In Good Company with Nicolai Tangen - Dominos CEO: Pizza, pineapple, and courage

Episode Date: January 31, 2024

Dominos was founded in 1960 by two brothers. Now they are the largest pizza company in the world, serving over 1 million people daily across 20,000 locations globally. Their CEO Russell Weiner talk about what makes a good pizza, their unique marketing campaigns, new delivery trends, and can you have pineapple on a pizza?The production team on this episode were PLAN-B's Pål Huuse and Niklas Figenschau Johansen. Background research was done by Sigurd Brekke with input from portfolio manager Irene Jensen.Links:Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

Hi everybody, today I'm speaking to Russell Wehner, CEO of Domino's, the largest pizza company in the world. Domino's was founded in 1960 by two brothers. Now they are serving more than 1 million people daily across 20,000 franchisees. We own 3% of Domino's, translating into 4 billion Norwegian kroner or 400 million US dollars. Now, this is going to be a fun conversation. We aim to settle the biggest pizza debate ever. Is it okay to have pineapple on pizza? Should you use fork and knife? And lastly, will he join me to the world championship in pizza in Italy? Tune in.

Well, hi everybody. I'm super happy. I'm here with Russell Wehner, the CEO of Domino's Pizza. Very welcome. Oh, thanks so much for having me. Now, given that we have the honor of having you on, we have to kind of start with the most fundamental question in pizza science. Yeah. One that I'm wondering a lot about. Is it okay to have pineapple on a pizza? You are now, you've been given the okay to have pineapple on your pizza. Yeah, I'll tell you, the thing that is amazing about pizza, it's got these three core ingredients. It has dough, sauce, and cheese. And you can pretty much put anything in the world on it. And it tastes great.

You know, we're in 94 markets around the world. So I've had things that I didn't think as a, I grew up in New York, as a New Yorker eating pepperoni pizza my whole life that I'd ever have on a pizza, like shrimp and, and corn and, and all these different great cheeses. Pineapple is absolutely included. There are 34 billion ways to make a Domino's pizza. Sounds good. So, of course, I ordered one in here. I'm actually eating it as we speak. So here we go, right?

So how do you see whether this is a good pizza? What makes a good pizza for you? Well, we've got folks who go visit our stores two or three times a year to do kind of spot checks, as well as we take customer feedback. But pizza making is actually pretty difficult. Actually, one of the innovations we're launching into our stores over the next few years is what we call an auto stretcher. is what we call an auto-stretcher. Because stretching pizza usually takes about 20 shifts for someone to get good. With the new auto-stretcher, it takes about two.

And so why stretching is so important is unless, you know, if you have your center that's too thin or what have you, you can really have... Look, like I said before, anything with dough, sauce, and cheese is going to taste good. But we want the ingredients to be in the right place. We want the pieces to be crunchy and not soggy. And so those are all the things that we look for.

What are your best sellers? Not surprising, pepperoni, cheese, sausage, mushroom, are 40, 50% of what we sell, at least here in the States. Now, I always order American hot with extra jalapenos. Cheese, sausage, mushroom are 40%, 50% of what we sell, at least here in the States. Now, I always order American hot with extra jalapenos. Do people always eat the same one? No. I mean, the great thing about pizza is it's a shareable occasion.

Our head of international always says, you never hear anyone talk about, oh, let's have a chicken party. They say, let's have a chicken party. They say, let's have a pizza party. And the thing about pizza parties, it's shareable. And that's where you get to really try and experiment with other people. So like me as an example. So like I told you, for me, I'm a pepperoni pizza guy. But I remember when we were working on our specialty pizzas, my wife's a vegetarian. I worked with our folks in the test kitchen. I said, you know what? We need a vegetarian pizza that I can eat with my wife.

And our vegetarian pizza is my second favorite to pepperoni on the menu. And so we really have something for everyone. And I urge people, the beauty of Domino's is you can mix and match even within the pizza. So try something you've tried and try something new. What are the main trends you're seeing now in the pizza market globally? We started a lot of the trends back when digital ordering was nothing. People used to call and come in, and Domino's and the pizza companies in general were the ones who started online ordering. And us and our major competition were kind of upwards of 80% digital ordering. When you think about the pizza companies today, well, by the way, people are catching up, right?

So now you've got aggregators. And so everyone from mom and pops to burger places are now digital. mom and pops to burger places are now digital. The next steps for pizza is really, I'd say there's something that everybody's doing and there's something that pizza is doing. If you run a restaurant today and you're running the scale, you've got to be working with big data, data on your customers and data on how to optimize your operations

and using AI around that. We could talk about that if you want. And that's what you're seeing in general, the restaurant industry. Within pizza, folks are starting to do what I talked that Domino's did a while ago, which is launching items that go with pizza that may be a veto vote. So you've seen a lot of single-serve sandwiches and items like that that have been launched recently. Now, you're basically a technology company, right?

