August 3, 2009 / 11:24 AM / 10 years ago

Domino's Pizza adds chocolate cake to expand menu

SAN FRANCISCO (Reuters) - Domino’s Pizza Inc (DPZ.N) is adding something sweet to its growing pizza, pasta and sandwich menu that is expected to be “a huge home run,” even as consumers have cut back on small indulgences in the recession, the company’s chief executive said.

The addition of a “lava crunch cake” molten chocolate cake is part of Domino’s strategy to attract new customers and hold on to existing ones through new menu offerings in the midst of a spending slump.

The cake becomes the first real dessert item sold in the United States by the pizza delivery company, other than the cinnamon and sugar-laden dough sticks it now sells.

The dessert, priced at $3.99 for two individual-sized cakes, launches Monday and should further differentiate Domino’s from its competitors, said CEO David Brandon.

“This is a perfect add-on,” Brandon told Reuters on Friday. “If we can even get a small percentage of the people to say yes, we’ve added a $4 item and it becomes very profitable for our operators and very profitable for our brand.”

Still, the incremental benefit from a new dessert item is not necessarily guaranteed, as many consumers have cut back on items like appetizers, drinks and desserts amid tight meal budgets in the economic downturn.

The global company, which competes with Yum Brand Inc’s (YUM.N) Pizza Hut and Papa John’s International Inc (PZZA.O), has been expanding its menu over the last year to entice more consumers.

Pizza sellers, even those that deliver, have been fighting for customers as more people prepare food at home to save money.

Pizza delivery chains were hurting even before the recession. The category has seen negative consumer traffic for three consecutive years, according to Brandon, who said the best counter-strategy was to add new products.

“The only way we’re going to stimulate activity in our stores is through innovation,” he said.

Last year, Domino’s added four types of sandwiches, a category it expects to expand, and earlier this year it launched bread bowl pasta items. Brandon has labeled both categories “very successful.”

Domino’s also now offers a line of higher-end pizza called “American Legends” with more cheese and toppings such as feta cheese or roasted red peppers.

The company’s recently reported second-quarter results, which were better than expected, are directly attributable to the recent additions, Brandon said.

In the second quarter, Domino’s U.S. same-store sales fell just 0.7 percent. Moreover, the Ann Arbor, Michigan-based company has now seen two consecutive quarters of positive traffic, a “significant shift in trend,” said Brandon.

“Had we not launched these platforms I am very sure we would not be with positive traffic right now,” he added.

The lava cakes, which Brandon first tasted at a Domino’s in Turkey, were tested to make sure they will arrive hot and crispy on the outside yet with a molten interior, even after the delivery trip.

For a limited time, the cakes will be offered free with the purchase of a bread bowl pasta item.

Although competitors have similarly added to their menus, Domino’s chocolate cakes should stand apart, Brandon said.

“Right now we really don’t have anyone out here with anything like this in the United States,” he said. “This will really be something that is new and different.”

Pizza Hut sells “Hershey’s Chocolate Dunkers” dessert sticks and cinnamon sticks, while Papa John’s sells dessert items such as the “Cinnapie.”

Shares of Domino’s are up 75 percent since January, but are 37 percent below year-ago levels.

Editing Bernard Orr

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