If there's one word that works as a buyer draw-in and way to claim your product is superior, it's "premium." Brands will use it to refer to anything from a flight upgrade and car rental tiers to a pizza — sometimes, it is a way to slap a higher price on a product with only a minimal difference from the non-premium product.
"Defining what a premium brand is can be difficult because it depends on whom you ask," writes Brand Strategist Chris Fulner. "Each individual has their own definition of 'premium.'"
Papa John's (PZZA) is one fast-food chain that is running with the "premium" label. During its latest earnings call, CEO Rob Lynch said that launching a number of specialty products have helped the chain tempt consumers with pizzas that give them more than what they could get for the cheapest option.
When talking to pizza lovers, that almost always comes down to more cheese.
What's 'Premium' About These Pizzas?
Back in 2021, the Louisville-based pizza chain launched a number of what it called premium pizzas: the Epic Stuffed Crust and the Epic Pepperoni Stuffed Crust. (Epic is another word that can be used to mean anything a brand wants it to).
As regular pizza crust does not come stuffed, this allowed Papa John's to position itself as offering specialty items and charge more than what it costs to get the average pie: $13 for the cheese and $14 for the cheese-and-pepperoni.
"These are premium products that we’re promoting and that’s a very different model than some of our competitors, who promote the absolute lowest price point that they can and tie their advertising to those low price points," Lynch said in an interview with QSR.
During the quarter ending on March 27, Papa John's reported revenue growth of 6% to $542.7 million. It also announced plans to expand to around 300 new restaurants in 2022 and eventually expand to Asia with 1,350 locations in China by 2040.
Papa John's is also the only of the country's biggest pizza chains to report a positive sales quarter. Yum! Brands (YUM)-owned Pizza Hut and Domino's (DPZ) saw their sales fall a respective 6% and 3.6%.
The Business Strategy Of Premium Pizza
Lynch was quick to attribute the success to, among other things, these types of premium products as they bring in more money per pizza and draw in customers who like stuffed crust and will keep coming back for it.
"We don't need quite as many transactions and therefore were less impacted by the staffing challenges that we’re all seeing," Lynch told investors during the May 5 call.
Amid rising food costs and inflation, the chain was one of many fast-food chains to recently raise its prices by around 5%.
But with how we eat and order pizza changing as the country emerges from the pandemic, shares of Papa John's are down more than 14% year-over-year while Domino's stock has fallen by nearly 24% in the same time period.
The companies, in turn, are trying different things to keep people coming back. Premium products are one strategy but it can also mean celebrity partnerships and investing in restaurants for those who have tired of ordering in during the pandemic.
"We will continue our successful strategy of letting our customers, especially those who are less price-sensitive, to self-select into our premium-priced innovation," he told analysts during the May 5 call.
