The Market

by Simon Lord

last updated 08/06/2020

Simon Lord is Editor of Franchise New Zealand and has a background in the fast food industry.

Georgie Pie - BACK ON THE MENU

by Simon Lord

last updated 08/06/2020

Simon Lord is Editor of Franchise New Zealand and has a background in the fast food industry.

From the archives June 2013 - McDonald’s are looking to dominate a new market by bringing back one of NZ’s best-loved brands. Simon Lord takes a deeper look at the strategy behind the relaunch of Georgie Pie

June 2014 - Do we still have the appetite for Georgie Pie? McDonald's is trialling bringing back New Zealand's very own fast food pie brand..

Update - June 2020. After seven years, McDonald's is taking Georgie Pie off the menu again due to lack of demand.

It’s the brand that, for many people, defined a Kiwi childhood. The Georgie Pie sign promised a wide range of pie flavours, a ‘Funtastic Value’ menu where everything sold for $1, $2, $3 or $4, and a family-friendly atmosphere including the classic (if not always hygienic) ball pools. Best of all, it was New Zealand’s own home-grown alternative to the global fast food giants, proving that the Kiwi pie was more than equal to anything that came out of the US of A. Georgie Pie was the ‘think big’ project that people loved.

But although the Georgie Pie star burned bright, it burned briefly. Its first restaurant opened in 1977 and for some years it remained relatively small and Auckland-based, but by 1994 it had 26 restaurants serving a reported 600,000 pies a week. The company’s owners, supermarket chain Progressive Enterprises, embarked upon an ambitious plan to open 25 new restaurants a year, with a goal of having 114 restaurants by the end of 1998. To fuel this expansion, a state-of-the-art factory capable of producing over 6,000 pies per hour was built in Mangere – but it proved a step too far. The facility was expensive, hoped-for overseas expansion never happened and when the company tried to address its problems by raising its prices, customer numbers started dropping. By 1996, Georgie Pie and its 32 outlets were up for sale.

The two obvious buyers for 32 purpose-designed fast food restaurants were McDonald’s and Burger King. Burger King was just launching in New Zealand and such a purchase would give the company instant credibility in the market – something McDonald’s could not afford to let happen. So McDonald’s paid slightly over the odds for Georgie Pie, acquiring 17 outlets for conversion and closing the others. As part of the deal, it also acquired Georgie Pie’s intellectual property, including the brand and recipes for the pies that had captured the hearts and stomachs of the nation. The last Georgie Pie closed in 1998.

Will It Be Viable This Time Round?

Now Georgie Pie is back – in a limited fashion, at least. McDonald’s is trialling a single Georgie Pie-branded product in 11 McDonald’s restaurants around Auckland and the Waikato. The test will enable the company to evaluate the product from a number of angles: operational efficiency, business impacts, product mix and customer reaction. If successful, McDonald’s says it hopes to roll the product out in a national launch later this year and may later add other Georgie Pie flavours, including dessert pies.

Georgie Pie has attracted a lot of nostalgia over the years, with a ‘Bring Back Georgie Pie’ campaign and a Facebook page that attracted over 57,000 likes. It’s not surprising, then, that the announcement that Georgie Pie was to return received huge media coverage, with the press conference at McDonald’s in Greenlane, Auckland (the former Georgie Pie flagship store) attracting a packed crowd of journalists. However, coverage and social media comment may have been less positive than McDonald’s hoped for, with considerable criticism aimed at the company for its pricing, the lack of choice (only one flavour, Steak Mince ‘N’ Cheese), and the fact that McDonald’s would be selling through its existing outlets rather than opening new dedicated Georgie Pie outlets. As one disappointed soul wailed on Facebook, ‘I wanted Georgie Pie back but exactly as it was.’

McDonald's NZ managing director Patrick Wilson makes the announcement thousands of Facebook followers have been waiting for - Georgie Pie is back.Patrick Wilson, McDonald’s New Zealand managing director, has been philosophical about the criticism, though. ‘The original Georgie Pie came to an end because it simply wasn’t viable,’ he said. ‘We think we’ve found the right balance to make it sustainable.’ And that balance is unlikely to include the building of dedicated Georgie Pie restaurants. ‘It costs $4-5 million to get a new restaurant up and running – we see Georgie Pie more as being complementary to McDonald’s existing menu.’

