Selling the sauce

 
Aug. 18, 2008
Several years ago Scott Jacobs, owner of a Fox's Pizza Den in Ridgway, Pa., experimented with mixing hamburgers and pizza dough. After numerous attempts ended up in the trash can, Jacobs came up with the Burger Bundle, a hamburger patty with cheese and sauce, encased in pizza dough.
 
Burger Bundles can be microwaved from a frozen state and are ready to serve in less than 3 minutes.
 
"Once it started to take off, I formed a separate company and invested a half million dollars in equipment," Jacobs said. Today, Burger Bundles are sold online, in stores within a 70-mile radius of Ridgway and in his own restaurant.
 
He's also in discussions with several food distributors to offer the product nationally, he said. 
 
Jacobs is one of a number of operators who are expanding their reach by packaging products for retail sale. However, it's not as simple as filling a jar with pizza sauce and slapping on a label, he said.
 
"The regulations you have to follow are a lot different than they are for operating a restaurant," he said. "I wouldn't recommend a small operator try it."
 
Still, it can be done. Sal Impastato, owner of Sal & Judy's restaurant in Lacombe, La., began packaging his restaurant's salad dressing and pasta sauce in the mid-1990s.
 
Although the products were originally distributed only in the Gulf Coast area, sales grew to the point that Impastato built a 20,000-square-foot, $8 million packaging facility to accommodate demand. Impastato's product line now consists of 19 products sold in 23 states.
 
And fans of California Pizza Kitchen don't have to visit a restaurant to taste the company's signature BBQ Chicken Pizza. They can stop by the frozen food section of their local grocery store. BBQ Chicken and 10 other California Pizza Kitchen pizzas are distributed in supermarkets and other retail outlets around the country.
 
The gourmet pizza chain first introduced frozen pizzas in Southern California in 1999 as part of a licensing agreement with Kraft Foods Inc., which manufactures and distributes the pizzas. By 2004, the line had become available in all major markets.
 
In 2007, the company recorded nearly $5 million in revenues from the Kraft partnership.
 
The frozen line features many of the restaurant's most popular pizzas in regular, thin crust and pizza-for-one options. The company sees the line as a way to expand its reach beyond where it operates restaurants.
 
"It primes the pump for us," California Pizza Kitchen co-founder Rick Rosenfield told Pizza Marketplace earlier this year. "When we go open in a new area, people come in and tell us they've tried our frozen pizza and they are really thrilled to see the restaurant."
Shelf space a scarce quantity
 
Products offered for retail sale need to pass rigorous safety inspections and meet strict label and packaging requirements.
 
The cleanliness standards for a packaging facility are much stricter than they are for a restaurant, Jacobs said. The entire process is subject to frequent inspection by the U.S. Department of Agriculture.
 
And if an operator is successful in their core business, packaging menu items for retail sale is likely to be a distraction.
 
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Even a player like California Pizza Kitchen isn't making a killing selling their products in a grocery store. According to CPK's most recent earnings release, royalties from its deal with Kraft represents less than 1 percent of the company's revenue.
 
Tips from Pastorelli Italian Food Products on packaging a menu item
  • Choosing a manufacturer will be the most important decision you make. There are many regional manufacturers who can package your product
  • Packaging will be where you will want to establish your brand identity. Spend wisely!
  • Packaged sauces are easier to store and sell than frozen food. Anything that can sit on a shelf is a good starting point.
  • You'll need capital and warehouse space. Manufacturers generally want to produce a full days' run as opposed to a small batch. That can amount to about a truckload of finished product and can cost well over $15,000.
  • Exhibit at trade shows. That is where you're going shine and get people to try that award-winning sauce.
Rick Pastorelli, owner of the Chicago-based Pastorelli Italian Food Products, works with several restaurant operators who package their own sauces and salad dressings for retail sale. Pastorelli recommends enlisting the aid of people familiar with the terrain.
 
"There are individuals who specialize in those types of services, who can get your nutritional information together for your label, your package size and that type of stuff," he said. "Then you can just hand it over to the manufacturer and say, ‘This is what I am looking for.'"
 
J. Peter Clark, a food processing industry consultant, recommends contacting an organization such as the New York-based Private Label Manufacturers Association for information on how to go about packaging a menu item for sale.
 
Packaging the product is the easy part, however.
 
"The biggest issue with a new food product is not getting it made, but getting it sold," Clark said. "There is great competition for shelf space."
 
Pastorelli recommends enlisting the aid of a third-party distributor to help get an item placed in a grocery store.  
 
"Most grocery stores will not talk to startup companies," he said. "Your volume isn't going to excite them enough, which is why you're going to need a third party to go in on your behalf who typically owns shelf space of their own."
 
And before an operator cuts a deal with a distributor, he said, they should first sell the packaged product in their own restaurant.
 
"You would be competing against yourself but at least you would be getting real feedback," Pastorelli said. "Once you've changed the way people perceive that particular product and will not purchase anything else you created your own success story. That story is one that will help you sell in grocery land."
 

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