People call us a technology company. I think that one of the biggest compliments I heard one time was that Domino's is a technology company that's a marketing company that just happens to be a pizza company. When we look at our business today, and we just launched a new five-year strategy with investors, we took them through it on December 7th, one of the things that we realized we need to lean more into is the deliciousness of our product. And so I think while we will always be, technology will always be an enabler

and we're always going to be at the forefront. We have to be at the forefront of deliciousness. Technology can support that. But I think what we've seen is when we spend too much time talking about technology, even though we have the best pizza in the business, we don't get credit for it. And so today, this is one of the first interviews I'm having where I still want our amazing team to get credit for all the technology we're going to do.

And we're going to continue to lean in. But if we don't drive deliciousness, if we don't have people thinking of us as a pizza company, what technology is, is an enabler. All we want as a pizza company is for the product to be great, for the service to be great, and technology is a part of that. But it's part of us being fanatics about the pizza experience. How important is the books? Oh! I read about somebody collecting pizza books.

He had like 1,800 different ones. Well, let me tell you, there are things in your life that when you look back, you said, oh my God, this thing was meant to be. And for me, it was Domino's. And I'm not kidding you. And it has to do with pizza box. So in college, you know, like any college person, me and my roommates, we didn't have a lot of money,

didn't have a lot of furniture, but we'd pool our money once a week and we'd order Domino's pizza. Hand to heart on this. And the boxes were so sturdy at Domino's because we were a delivery company. And so boxes need to be piled on top of each other without hurting the product. The boxes were so sturdy that we would make furniture out of them. So my end table were five pizza boxes on top of each other. Our TV was at a bunch of pizza boxes. This was in college. And so I talked to college friends and they say, wow, this Domino's thing was meant to

be a long time ago. So the boxes have to be sturdy, but they're also, it's all about quality. And so there's venting in the box that enables the product to stay hot while not being soggy and so boxes are critical to us now because of all the boxes we do we also want to make sure we're um doing as much as we can to minimize our impact on the environment and so 70 of the materials used in our boxes are recycled. How long time do you spend folding a box? Are you fast? I was much faster in folding boxes and making pizza when I started.

The interesting thing, though, is we've completely revolutionized the way. It's just a box. But all of these things that you do over time make your operations better. So if you walked into Domino's five years ago, it wouldn't look like a pizza store. It looked like a box factory because what we did was our guys got it and our team members came in early. They would fold the boxes. All the boxes would be folded. The pizza would come out of the oven. We'd unfold the box, put the pizza back in, and then refold it. So three times.

During COVID, we had some real volume pushes, and we had some shortages on people. And so we completely redid our circle of operations. One of the things is boxes. So even someone like me now can fold a box quick. Because we don't pre-fold, unfold, and refold. All our boxes are flat outside of the oven. When a product comes out, you put it on a flat box, you box it around the pizza, and then it goes out.

So it's only one fold, and it's a significant time-saving. It makes the job easier too. You mentioned that you had this big pizza turnaround when you joined as a marketing officer. Tell me about it. Why was it necessary? I mean, how bad was the pizza at the time? It was the pizza and the business. And so just a little bit of a background. So I joined in September of

2008. And we were just on our way to our third negative year of same store sales in a row. In September, the stock was maybe around 14. By November of that same year, it was below $3. Yeah. And a good number of our franchisees were running below break even at that point. And so, you know, it was a it was a when we looked into all of the opportunities, do this, but I'd urge you to. There's how something tastes, and then there's how the brain perceives it. And so one of the best things we did, and this was just an accident one day, I asked someone to do this in research, is we took our pizza and we put it in a competitor's box. And we put a competitor's pizza in our box. So not only did Blind did our pizza not taste as good as the competition, it wasn't a huge difference, but it wasn't as good. But the bigger thing was the brand issue. We put our pizza in somebody else's box and all of a sudden it

tasted better and vice versa with theirs. And so the biggest thing with the pizza turnaround was not just changing and improving the product. It was a marketing behind it. I think the marketing was the bigger piece of it because we had to change 50 years of perceptions around the brand. And how did you do that? What kind of things did you do? Yeah, so I'm a big believer with marketing. I'll take you back to running. I was writing the creative brief, but I was the marketing guy at the time. I was writing the creative brief. And I went on Google. This is 15 years ago, Google. And I Googled new and improved.

