Canadian Pizza Magazine

Features Business and Operations Marketing
Going frozen


April 5, 2011
By Jim Chliboyko

Topics

Frozen pizzas in the supermarket at super low prices are a threatening competitor to their fresh counterparts. Some operators and chains are tackling the challenge head on either by putting themselves in the grocery store or by selling their own frozen pizzas in-store. There can be several reasons for a chain, or a single restaurant, to go the frozen route. We looked to our neighbours to the south for examples of chains that have made their way into the aisles.

Frozen pizzas in the supermarket at super low prices are a threatening competitor to their fresh counterparts. Some operators and chains are tackling the challenge head on either by putting themselves in the grocery store or by selling their own frozen pizzas in-store. There can be several reasons for a chain, or a single restaurant, to go the frozen route. We looked to our neighbours to the south for examples of chains that have made their way into the aisles.

Frozen_Pizza 
Pizza
Patrón’s frozen pizza line offered in U.S. supermarkets is one way the
chain creates multi-channel brand awareness. (Photo credit: Pizza
Patrón)


 

California Pizza Kitchen (CPK), a chain which rolled out a frozen pizza several years ago only in supermarkets, did so with the main motivation of, simply, profit.

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“The Kraft relationship was rolling along, really doing great, but with the introduction of the thin and crispy, it rocket shipped,” says Rick Rosenfield, co-president and co-CEO, in the video of the 2007 CPK annual report, referring to their (at the time) new, frozen offering.

“It’s a very high-margin revenue stream. It runs about 95 per cent, and it diversifies the portfolio nicely,” adds Sue Collyns, CPK’s CFO, in the same annual report.

In the case of Pizza Patrón, the company has its own reasons for selling frozen pizzas. According to the chain’s brand director, it’s a relatively “little guy” up against the bigger, better established chains.

“It’s a completely different channel of business for us; it’s only sold in retail grocery stores,” says Andy Gamm, from his Dallas office, of his chain’s frozen pizzas. Pizza Patrón itself is a mid-sized, 25-year-old pizza chain with almost 100 locations in seven states in the American south. It self-identifies as a Latino restaurant with a new motto of “Latin Life, Enjoy”.

The chain made the news a few years back by accepting pesos in its outlets, and currently it’s the official pizza of American Airlines Center, home to both the NHL’s Dallas Stars and NBA’s the Dallas Mavericks.

“We’re a small company, and we have a vision to become a nationally recognized brand,” says Gamm. “One of the ways to make that happen is to consider multi-channel growth, finding other ways to get our brand in front of consumers’ eyes.”

But, Gamm says, getting a retail version of what one produces in-store is quite a lengthy process that includes developing the specific recipes (which will differ from the in-store product), and finding a distributor and manufacturer.

“We’re just getting started. It’s a challenge getting shelf space. We’re in a number of different markets here between Dallas and Houston, and we’re expanding into some bigger chains.”

To that end, Gamm says other considerations with a retail offering include how to roll it out to the supermarkets and how to decide which supermarkets to deal with.

“When we started, our focus was to expand awareness in the Hispanic segment, through Hispanic grocery stores. Since then, we’ve had opportunities to get into the more general market,” said Gamm. “It really came down to brand strategy. We’re going up against very large chains with deep pockets. This was a way for us to multiply the awareness of our brand without a significant investment, like the kind needed to build stores.”

In the case of Canadian independent Diana Coutu, her motivation was a bit different. For her, it was all about the cheese.

The Canadian Pizza columnist, pizza award winner, and owner and operator (with her husband Pierre) of the single-outlet Diana’s Gourmet Pizza in the Winnipeg neighbourhood of St. Vital was inspired by a certain price break for cheese she heard about.

“We do a take and bake, anything off our fresh menu. And we have a frozen line, with five types of pizzas and seven types of panzerottis,” she says. “Cheese for a frozen pizza is 30 per cent less than cheese for a fresh, fully baked pizza.”

Coutu says that it seems a lot of pizza makers don’t know about the price cut you can get in your own store, and not just the grocery store. It’s the Canadian Dairy Commission that has set two prices for cheese, one for manufacturers and one for everyone else.

“Canadians pay some of the highest dairy prices in the world. We pay twice as much as our American friends do.”

The way Coutu explains it, in the early 1990s, a lot of frozen American pizza was coming over the border. The Canadian Dairy Commission was created at about that time, setting the price for dairy products every year.

“One price is for further processors, and providing they apply for the proper permits, they can purchase this cheese under these permits, for 30 per cent less. It’s a 5A permit for frozen pizza manufacturers. We are purchasing mozzarella for $3.41 a pound (saving a little over a dollar per pound).”

Coutu, though, the priority wasn’t to profit from pizzas made with the monetarily cheaper cheese, or to expand her brand (though there’s nothing wrong with that). Rather, she was interested in offering a price break to her customers.

“There’s explosive growth in the frozen pizza market. We thought we could make a better [frozen] pizza with the cost savings, and pass the savings on to our customers.”

While Coutu’s fresh-baked pizzas run at about $15 for a pepperoni, her frozen variation only costs $11.50.

“And there are no taxes because it’s considered groceries,” she adds.

Coutu says her frozen pizza sales have increased by two per cent since moving to a new, larger location that can accommodate more frozen pizzas. She estimates she goes through 380 pounds of cheese a week for fully baked pizzas, and 45 to 50 pounds for the frozen.

“What we found with our frozen line, it doesn’t cannibalize our fully baked line. The frozen line attracts a different mindset of customer: ‘I’m going to eat it later, or just have them in my freezer.’ People started asking about things they could bring to the office, or put in the freezer. Once we launched it, we found that there was a pent-up demand for a better-quality frozen pizza and panzerotti.”

One hurdle, though, on her quest for the cheaper cheese, was that there was a lot of paperwork and it took a long time to track down the proper information about permit 5A. Applicants also have to make a claim of something called “a proof of injury,” that “a U.S. import is hindering your ability to make something for Canadian consumer,” explains Coutu.

“I’d say, beginning to end, it probably took six months. It really was buried. You have to go through the forms, understand the info. Each pizza and panzerotti we make has its own permit.”

In the meantime, Coutu says that she’s not interested in going the retail route.

“We wanted to go into that avenue, and get into supermarkets. There was some interest in the past, but the conversation (with the supermarkets) usually goes like this: we really like your product, can you make us a pallet, and what we don’t want we’ll send back.”

Coutu says she also didn’t want to deal with wholesale pricing or the highly specialized equipment required to make the retail pizzas. After all, the whole point of Coutu’s business is to make everything by hand. But the store did invest in a shrink-and-seal tunnel machine for the frozen pizzas she sells now.

However, Coutu has another motivation for selling a frozen pizza.

“Frozen makers have been given an unfair advantage over a fresh pizza maker. They don’t put as much into it as a fresh pizza maker does.”

It’s something she’s obviously hoping to change.


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