Competition begins to sizzle in Ireland’s pizza delivery market

There was an abundance of mirth in international media last week when it emerged that the US pizza chain, Domino’s, has ended its seven-year foray into the market in Italy, where pizza was created and its traditional style is revered. The locals don’t go in much for cheeseburger pizzas around Naples.

The group’s plan to open more than 880 outlets in a country where it is almost a crime to use pineapple as a topping always looked like an expression of corporate hubris. Domino’s finally threw in the towel this month, shuttering the paltry 29 outlets it opened since 2015. This sparked an avalanche of jokes, comparing the US group’s Italian job to an attempt to sell ice to Eskimos, or bring coal to Newcastle.

The brand may have been humiliated in Italy but, in Ireland, Domino’s still fancies its chances of delivering huge growth. The pizza market here continues to boom in the post-pandemic era.

Domino’s currently has 57 stores in the Republic, having opened its newest outlet in Limerick just last week. It has previously said it believes the market here could take up to 75 stores. The franchise-driven brand has been far more coy about its expansion targets since the pandemic. But it still says it sees “attractive opportunities” in the Irish market, which, the group’s financial results suggest, continues to strongly outperform the pizza delivery market in Britain.

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The US chain is not alone in its ambitions. Ireland’s pizza delivery market could go supersize. The largest chain in Ireland, Apache Pizza, wants to rapidly expand its estate of about 160 outlets in the Republic and 20 in the North – last year it said it wants a further 20 stores in the South and in March this year, it suggested it also wants to double the number of its outlets in the North.

Last month, the other member of the Big Three pizza delivery chains in the Irish market, Four Star Pizza, announced plans to grow its number of outlets in Ireland by 80 per cent over the next 2½ years. The chain currently has 42 in the Republic and 14 in the North, but it believes it can break the 100 threshold by the end of 2024.

It isn’t just the big, franchise-driven pizza chains that spy growth feeding Irish customers, who increasingly turned to home delivery during the long lockdowns of the pandemic. The independently-run, artisan pizza delivery chain, Base Wood Fired Pizza, is also seeking to expand from its current roster of seven outlets to up to 17 in the next few years. It is currently focused on the greater Dublin region, but it says it won’t rule out a national tilt in coming years as the company progresses.

Ireland’s pizza delivery market has in recent years begun to attract heavy-hitting backers with deep pockets and big ideas. Yet not everybody in the sector is rolling in dough. Industry sources say they also expect a post-Covid shake-out of some of the smallest operators, as inflation pressures bite.

This week, for example, Tiger Wood Fired Pizza, which had outlets in Rathmines and Deansgrange in Dublin and was backed by the wealthy McCann family of Fyffes fame, went into liquidation. A handful of other similar, small operators are also said to be feeling the squeeze, even as bigger groups expand.

As the market shifts, which operators will capture the fattest slices of growth in the Irish market?

Plush neighbourhoods

Base, which was cofounded in 2008 by solicitor-turned-pizza aficionado Shane Crilly, last week draped a cheeky marketing banner across the front of its outlet on Merrion Road in Ballsbridge, directly across the road from the RDS, where the Dublin Horse Show this week returned after a three-year break.

“Did ya miss the ride?” the banner screamed, in a facetious welcome back message for Horse Show visitors.

Base, which operates the majority of its outlets in plush neighbourhoods of south Dublin, distinguishes itself from the big franchises with a focus on craft pizza. It operates all its stores itself, with no franchisees. The group appears to be highly profitable. It doesn’t publish consolidated accounts, but various recent financial statements suggest that five of its outlets – Terenure, Stillorgan, Lucan, Glenageary and Ballsbridge – racked up profits of close to €900,000 last year between them.

“We have big plans for the business,” said Crilly, who confirmed that Base got a “big bounce” from the pandemic.

The company is understood to have recently agreed a financial restructuring, which saw Crilly sell some of his majority stake. Previously, a significant minority stake was owned by Loyola hospitality group, which also has investments in several pubs, such as the Leopardstown Inn, and is run by solicitor Stephen Cooney. It has now decided to invest further in Base.

Base was the subject of takeover offers from supermarket groups in recent years, prompting its current shareholders to reassess its structure. Loyola, it is understood, now controls more than three-quarters of the business. Crilly remains a significant minority shareholder and has shifted from his position as the day-to-day chief executive to a strategic role, helping to plot the growth of the business.

Base has hired Clyde Jamison, a former country manager in Ireland for Domino’s, as its new chief executive to spearhead the business operationally through its expansion, and also to oversee an investment of about €500,000 in new technology, such as its ordering app.

“We’ve earmarked 10 new locations for expansion in the next few years,” said Crilly. “We’re already in negotiations for sites on four or five of those.”

The company’s expansion plans include Killester, Swords, Knocklyon and Stepaside in Dubin, while its first outlet outside of the capital – Greystones in north Wicklow – is in the planning stages. “Dublin remains the focus, but a national expansion is not off the agenda,” said Crilly.

Jamison, who has worked in the business in Ireland since 2007 and also abroad in South Africa, acknowledges that most of Base’s larger US-style competitors are also hungry for growth in the market: “But we distinguish ourselves from them because we are Italian-style.

