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Domino’s CEO: Decision to ‘tactically hold back’ marketing spend in Q1 was ‘the right thing to do’

Domino'sDomino’s has admitted trading in January was “slow”, in part because it “tactically held back on marketing spend” to allow it to support “more strategic” launches later in the year.

The pizza chain is about to begin the phased rollout of its loyalty scheme, as well as introducing a value-based lunch deal as it looks to drive repeat business and appeal to consumers across more occasions.

Domino’s CEO Andrew Rennie said holding back marketing spend at the start of the year was “strategically… the right thing to do”, despite the dip in sales.

“We held back marketing in January to invest later in the year. So Q1, Q2, the first half will be slower and the back end, the second half, will be much higher, I believe,” he told investors this morning (12 March).

He said underlining Domino’s value proposition will be critical, particularly in the current climate, as the “number one reason consumers buy from anybody is value”.

Our consumers need value and we’re supplying the value but in a very profitable way.

Andrew Rennie, Domino’s

As part of this drive, Domino’s is launching a £4 lunch deal, a first for the business. As part of the deal, it will offer “cheeky little pizzas”, which are under 600 calories and wraps under 450 calories, as well as fries, cookies and smaller serves of chicken.

“For the first time in the history of this business, we are going out with a £4 price point. That’s never happened before,” he said.

“Our consumers need value and we’re supplying the value but in a very profitable way, because by going after this daytime segment we haven’t done before, that actually sweats out assets much better for our franchisees.”

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Rennie underscored the importance of value, while making it clear “value isn’t just price”.

“Value is product, service and image divided by the price. So, for us, it’s really important to make sure it’s a really good product. I’m really proud of the fact we could have taken shortcuts, taken cheaper products to lower the price, but that’s not what we want. We’re about supplying the best product in the marketplace, even against the trends of food pricing.”

Loyalty launch

Domino’s is also about to launch its loyalty scheme, with “stage one already underway” and two subsequent phases planned for later in the year.

Rennie said the business has taken a data-led approach to its roll-out to ensure it is able to test and learn.

“I don’t want to just throw money at it for the sake of it. I want to gather data that helps lead to each stage and [determines] how we go about each stage. It has been done in a very methodical way,” he said.

“I’ve seen loyalty programmes where a lot of money’s been thrown at them and it’s been very costly. So we’re just making sure we do it very clearly, very methodically, but we’re committed to having a loyalty programme.”

Domino’s prepares for launch of loyalty scheme in the UK

He said he will report back in August on how the roll-out is progressing and what it has learned up to that point.

As well as driving growth through innovation and appealing to more customers across more occasions, Domino’s also hopes the launch of such initiatives will drive collection orders.

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“People quite often don’t understand that collection is actually a very profitable part of our business, and it is a different customer. So you aren’t stealing from a delivery customer, it’s a totally new customer,” he explained.

I don’t want to just throw money at it for the sake of it. I want to gather data that helps lead to each stage.

Andrew Rennie, Domino’s

Prior to becoming UK CEO Rennie led the Domino’s business in other markets including Australia, France and Germany. “[There] we had a much higher carry-out percentage than we have today. There is a huge opportunity to keep that growth and accelerate that growth,” he added.

Currently, roughly 37% of orders in the UK are collection, that’s an 18% increase compared to four years ago, Rennie said. But he believes the “opportunity is still much bigger”. In America, collection orders account for 55% and Rennie said US CEO Russell Weiner believes he can keep growing it.

“That means we’re 20% behind where the US is today,” Rennie said. “I think the initiatives… with our lunch [offer] will push us towards that 50% barrier.”

Growth opportunities

Domino’s revealed it has taken full control of Irish business Shorecal as it looks to increase its store count in the Republic of Ireland and Northern Ireland.

Across the entire UK and Ireland business, Domino’s accelerated store openings last year, with 61 new stores opening in 2023. This represents the “best store growth in five years”, Rennie said.

Overall, the business expects to have 1,600 stores in the UK and Ireland by the end of 2028, which it believes will lead to £2bn in system sales. The target is to have 2,000 stores by 2033 leading to system sales of £2.5bn across the UK and Ireland.

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Rennie said Domino’s “really is in growth mode”. While he said the “core” business will “always” be its main focus, “if we can do investments that give us long-term growth we will look at them very closely, with clear guardrails for growth and returns. The board and myself are very clear on that”.

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“We’ve got a very good capital framework that we adhere to every day, so we’ll update on additional growth opportunities soon… maybe sooner than later. We’ll see if they go the right way. But certainly this year, you’ll see more growth initiatives coming from us,” he said.

Domino’s increased group revenue by 11.1% for 2023 for the 53 weeks to 31 December, with underlying profit before tax of £101.7m.

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