And I got 14 million hits. And I realized we can't just say this is a new and improved Domino's pizza. Everyone says new and improved. That doesn't mean anything. And so how do you get people to really listen? And we started throwing around this idea called tensions. And the idea here is if you understand the tensions in your brand and you understand the tensions in society and you can address those two together, you've got a big idea. And so the tension in our brand back then was we were a pizza company and our pizza didn't taste very good. That was kind of a secret we weren't telling everybody. pizza didn't taste very good. That was kind of a secret we weren't telling everybody. Not that people will walk in the hall saying, oh, I know our pizza doesn't taste good. But in theory, when you think about the tension, this was a pizza company sitting on a pizza.

They knew they'd get better. Well, what was going on in 2009? That was when the banks were going under. The CEOs of the car companies were flying down to DC to ask for bailouts. And so what customers were telling us the tension was in their life is, I can't trust anybody anymore. Whether it's the companies, the banks, nobody's telling me the truth. So we felt like, all right, well, I know we're just a pizza company. But if the world wants to hear the truth, and we have a truth that's pretty harsh, we will be doing something that everybody wants all the pillars of society to do, even though it's just a pizza company. And that'll get people talking. And that's what happened. So we went on air with this background, with these tensions of everyone in the world seems to be lying to me, kind of the American

consumer thinking that. And we went on, we told them the truth. And more importantly, we did something about it. And it was the most amazing experience to be a part of. We were three days away from running out of pepperoni. We sold so many pizzas. We were all going out and working the stores. And that was just the start of the turnaround. So what did you do? You took out an ad and say, listen, guys, we've been fooling you the whole time. We produce really bad pizza. We didn't say we out an ad and say, listen, guys, we've been fooling you the whole time. We produce really bad pizza. We didn't say- But now we're going to make it better. I mean, we didn't say that we were fooling them because we weren't.

I think over time, what happens with any company, now it won't happen at Domino's anymore. Think about this. Think about the quality of product X is over here. Well, you want to save money. So what you do is you take some ingredients, change them around, and you say, is the new product X, does it statistically taste the same? It does. But then you do a statistics on that one, and you innovate on that one. And all of a sudden, five generations later, this product does not taste like this product.

Five generations later, this product does not taste like this product. And so what we did not have and we have now is a gold standard. And any change we make has to be better than the gold standard. And what had happened over time is from a cost perspective and sometimes even just to enhance the quality of the delivery, the product changed. And it wasn't like we were significantly worse than the competition, but it wasn't where it needed to be. And I said, this perception was there about us. So yeah, we went on. It's one of the best scoring ads in the history of, certainly of QSR, where we went out there and we said, hey, actually, we had customers do it. We showed customers the pizza. We talked to them about the brand.

And we showed what they said about the pizza. And then what we did was, using some reality TV techniques, we surprised them at their house with the new pizza, showed them what they said about the pizza, and said, hey, what do you think? And people just were blown away by the transparency of it. And then we had all this other stuff online and tell me I'm getting, I get really excited about this campaign. Did you do anything internally as well?

So you told the clients that you, you know, that you weren't good enough. What did you do internally with, with yourself? Well, we, obviously there was lots of data behind all this right and so it was clear to you know our our management that um the new pizza was better but because we also did what was then considered a pretty risky ad um you know you don't want to be the new coke of um you know of pizza uh we we tested the ad and we had a backup ad. And so we felt like we were prepared there from a risk mitigation standpoint. But the other piece was we had franchisees. We had franchisees who had put their heart and soul and their lifeblood into this brand. And we wanted to

make sure they came along with us and they understood why we were doing what we were doing. And we wanted to make sure they came along with us and they understood why we were doing what we were doing. So we did a couple of things. One is we actually went out and did a roadshow. We had a blind taste test of the old product versus the new product. And literally, I remember to the day, literally only one person. And nobody knew what the old one was. It was A and B or C and D or whatever it was. Only one person liked the old product better.

And so we got their buy-in. And once they were all in, we were able to go for it. So it was a great example of partnership turning around the business. One place where your business hasn't worked particularly well is Italy. Well, I think a couple of things. One is having the right partner.

For example, I look at our China business now and it's on fire. It was not that way with our first partner. And so you've got to find the right partner. It was not that way with our first partner. And so you got to find the right partner. And you got to make sure you launch the product that's right for that environment. When we look back into what we did in Italy, the decision was made to launch a product that tasted more like an Italian pizza versus embracing really who we are. And so Italy is a huge market for us. At some point, I'm sure we'll give it another shot.

