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8/4/2009
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iPhone A Hit With Consumer Companies

Pizza Hut, Kraft, and Whole Foods are looking to iPhone apps to grow revenues in a tough economy.

Taco Bell and KFC are weathering the recession, since cash-crunched consumers can pick up a meal for less than $5. But Pizza Hut -- Yum! Brand's other big restaurant business--is a pricey problem. And that's where a new iPhone application could make a difference.

The Pizza Hut online meal-ordering app has been downloaded more than 150,000 times since it became available July 15. Pizza Hut hopes to increase the average daily downloads 20 percent by year's end, said Bob Kraut, VP of marketing communications, in an interview.

And while Pizza Hut doesn't yet have solid numbers on how often people are using the app, it's achieved an important milestone: Reaching 150,000 consumers with the financial means to own an iPhone, and spend a bit more on dinner.

"This is the next step, in terms of us going where the fish is," Kraut said.

These are tough times for consumer goods companies and retailers, with so many people cautious about spending. Conversely, Apple sold 5.2 million iPhones in its most recent fiscal quarter and can barely keep up with demand. The result: More consumer-oriented companies are trying to hitch onto the iPhone's success to grow their own revenues.

For Pizza Hut, which recently added pasta and chicken to its menu as part of a "home meal replacement" strategy, the focus is on boosting e-commerce sales. Pizza Hut's goal is to hit $1 billion in annual online sales by the end of next year, and it sees the iPhone app as a powerful vehicle, in addition to a Facebook app and a Twitter account written by a college student.

iPhone users are "willing to spend more because they have the means," Kraut said. "They know what they want, and the guest check tends to be higher."

Growing Pizza Hut's revenues is a top goal for the parent company. "Pizza Hut is our biggest challenge in the U.S. as it competes in a more discretionary, higher guest-check, dinner category," said Yum! CEO Dan Nowak in a second-quarter earnings report last month.

Other factors that impacted Pizza Hut's choice of the iPhone for its mobile platform include the generally high rate of e-commerce purchases made from iPhones; its unique viewing and touch capabilities; and the tendency of proud iPhone users to show off their apps to friends. The Pizza Hut app is currently ranked No. 2 in free app downloads in the Lifestyle category at iTunes.

Pizza Hut is clearly going for entertainment value. Customers build their own pizza by choosing a type of crust in the scroll wheel, "pinching" to select size, and dragging-and-dropping toppings onto the pizza. They can select among a choice of sauces for their chicken wings, and if so inclined, can shake their iPhones to "sauce" their wings. Pizza Hut's feedback forums show that customers particularly enjoy the app's virtual vintage refrigerator on which they can place coupons, Kraut said.

Last month, Weber-Stephens Products Co. introduced an iPhone app filled with grilling recipes at a price of $4.99. Weber sees the app as an extension of its successful cookbook business, a strategy that's paying off so far. The "Weber's On The Grill" app is ranked No. 2 among paid Lifestyle app downloads on iTunes, even beating out Sports Illustrated's Swimsuit 2009. The Weber's app features 250 recipes from several published Weber cookbooks that have sold in the millions of copies. "We look at the iPhone app as an extension of Weber's content program," said Christina Schroeder, CEO of Rabble+Rouser, the brand communications and advertising firm that produced the cookbooks and app, in an interview. Users can save grill recipe ingredients to a shopping list, and also use the app as a cooking timer.

Rabble+Rouser has beefed up the iPhone development skills on its staff in recent months, and is looking at iPhone opportunities for other consumer companies too, Schroeder said. Other mobile platforms under consideration include the Palm Pre, Blackberry, and Amazon Kindle. "We're in an age where people want options and don't want to be constrained to the pages of a book," Schroeder said.

Kraft's iFood Assistant, a recipe application released last December, allows Kraft to "connect more deeply with consumers," said Basil Maglaris, Kraft's associate director of corporate affairs, in an e-mail. But when used, it also helps Kraft sell more products. Most of the recipes include at least two Kraft products in them, resulting in some interesting ingredient combinations. A recipe for basil pesto, for example, includes a packet of Kraft Good Seasons Italian dressing mix.

Kraft remained on iTunes' paid Lifestyle top 20 list for months, proving many were willing to pay the 99 cents for it, but dropped off just within the past two weeks. "Downloads are certainly one measure of success but we're also pleased to see the level of ongoing engagement after the app is downloaded," Maglaris wrote.

Another big name in the consumer area, Whole Foods Markets, released a recipe application in June. Reception was initially strong for that app, but it's now teetering on the edge of popularity, hanging in at No. 20 in the free Lifestyle app section.

The Whole Foods app includes over 2,000 recipes searchable by ingredient, special diets, and other elements like "budget" and "family friendly." Consumers also can enter ingredients and get back meal recommendations. To encourage purchasing those ingredients at a Whole Foods store, the app includes store locator information, hours, phone numbers, and specials.

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