On February 7, Domino's Pizza announced that it will close 205 unprofitable stores globally, with 172 of them located in Japan. Regarding this global store closure, Domino's Pizza stated that the purpose of closing the stores is to enhance profitability.

While Domino's Pizza is closing stores globally, it is expanding its presence in the Chinese market. In the first half of 2024, Domino's Pizza China, the exclusive master franchisee of Domino's Pizza in China (referred to as "Domino's China," with stock code 01405.HK), added a net of 146 stores and plans to open 240 stores in 2024. Domino's China also stated that it will continue to implement a strategy of deepening and expanding its network, further penetrating existing markets while entering more new cities.

Domino's Pizza announced store closures globally, while continuing to expand in the Chinese market. Domino's Pizza was founded in 1960 and currently operates over 21,000 stores in multiple countries and regions worldwide.

The majority of the closures are occurring in Japan. According to the International Food Exhibition, the pizza market in Japan is highly competitive. Well-known pizza brands such as Pizza-La and De Mae-can have already established a strong customer base. Although the food giant Saly's does not specialize in pizza, its pizza products offer high cost-performance ratios, directly competing with Domino's.

In the first half of 2024, Domino's China added a net of 146 stores and plans to open 240 stores in 2024. On November 15, 2024, the 1,000th Domino's Pizza store in Mainland China opened in Chengdu Wanda Plaza. In its 2024 half-year report, Domino's China also stated that it will continue to implement a strategy of deepening and expanding its network, further penetrating existing markets while entering more new cities.

Domino's Pizza performed well in the Chinese market in 2024, with revenue increasing for three consecutive quarters. In the first quarter, revenue grew by 5.88% year-on-year, by 7% in the second quarter, and by 5.14% in the third quarter. In the first three quarters, the company's revenue reached 3.263 billion yuan, up by 6.05% year-on-year. After five consecutive years of losses, Domino's China achieved profitability in the first half of 2024.

"Japan is a traditional core market for Domino's Pizza and a highly mature market, so the adjustment of stores in this market is a normal business practice. China, as a relatively emerging market for Domino's Pizza, has a better development prospect than Japan," said Zhu Danpeng, vice president of the Guangdong Food Safety Guarantee Promotion Association, to Red Star Capital Bureau.

However, it is not easy for Domino's China to maintain its lead over other brands while expanding. After Domino's, there are other brands such as Papa John's and Le Kaiser. Le Kaiser has built its brand with the "durian pizza," while Papa John's is accelerating its store expansion, planning to open 1,350 new stores in China's South China market by 2040.

Domino's, which takes pride in its 30-minute delivery service, is seeing its competitiveness in the Chinese market gradually weakened. The reason is that the 30-minute delivery service is no longer a bonus or an option but a necessity in the food industry. Additionally, Domino's delivery fee of 8 yuan is often criticized by consumers.

"Domino's faces many challenges in China. In terms of product category, pizza is now a common food item that no longer excites consumers. In terms of the overall environment, the Chinese market now emphasizes high cost-performance ratios, and the food industry is highly competitive with price wars," said Li Weihua.

If you would like to learn more about the food industry, please visit the SIAL China website for more information.

Source: Red Star News

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