Just how complementary remains to be seen. The new pie is around 190 gms after cooking and sells for $4.50, compared to the Quarterpounder at 187 gms and $5.80. While McDonald’s aren’t about to disclose margins, Patrick admits the pies have lower margins although they require less make-up time in store, reducing labour costs. In addition to the much-criticised $4.50 price, the pie is also available as a medium combo at $6.90 or a menu add-on at $4.00 when purchased with any other McDonald’s combo meal.

Old Recipe, New Challenges

McDonald’s has made a big point of following the original much-loved recipe faithfully, including Georgie Pie’s unique short pastry formed in the distinctive square shape of the original pies. The company recruited former Georgie Pie general manager Brian Popham to consult on the product research and development process, and is producing the product on the original Georgie Pie production line in Mangere, now owned by Goodman Fielder. The whole process has taken two years and Patrick Wilson says that the only significant change to the original recipe was the removal of added monosodium glutamate. The result lays to rest the fears of the former MD, Mark Hawthorne, who once suggested that the original recipe product would ‘taste like cardboard’ these days.

The pies are produced with part-cooked fillings and flash frozen before being delivered to restaurants. Each restaurant then bakes on site, which has necessitated the installation of special computer-controlled cooking and warming ovens. This presents a new set of challenges to operators, admits Patrick Wilson – pie preparation time is 30 minutes, as opposed to the maximum 6 minutes of any product in the current range, so forecasting of demand is essential. This is somewhat off-set by the increased hold time, which may be up to two hours (although many other pie operators hold for double that period or even more).

We Got Absolutely Slammed

At 10.15 on the morning of Wednesday 5th June, Mark Rush was a nervous man. In just 15 minutes, the long-time Georgie Pie fan would see the return of his favourite Steak Mince ‘N’ Cheese pie – but Mark had more invested than most. As franchisee for McDonald’s Queen Street, he’d championed the Georgie Pie trial and his restaurant was one of just two selected for the relaunch. ‘But it was all calm and quiet outside with 15 minutes to go,’ he recalls. ‘I was wondering, “Where are all the customers?” Then at 10.30 the hordes rushed in and we got absolutely slammed!’It's back - the queue outside the Queen Street, Auckland, McDonald's waiting for the first Georgie Pies to go on sale.

The restaurant had installed three ovens and built up stocks in advance, but ‘We had some capacity issues,’ Mark admits with a grin. ‘The first couple of hours were hard for all concerned and it was pretty hectic, but our customers were very good-natured. That afternoon we installed another two ovens and the second day was very successful. A lot of customers came back for more and there was no wait for the product. Best of all, people were saying, “This is the pie I loved.” Like me, they could still remember the taste even though the last time was 15 or 16 years ago.’

  It sounds strange to hear a McDonald’s franchisee singing the praises of Georgie Pie, especially one who remembers when they were the opposition. Mark has been with McDonald’s for 26 years, starting as a crew member in the franchised restaurant at Henderson Square, then moving around new stores before joining the company and working his way up through the operations division. After a spell as project manager deploying IT initiatives throughout the Asia Pacific region, he fulfilled his dream of becoming a franchisee himself. Today he owns five restaurants in central Auckland and Newmarket and is one of five elected members on the McDonald’s New Zealand marketing executive.

‘I’ve been a fan of bringing back Georgie Pie for a long time,’ he says. ‘You don’t want to die wondering about anything and I wanted to know how it would resonate with the consumer all these years down the track. So when McDonald’s started getting serious a couple of years ago, I was quick to put my hand up to be part of it. As a franchisee testing the product, my role is to get involved and gain first-hand knowledge of the impact on my business and what my customers are saying. There are five franchisees involved in the trial and it gives us a lot more understanding when we look at the data and have to decide whether to roll it out nationally. It takes quite a hefty investment to do a product roll-out like this one and I think one of the reasons McDonald’s is so successful is that franchisees have the ability to be really involved in those decisions.’

Attracting More Customers

In among the carping of people saying ‘McDonald’s have priced it so high they must want it to fail,’ there have also been suggestions that the only reason McDonald’s are testing the product now is to maintain its legal control of the Georgie Pie brand and intellectual property – in much the same way as Ford use the name ‘Escort’ on limited-edition versions of other models from time to time.

While that may be an additional benefit, Mark Rush’s report of the opening days suggests the main agenda lies elsewhere. ‘The launch of Georgie Pie has brought in a lot of new customers. It’s interesting to see how many 30 and 40 year-olds are lining up at the counter in Queen Street, rather than the students we usually get.’ Bankers and corporate executives re-living their youth? ‘Absolutely – Georgie Pie’s attracting a lot of people we haven’t connected with for a while.’

