Boost revenues with retail

Boost revenues with retail

Larry Flax and Rick Rosenfield had 86 California Pizza Kitchen locations in 1996 when manufacturer Kraft Corp. approached them about a frozen-pizza partnership. With minds whirling in the wake of CPK’s then-recent spinoff from PepsiCo, the two were a bit uncertain.

“The truth is, we never thought about it before then,” said co-chief executive Larry Flax. “We were just trying to run a restaurant company that was ours again.”

But having access to Kraft’s manufacturing prowess and its established supply and distribution chain convinced Flax and Rosenfield that adding a retail option was a low-risk gamble. The supermarket pizza line launched in 1997, and sales marched northward.

Twelve years later, CPK’s frozen pizzas are sold in 50 states at 17,000 outlets. Though Flax doesn’t know the exact number of frozen pies sold annually, public filings show the license agreement steered $4.7 million in royalties to CPK’s coffers in 2007, up 27 percent from 2006.

Was it difficult to match the frozen product’s standards to yours for fresh?

No, not at all, because they didn’t try to go cheap on us. They used the same ingredient specs we used for the restaurants. We were very involved then, and even today, when they develop new pizzas, I go to Chicago to work with them in their kitchens.

Were you concerned frozen-pizza sales would reduce restaurant sales?

Yes, that question was asked, but we never really answered it. What we know for sure is sales continue to grow in both segments.… What you have to ask is, “Do [customers] sometimes try the frozen pizza because they love our restaurants, or do they try the restaurants because they love our frozen pizzas?” We know the answer to both is yes.

What’s your advice to other operators considering going retail?

Know that what ultimately sells is brand identity, which we had. Even if you’ve got the best meatloaf in the world, but it’s not widely known in a lot of markets, then it’s going to be tough to sell. Secondly, partner with a great distributor that has the access to the [retail] market. I don’t think we’d have had a shot at getting into distribution ourselves. It’s a specialty business that’s mind-boggling. Kraft has been a fantastic partner.

Would you recommend other operators try retailing during a recession?

In recessions, people draw close to things they own or things that are free, like their families. They spend more time at home, and they’re eating more food from grocery stores. If they’re eating our pizzas at home but not at our restaurants, that’s still good. So I think the same thing could work for other restaurant companies.

Is there anything you wish would have happened differently?

I’d have loved it more if Kraft would have given us the exposure they gave DiGiorno because we would have grown faster. But in fairness to Kraft, they owned DiGiorno. It was theirs as opposed to working with a licensee, so there’s a whole different mind-set at work.

Anything new in the retail pipeline for CPK?

We just came out with our “For One” pizza singles in May. They’re perfect for kids or somebody in a hurry. There will be other things coming, but unfortunately I can’t tell you much about them.