Luke McClelland from Wanganui was Domino's Pizza franchise manager of the year in 2007. Photo / Wanganui Chronicle

Luke McClelland from Wanganui was Domino's Pizza franchise manager of the year in 2007. Photo / Wanganui Chronicle

The cut-throat pizza business in New Zealand is gearing up for a new round of hostility, as market heavyweight Domino's and Hell try to hold on to slipping profit margins in a world of soaring cheese prices.

Domino's - which pitches itself as the "value" end of the market - is tomorrow launching a new, healthier pizza, hoping its fat-free crust will attract punters watching the kilos as well as sport on the TV.

It is also staging a push into the "premium" side of the market, where it will find itself in a more direct fight for customers from local pizza heroes, Hell Pizza. A new push to online ordering is also under way, with Domino's this month rolling out its new internet ordering process.

Statistics New Zealand last week reported a 14.7 per cent jump in butter and cheddar cheese prices - prices difficult to pass on to pizza buyers taking advantage of fierce competition between Hell, Domino's and once-dominant Pizza Hut.

Pizza Hut used to command the biggest slice of the market but has been in steady decline for a few years, slugged on one side by the popular iconoclastic Hell brand and on the other by the cheaper Domino's.

"Pizza Hut continued to experience tight trading conditions in a competitive market, which had meant a continuing short-term sales decline," said the stock exchange-listed owner Restaurant Brands in December.

Total sales for the quarter were down 13.4 per cent, with same store sales falling by less than 9 per cent. Year-to-date sales of $56.5 million were down 9.7 per cent, and down 6.6 per cent on a same-store basis.

"Marketing strategy changes, which started to be implemented towards the end of the quarter, were expected to deliver better sales in the last quarter of the year," the company said.

Pizza Hut store numbers fell from 105 in the third quarter last year to 98. Restaurant Brands is progressively closing its "red-roofed" restaurants as leases expire or the "opportunity arose to exit a store".

Despite sales heading through the floor at its Pizza Hut rival, the fast-food industry is in good shape, says Colin Mellar, general manager of Hell in New Zealand. Hell enjoyed some huge sales increases in a record two weeks over Christmas, he says. "That was a bit out of the bag. We were ready, not so much to 'batten down the hatches', but expected the Christmas period to be patchy. But we got a couple of nice surprises."

Domino's is now increasingly looking to "come and play a little in their market", says Mellar.

"They are the cheaper end. We are not of a mind to play too much in that market, but sometimes it's interesting to have a look over the fence.