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Little Caesars Raises Pizza Costs 11% with 33% More Pepperoni — Does Upgrade Justify the Price?

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As inflation raises the price of groceries, dine-in meals and takeout foods, companies are trying to cover costs without losing customers. Some are turning to “shrinkflation” — reducing portions or package sizes — while keeping prices the same. Others, like pizza chain Little Caesars, are raising prices but trying to put a positive spin on the cost increase by delivering more value. But does it make good, economic sense?

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In a national promotion, Little Caesars announced that its iconic “Hot-N-Ready” $5 pepperoni pizza will now cost $5.55. The increase amounts to 11%, but customers will also get 33% more pepperoni on each pie.

Little Caesars emphasized that the $5 price for the pizza has remained the same for 25 years. “Change is good when it comes to giving our customers more of what they love and we’re changing our iconic HOT-N-READY Classic, adding 33% more savory, meaty pepperoni still at the country’s most affordable price,” said Little Caesars chief marketing officer Jeff Klein in a news release.

Make Your Money Work for You

Although Little Caesars just recently announced the increase, stores in some markets had raised the price back in October. A pizza fan on Twitter broke the news with a tweet showing a sign at a local establishment announcing the price change:

A Little Caesars spokesperson told MSN that prices vary regionally, which explains why some markets saw an increase earlier. After the promotional price of $5.55 nationwide ends, franchise owners can once again have the option to set prices based on their market.

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For pizza-eaters paying 11% more but gaining 33% more pepperoni, is the price increase worth it? Considering that price of pepperoni, per pound, had risen by 50% or more during the summer of 2020, the Little Caesars pepperoni pizza remains a value.

Let’s Do the Math

Pepperoni manufacturer Hormel reports that 1 oz. of pepperoni equals roughly 14 slices. The website Prezi.com says that the average Little Caesars HOT-N-READY pepperoni pizza contains 30 slices of pepperoni, which is approximately 2 ounces. The new improved pizzas, with 33% more, would contain roughly 40 slices each, or 2.8 ounces.

Make Your Money Work for You

A restaurant owner in New York in 2020 reported that pepperoni had gone up in price by $2 per pound, exceeding $4 per pound total. Restaurant owners in other regions reported similar price increases.

That means pepperoni costs roughly 25 cents per ounce or more, depending on your region. The total cost of the pepperoni on your Little Caesars pizza would be about 70 cents, but the additional pepperoni on the “new and improved” version only costs Little Caesars 20 cents more.

Add in the cost of the other ingredients, which have also risen due to inflation — not to mention utilities and overhead — and the price hike of 55 cents makes sense. It covers that extra pepperoni and a little bit more which, of course, is the goal of inflation-related price hikes. Companies are trying to keep their profit margins the same as they were prior to inflation.

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Make Your Money Work for You

Where has the extra money not gone? Google searches show no mention of salary hikes for Little Caesars’ employees. Indeed.com reported that the company’s average salary is $10.88 per hour, which is 11% below the national average.

When you think about it, $5.55 is still a reasonable price for fast, ready-to-eat pizza, and Little Caesars said in the release that it is still the country’s best price, based on regular prices for the nation’s top four national pizza chains.

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