and additional snacking options,” Meij told the market on Monday.
The company has cited a 10% target of the Australia and New Zealand cold desserts markets, which would be worth upwards of $70 million. In the 2016 financial year, the company booked $1.96 billion in revenue.
Meij told SmartCompany this morning the frozen treats have been developed especially to be delivered to the homes of Domino’s customers, with a full milk recipe that won’t melt as fast as soft serve, and will hopefully lead to bigger order spend from customers.
“It encourages us to buy more meals,” he says. “It enables us to sell more pizza.”
The business is also trialling a new “meal ocassion”, and while the product type hasn’t yet been revealed, Meij hopes it will create another sales category for the business.
“Instead of having pizza, we’re having a completely different food as well.”
The Australian ice-cream market is a competitive space, dominated by franchises and split between artisan offerings and the snacks and sundaes the pizza chain will offer.
IBISWorld estimates the ice-cream store industry generates $557 million in revenue a year, of which only 5% is from ice-cream sundaes and 14% is from soft serve. It’s a franchise-focused area, and Baskin Robbins still holds the biggest single market chunk, with a 12% share.
The numbers suggest the ice-cream product might not represent the biggest slice of Domino’s takings in years to come, although it could serve to increasing the overall customer spend each time a customer places an order.
The company has upgraded its full-year earnings guidance for 2017 from an increase of 25% to an increase of 30%, boasting that Australian sales delivered the highest like-for-like growth in the company’s history. However, full-year profit guidance will stay at 30%.
Strategist at Retail Oasis Pippa Kulmar told SmartCompany while frozen desserts are incredibly seasonal, Domino’s would have likely been motivated to diversify its offering as much as possible under the broader umbrella of its brand and mission.
“I can’t imagine it’s going to be a core part of their business – like every fast food company, they’re always looking to add to their meal times,” she says.
“I think it’s interesting in terms of them to play around with their delivery model, because [delivery providers like] UberEats is surely affecting that.”
Along with its continued focus on drone technology and delivery, Domino’s has been keen to position itself as a fast-growing global operation.
A presentation from chairman Jack Cowin delivered to shareholders yesterday shows that Domino’s added 484 stores over the past financial year, including 69 stores built in the last 12 months in Japan alone.
Meij told SmartCompany the only reason a global expansion would slow is if “we screwed up”.
“We’ve been in digital for 11 years – the compounding rate is [of digital food integration] is not going away. It’s a large macro trend,” he says.
Kulmar says other businesses can learn from the pizza chain’s expanded product offering approach, provided they know their own purpose first.
“A business has got to be bigger than the product that it offers,” she says.
“If you’re just aiming for one destination, that’s a worry – timing is really up to the business’s understanding how it’s growing and whether it’s about to stagnate.
“If you want to expand, and you have a purpose above just the one product, it makes it easier to transcend that with your consumers.”
Don Meij’s contract as managing director was scheduled to expire on November 1 but it has been rolled over another year.
Cowin said in a statement to shareholders that the short-term contract renewal was to align Meij’s remuneration with a “long term executive incentive program” that will be considered next year.
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