This paper examines the strategic alignment of California Pizza Kitchen's (CPK) mission, organizational components, and expansion decisions in the context of the post-2008 economic recession. The analysis focuses on two key moves — the rollout of CPK ASAP fast-casual airport outlets and the Kraft/Nestlé pizza licensing agreement — evaluating how each affects brand equity, customer experience, and long-term profitability. The paper argues that CPK's rapid, price-driven expansion risks commoditizing a brand built on premium, experiential dining and recommends recentering strategy on value delivery and full-service restaurant quality as the sustainable path to growth.
The mission, strategy, and organizational components critical to the long-term viability and success of California Pizza Kitchen (CPK) need to be focused on delighting and exceeding the expectations of customers on a regular basis. Due to the many threats and opportunities the company has had to navigate in the midst of an economic recession, however, the mission, strategy, and organizational components are not as aligned as they need to be for CPK to gain new customers and profitably extend their brand globally.
Choosing to create the low-end CPK ASAP stores in airports internationally partially solved the lack of geographic distribution, yet detracted from the customer experience and risks positioning CPK as a commodity. The same could be said of the very profitable strategy of allowing the licensing of their pizzas to Kraft, who sold their high-end pizza business to Nestlé in 2010. Of these two strategies, the one least congruent with CPK's mission, strategy, and organizational components is the development of the ASAP stores (Ruggless, 2007).
What CPK needs to consider is how to sell more on value and less on price and availability. The current strategic direction is increasingly commoditized in nature, risking long-term brand strength for short-term financial gain. CPK needs to reconsider its direction and put delivering value and exceptional customer experiences at its center first, then build expansion strategies on that foundation.
CPK has responded quickly to the threats of an uncertain economy and the need to grow geographically by making rapid expansion plans with its ASAP chain of outlets in airports globally and entering a licensing agreement with Kraft (now Nestlé) (Fair Disclosure Wire, 2010). This has addressed the liquidity pressures and flat revenue growth caused by consumers reducing visits to full-service restaurants and the rising costs of real estate investments. It has not, however, created more value or contributed to a greater level of customer experience in CPK's flagship restaurants. By choosing the ASAP stores and licensing route, the brand is becoming more commoditized and less differentiated on the value and experience the company is capable of delivering.
CPK initially defined itself as a unique, high-quality restaurant chain that centered its messaging, menu, market position, and location selection on delivering a distinctive experience. The CPK full-service restaurants are brightly lit, family friendly, and high-energy, with open kitchens viewable by patrons, striving to be upscale yet affordable. The value proposition was originally focused on excellent food that was uniquely Californian, delivered in a fun, high-energy yet relaxed setting. This attention to detail and quality in regional full-service restaurants led to high levels of customer loyalty and established the brand as a favorite with families.
As the global economic recession began to affect the incomes of these loyal customers, per-ticket spending and visit frequency declined through 2009, with 2010 seeing a slight gain in sales in the flagship restaurants throughout the west coast of the U.S. (Fair Disclosure Wire, 2010). During this same period, the Kraft Foods partnership was heavily invested in to generate greater profits by licensing the food company to produce and sell CPK pizzas through retail channels. Nestlé has since purchased the high-end pizza business from Kraft, which could further dilute the brand. In 2007, at the onset of the recession, CPK rushed to create the ASAP chain, which has had mixed profitability yet achieved the strategic goal of broadening the company's geographic reach. The decision to sell off stores in the 2006, 2007, and 2008 timeframes also harmed the company's ability to deliver consistent value (Fair Disclosure Wire, 2010).
"ASAP stores vs. full-service investment trade-offs"
Putting value back at the center of the CPK business model is critical to growing long-term profitability. CPK senior management needs to confront the paradox that the ASAP locations present: the strategy achieves greater geographic reach yet potentially sacrifices brand value. Ironically, the same investment directed at the CPK ASAP locations could just as easily have been applied to two or three strategically located, larger full-service CPK restaurants, resulting in more focused and effective internal systems.
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