Global Food Forum: Covid fast tracks online food shift, Domino’s Pizza

Pizza king Don Meij tells Global Food Forum pandemic has brought forward by as much as 3 years his goal to be 90% online.

Domino’s Pizza Enterprises chief executive Don Meij believes the COVID-19 pandemic that has accelerated the shift to online by consumers has brought forward by as much as three years his goal to have 90 per cent of his pizzas ordered and paid for from smart phones, laptops or other digital devices.

Speaking at The Australian’s Global Food Forum on Wednesday, Mr Meij also said the food retailer was now facing for the first time in decades stable input prices with key costs such as borrowing rates, electricity, rent and wages flat or deflationary.

Looking across food supplies Mr Meij noted that the pricing of cheese remained incredibly volatile and that despite the disruptions to abattoirs due to COVID-19, especially in Victoria, the pizza chain was still able to secure its meat orders at reasonable prices.

Mr Meij, whose Domino’s business operates the famous pizza brand in Australia, New Zealand, Japan, Germany, France, Denmark and the Benelux countries, believes the food retailer can use COVID-19 and the pivot online to ramp up its penetration of online sales.

In fiscal 2020 Domino’s total online sales rose 21.4 per cent to $2.36bn, making up 72.1 per cent of all sales, with Mr Meij keen to get that to 90 per cent.

“We think we have seen an acceleration that has brought the future forward about three years,’’ Mr Meij told The Global Food Forum.

The Australian's Eli Greenblat with Domino's Don Meij

“So when we would look at our business model and strategy, we used to predict that 50 per cent of all takeaway food would be delivered via an online transaction by 2028 or 2030 and it feels like that has been brought forward by three years.

“So all the trends that we would have experienced have been compressed, now our feeling of getting to 90 per cent – and just so you know we already have (Domino’s) Germany at over 85 per cent – is that our pick-up business goes online.

“Here our customers didn’t really see the benefit previously in every case, we were 85 to 90 per cent of our (home) delivered sales being digital, but (store) pick up was only 50 per cent, well with carpark delivery because that is an online transaction we have seen that accelerate really quickly.’’

Mr Meij said consumers were feeling more comfortable with shopping online for pizzas, choosing their meals and Domino’s was booking better profits on digital orders.

Although COVID-19 has also brought with it added costs in terms of cleaning and other health protocols for the stores, Domino’s was able to better communicate, market and engage with customers online that was building a relationship with them for the long term.

The pizza group, which last year booked total network sales of $3.27bn, is also benefiting from more competitive input prices that was helping to flatten its cost of doing business.

“For the first time in maybe decades we are actually seeing that most of our costs are quite stable, so interest rates are at record lows, our property prices are actually in many cases deflationary because there unfortunately has been a lot of distress in retail so we are instead of endlessly getting year after year of rent increases, or up every three years of a lease, we are now experiencing either flat to deflationary rents.

This is an online dinkus for the global food forum

“Even electricity, utility costs are quite modest, in our business labour costs for us are the flattest they have been in recent years. We were seeing really dramatic increases in inflation around the world as the shortage of delivery drivers meant that the market price to get drivers was often higher than government mandated agreements.

“Really most of our costs are at flat to deflationary right now, which is allowing us to make sure we are keeping our pricing quite aggressive to service customers that we know are also a lot more price sensitive.”

Turning upstream to his own suppliers, Mr Meij said Domino’s had maintained continuity of supply before and during COVID-19 at a time when other chains had struggled to obtain key fresh ingredients.

“Some businesses have had to shorten their menus, I’m really proud to say we have kept every single menu in our nine countries we are operating in exactly as it was pre-Covid, and even offered new products, one of the things about that is that relationships are more than just the soft commodity price.

“I think that is often lost on some companies when they only negotiate in tenders on price where at Domino’s price is important and we need to make sure we are getting the right value in the marketplace, so is that you make sure you have the right service, the right quality, the right innovation with (supplier) partners.”

For its biggest food commodity, cheese, Domino’s had witnessed record highs and record lows all in the space of a five month period in 2020.