He says that Just Eat, the home food delivery aggregator, is growing the entire pizza segment but argues that the Irish market is “also quite underdeveloped”.

There are challenges. The business has been hit with an “avalanche” of cost increases on ingredients, Crilly says. Base pushed through its first price increases since the pandemic earlier this year. “Hopefully things will level out,” he says.

Base managed to retain most of its employees through the Covid era but staffing remains a challenge and the shortage will likely end up crimping some of the growth plans of some of its bigger rivals. Base recruits pizza chefs in Italy and Croatia, and the company has started taking leases on houses for staff it hires from abroad as the accommodation crisis deepens.

“The accommodation thing just keeps tripping us up,” says Crilly. “Some of our new chefs – we’ve had to put them up in hotels.”

Crilly is adamant that Base can keep its focus on quality pizzas as it expands. Meanwhile, Jamison insists there is “absolutely” enough room for all groups to grow, as Base’s bigger, franchise-driven rivals begin to flex their muscle in the market.

Recent half-year financial results for Domino’s show the relative buoyancy in the Irish market compared to other regions. While sales across its franchise and company-run network in the UK fell 5.9 per cent in the six months to the end of June, they rose 1.8 per cent in the Republic to £36.4 million (€43.1 million). Its operation here generated €28 million in reported revenues last year for the UK-listed group that owns the master franchise, while sales growth in the first quarter this year was a chunky 7.3 per cent.

“We continue to see attractive opportunities in Ireland as demonstrated through our new store openings and our redevelopment of our Naas supply chain centre,” said Domino’s. “We have also recently signed a joint venture in Northern Ireland which demonstrates our belief in the opportunities that Ireland and Northern Ireland provide.”

It agreed to pay £6.6 million (€7.8 million) for a 46 per cent share of a franchise joint venture in the North with Hungarian businessman, Mike Racz. Domino’s likes to invest directly in its biggest Irish franchisees – in 2018 it paid €12.2 million for a 15 per cent stake in Shorecal, which operates close to 30 outlets in the Republic and in the North. Shorecal is majority owned by Belfast brothers, Charles and Adrian Caldwell, with a significant stake also owned by the wealthy Bronfman family of US billionaires, who made their fortune in Seagram whiskey.

The accounts at Shorecal, by far the largest Domino’s franchisee in Ireland, show what a gold mine the Irish pizza market can be. Pretax profits last year increased by 16 per cent to €12.25 million, while revenues rose by almost a tenth to more than €60 million. Shorecal paid hefty dividends of more than €20 million to its shareholders last year, on top of €8 million in 2021.

“Our Irish customers still see pizza as an affordable treat particularly in the current environment when budgets are tightening,” said Domino’s, as it vowed to grow in this market further.

Four Star Pizza is owned by hotelier Michael Holland, whose properties include the five-star Fitzwilliam on Dublin’s St Stephen’s Green. The entirely franchised group recently undertook a deep-dive analysis of its Irish network to identify outlets where customers routinely have to wait more than 30 minutes for delivery. Where that mark is breached, it is targeting new outlets.

It wants to hit several regional locations such as Sligo and Wexford in the Republic and Strabane and Enniskillen in the North, while it is also hoping that an upgrade of its app will help drive more business in established urban areas such as Dublin and Belfast.

Four Star says that, by the end of 2024, it wants to have 27 new outlets in the Republic and 18 more in the North, which would bring it to 101 on the island. It plans to open four new stores this year, 16 next year and 25 in 2024, with the bulk to be opened by existing franchisees who want to expand.

“We have taken a very data-driven approach to this,” Colin Hughes, the group’s managing director, said recently, as he promised to turn Four Star into an “ecommerce business that sells pizza”.

The king of the Irish market remains Apache Pizza, which was founded in 1996 by Irish business couple Robert Pendleton and Emily Gore Grimes. The group, with 180 outlets, was bought in 2018 by the Spanish group, Food Delivery Brands, which operates in its home market as Telepizza.

The parent group’s recent interim financial statements suggest that the Apache business in Ireland is outperforming its other units elsewhere in Europe and also in South America. First-quarter sales at Apache were up by 4.8 per cent, while the growth rate had accelerated to 11 per cent by the half year. Food Delivery Brands said its Irish business was “strong and steady”, as it hunts new sites and franchisees on both sides of the Border.

Burgeoning demand

As the cost of living crisis deepens and the Irish economy moves closer to a significant slowdown, the pizza delivery operators remain confident that consumers here will continue to dial for their dinner often enough to warrant pressing ahead with their significant expansion plans.

But how does this apparently burgeoning demand for belly-busting pizzas tie in with the healthier eating trends in the Irish food market in recent years? Is there not an inherent contradiction there?

Crilly, the co-founder of Base, which treads this line by using organic ingredients, offers an explanation: “Consumers are increasingly into their health – that is true. But they also like to treat themselves. The majority of Irish people are into striking a balance. By the time Friday or Saturday hits, they’re tired from work, and they want something to look forward to. But you have to give them quality.”

If all the various operators’ expansion plans for the Irish market are put into practice, competition will be sure to soon heat up.