But when I look back into maybe why that didn't work, I think those were two of the larger reasons. Right. Your pizza was too Italian. Well, we're not. You got to, if you don't love who you are, why should you expect anyone else to love you? Fair point.

Changing tides a bit here, what is it that drives you personally? At this point in my life and my career, it is leaving this brand and eventually whatever I can do broader in society, a better place. I know that just sounds really corny and maybe people just start understanding it when they get older. But Domino's changed my life, both in the opportunities it gave me and then turning the brand around from where it was to where it is today. And some of the best individuals and friends I have in the world are here, including our franchisees.

And so at this point, my feeling is I am both actively trying to drive the business today, but more importantly, leave it in a great place for the folks who are coming behind me because I know a lot of these people. So you may have a lot of CEOs saying, oh, I'm working towards the future because they know and look, I'm going to be doing this job for a while, but they know at some point when they retire, they're going to still be stockholders. I'm a, I'm a, I sound corny, I'm a hard holder in Domino's Pizza. So that, that's a real big piece for me. And then, you know, you know, outside of work, just trying to do what I can with, with kind of local and national charities, giving back, teaching, those types of things are just fulfilling.

But at this time of your life, you realize your kids will never listen to you, no matter how old they are. But for some reason, when you present to other people and you give them input, they listen to you. So that's fulfilling as well. Russell, what are your most important leadership principles? The biggest one for me is do unto others. It's just do unto others.

You know, you got to, I think there may be a couple of ways to do these jobs. One is through, you know, intimidation. We've all had those bosses. And the other is taking other people with you. Now, taking other people with you doesn't mean it's all hugs and happiness. Sometimes you're going to have clear, transparent, sometimes tough conversations. But I've always tried to, because in my career, I'm sure you too, you've had bosses that have

and haven't, like to treat people the way I would want to be treated. And that's something that we make sure that is part of our training program and part of what our leadership team does on an everyday basis. What are the biggest challenges you have in your leadership role? I would say that probably what is good for me in this role, there's a lot of challenges. I mean, someone asked me the other day and I said, you know, literally there's nobody brings you any easy questions. Like one day I just want an easy question.

So that's probably that and the fact that everything you do, the repercussions of a mistake on the business and people's lives, especially when you care about those people, it will keep you up at night. And so I think it's all about keeping that, keeping that perspective. What, what I am able to do because of my time here at Domino's is I want to be part of Domino's. I want to make Domino's better. And so what I'm able to do when decisions come my way is, is really just say, Hey, you know what? If, if, if we're doing the right thing for the business,

then that's the right thing for Domino's Pizza. And that's freeing. I think a lot of CEOs are, you know, believe me, I know you're an investor. We care about what our investors think. But I think what investors want is they should want a CEO and a leadership team that sometimes doesn't care what they think as long as it ends up in a better result. And everything we do here is with the desire to make Domino's better.

And that's a little freeing, I think. Which leader has had the biggest impact on you, personally? So her name is C. Nicholson just actually she just got married i just went to her uh her wedding a few weeks ago um why let me talk to you a little bit about why and when you talked about leadership principles you know so much of what i learned was from her there were other obviously people along the way she was your boss at some stage. She was my boss at Pepsi. So I worked at Pepsi for 11 years before I came here. And she was my first boss. She hired me in. And at Pepsi, this was during the dot-com boom.

And so all these public companies, or companies that were going to go public, are trying to hire Pepsi people to be in their business. I started as, there's a whole other story about how I got into marketing, because I never took a marketing course in their business. I started as, there's a whole other story about how I got into marketing because I never took a marketing course in my life. And the first part of my career was trying to compensate for that

and get over to do marketing. And C kind of gave me that chance. She hired me from another place and I was running marketing in their food service division, which is not very sexy from a marketing perspective. But anyway, what I was running marketing in their food service division, which is not very sexy from a marketing perspective. But anyway, what I was saying is all these people were leaving to go to these startups, internet startups. And I was maybe working for Sea for about four or five months. And I think they were running out of brand managers.

So they said, hey, who's got someone who they can move over to be brand manager on Pepsi? And she brought up my name. And very few people, when she was starting a whole new part of the organization, well, four months into her role, give up somebody? And that changed my life, changed my career. chief marketing officer at Pepsi and brought me over to be vice president of Cola's, which is a big job there. Well before I think most people would have thought I was ready. And then lastly, when Domino's was looking for a chief marketing officer, I guess I could say this now because it's 15 years ago, they actually wanted her. They kept calling her and calling her because they wanted a sitting chief marketing officer. And she said, I'm not going to do it,

but I got the guy for you. And they didn't want to interview me, but she got them to interview me. And obviously that brought me here and changed my life. So I think on the personal side, that's one piece. On the other side, on the business side, I'd say Dave Brandon, who's our, and I'm not just saying this because he's our chairman. I'm going to give you a really clear example about why that's the case. So I told you, we launched this new pizza.