Patrick Wilson confirmed that at the launch when he told Franchise New Zealand, ‘While we don’t mind customers trading up from a quarterpounder to a couple of pies, we essentially want more new customers coming in. We see this trial as widening our range and enhancing our restaurants even further.’ And that’s what the Georgie Pie relaunch is about. Over the past few years, McDonald’s has re-invented itself in many ways, from pushing healthier options to changing its entire system to cook-to-order and offering a slightly more upmarket experience with McCafés. But at the same time, the quick service restaurant market is under greater pressure than ever with Subway and Pita Pit at the healthier end of the spectrum (in consumer perception, at least) and a revitalised KFC and Carl’s Jr. delivering at the other – still popular – end. The lamb burgers and wraps which McDonalds’s launched last year were discontinued shortly before the Georgie Pie announcement having failed to reach sales goals after the initial surge.

‘2012 was a tough time for the whole market; it does seem to have contracted,’ Patrick says. ‘But I think you’ve got to continue to try different products. Some of them are going to be spectacular successes, some aren’t. Lamb definitely has a place somewhere; we’re just trying to figure out what we got wrong. Maybe it was just that the product was too big.’ Now the company is playing the Georgie Pie card, cashing in on a nostalgic brand while entering a whole new market segment for McDonald’s.

Seeking A Slice Of A Bigger Pie

The pie market is not a small one but, intriguingly for McDonald’s, it has no dominant player. Mark Hawthorne, the former MD of McDonald’s NZ who now heads the Asia Pacific region for McDonalds, suggested to me that, ‘The pie market in NZ is, what, 70 million pies a year. If we could capture just 20 percent of that market, at $4.50 a time that’s not shabby business.’ Actually, it adds up to a remarkable 63 million dollars.

Industry analysts have been sceptical that, even with McDonald’s brand power and reach, it could achieve a 20 percent share of such a fragmented market. However, figures suggest that just 5 percent share could add over $20,000 profit contribution per store and, with new customers and add-on sales on top, reviving Georgie Pie could prove to be a shrewd move.

Since the brand’s demise there have been several attempts to establish specialist pie franchises in New Zealand, including locally-developed Pie World and the South African chain King Pie. The only one to have achieved some measure of success so far is Australian chain Jesters, which has 17 outlets around the country. Grant Rawlinson, the NZ master franchisee for Jesters, told us, ‘We are excited for the whole category of pies to be put back on the table and up for discussion. Pies are a Kiwi institution; certainly Georgie Pie had a strong following and I am sure there will be those who will enjoy them once again.’ Another Australian chain, Pie Face, announced in 2012 that it aimed to open over 60 stores throughout New Zealand over the next 10 years. McDonald’s has over 160 restaurants.

Is It Financially Sustainable?

Whether Georgie Pie is back to stay now depends on results of the trials over the next few months, and that’s a decision that rests as much with McDonald’s franchisees as it does with their management. ’80 percent of our restaurants are franchised,’ says Patrick. ‘We have 52 franchisees, all very different personalities with their businesses in different states of health, so there is some nervousness. That’s why we’ve had to pilot as opposed to going national straight out. It’s not just the investment; it’s what happens with the product and whether it’s financially sustainable.

‘If we were to go to national launch we’d look at a broader range of products because, going back to the franchisee, unless it’s actually building the worth of their business it’s very hard to convince them to invest the capital. It’s not McDonald’s dollars we’re investing, it’s theirs, which I think is actually healthy for us as a system – they’re smart, independent business people. And because they are Kiwis themselves they understand the Georgie Pie brand and are interested in how we can make it fit with McDonald’s. After I discussed this with them, I have never had so many emails or calls saying, “I want in on the trial.”

‘Our research suggests that Kiwis still have a big appetite for their favourite pie brand. We’re hopeful that after the launch excitement, our customers will come back and enjoy what is a great tasting, quality product. We will then evaluate the pilot and look at options for a nationwide rollout.’

And Mark Rush feels the same. ‘There’s been a lot of work and research and hard thinking gone into this, and I think everyone’s been concerned to get the balance right – to do the right thing by Georgie Pie without being too protective of the Golden Arches. Personally, I’d like to see it succeed and see more flavours brought in to keep the Georgie Pie brand fresh long-term. Blackberry and apple, that’s one of my favourites…’

Simon Lord is Editor of Franchise New Zealand and has a background in the fast food industry.

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