We went on air with this really controversial, it seems now maybe not, but really controversial campaign. now maybe not, but really controversial campaign. When I pitched the idea to Dave, what I didn't know at the time was Dave was planning on retiring from Domino's and he was going to go work at the University of Michigan. He played their undergraduate on the football team. He was going to be the director of athletics. I would say nine out of 10 CEOs, when you bring them a controversial idea, that they can only be on the bottom. So if this controversial idea didn't work, Dave would have been the guy who screwed up Domino's. Maybe me, but he. And he would have been much better off telling me, hey, do that new and improved idea that you said wasn't really big. Just do it.

We'll be up 1%, and he could go on his way because he will have turned around the company. And he approved it with nothing to gain. I still say now to this day, I get credit. Certainly our former CEO, Patrick Doyle, who's another mentor of mine, should get credit. But that never would have happened if Dave was worried about anything other than the success of this business. And so those are two personal and business examples for me. They're both in different ways very brave, right? Yeah. Are you equally brave?

Well, I try to be brave from a business perspective. I mean, I could just point to that pizza turnaround campaign. Similar with people too. But what is important to me is I think about it as jumping out of an airplane. I think you got to be brave to jump out of an airplane. But you have a parachute. And so the key in business is to be brave and bold, jump out of that airplane, but have the parachute. So when we made the decision on the pizza, we had all the data. When we make decisions on people, we see what they've done and we look at not only the what, but the how. look at not only the what, but the how. And so I think when folks say take risks, if you just say take risks, that's just something to put on a t-shirt. You should take educated risks. There's still room for error. So I think I know I'm a risk taker. I try to be bold in our decisions.

But what I tell people is, I like to have the answers for the test before I go into the test. And so when we do these things, I hope to our customers and our team members they look like bold decisions, but we try to take them responsibly. When you make decisions, how important is gut feel? To me, gut feel is what brings it all together, right? So when you make decisions, hopefully they're not in a vacuum. You have a point of view of your leaders, you've got data, but there are no, as you know, there are no black

and whites decisions as you get further up in your company. They're all in your career. They're all gray. And what the gut is, is taking all those different points of ideas and bringing some fabric to them and interpreting that all together. And so I think that's a balance that I look for and that I feel like I have. That's a balance that I look for and that I feel like I have. And the other piece of it, though, is making sure you're surrounded by people who know they can push back. Because the day you think you know everything is the day you've failed.

And so gut feel is important. But also taking the input of the people around you that you trust is also important. Russell, we're going to finish off with some quick questions here, just short answers. So in 2016, the US presidential candidate was pictured eating a pizza with knife and fork, and that kind of destroyed his whole

campaign do you um do you use knife and fork knife and fork uh i do not use knife and fork i'm from new york by the way as a pizza guy however you eat pizza we we we we endorse that our only party here is the pizza party we're not any any political party. But I'm from New York. And in New York, what you do is you fold your pizza and you eat it like this. And it's even okay to drip a little bit on you. And so that's the way I eat my pizza. I wear it. Good. Some say never get high on your own supply. How often do you eat Domino's pizza? I could eat it. And I don't kid you this. I kid you not on this.

This could be my desert island food. You know when they say if you're stuck on an island, what could you eat? Absolutely it would be pizza, but probably two or three times a week. Yeah, so it's a bit like me then. Now, apart from Domino's, what's the best pizza experience you've had? There is a, I won't give the name, because I don't like, you know, we've got stores in New York too,

but there's a pizza joint in New York that just is fabulous in Manhattan. Yeah. Yeah. I think I've been there. It's very good. Now, lastly here, if I say a Bulgarian goat cheese cream with truffle,

what do you say then? It will taste good on a pizza. Well, it actually won the world championship this year. So I was wondering whether you wanted to come along to the world championship next time. Oh, the one in Italy? Yep. Are you going?

Yep, if you come along. Let's do it. Let's do it. Absolutely. Sounds good. Yeah, absolutely. Very good. Russell, we have a plan.

We got a travel goal here. It's been great having you on. Big thanks for feeding the world. And hey, I look forward to that Italian trip. Sounds good. Thanks so much. It was great meeting you.