The frozen pizza market is a rapidly growing part of the frozen food industry. The rising cost of other groceries and the diminishing ROI of going out to eat is helping the market grow as consumers forgo the pizzeria in exchange for a more cost-effective frozen pizza product at home.
Increasing customer demand means more prospective players are looking to dip their toes in the frozen pizza market. However, even experienced pizza makers may find getting a frozen pizza brand off the ground is easier said than done. A new frozen pizza brand will find itself competing with well-known players that dominate the market as well as an increasing number of newer frozen pizza brands that are upping their game in terms of quality.
You will also deal with food retailers who are not going to simply put your product on their shelves. Getting a frozen pizza brand off the ground is a difficult task in today’s market, but it’s not impossible if you make the right connections. Here are some of the biggest challenges for new players looking to start a frozen pizza brand.
Related: How Anthony Mangieri conquered the frozen-pizza segment
A Pricey Battle for Shelf Space
The biggest barrier to entry into the frozen pizza market is the cost associated with just getting your product on shelves. A successful frozen pizza brand will be sold through four main channels: grocery stores, convenience stores, club retail and discount stores.
Some of these channels may not be open to you depending on the type of frozen pizza you make. For example, a high-end frozen pizza brand will not be sold at a gas-station convenience store or dollar store. Most frozen pizzas’ main channel of entry is getting on the shelves at a grocery store. But shelf space is a grocery store’s most valuable asset, which means they aren’t going to shelve your product for free.
Slotting fees are payments that you make to a retailer to guarantee shelving space for your product at their store. This is the biggest barrier to entry for most frozen pizza brands because, after you have paid all this money to create a product that can be sold in grocery stores, you have to pay an expensive fee to get it on the shelf. If you want to be in multiple stores, you will have to pay multiple slotting fees.
The difficult part of slotting fees is that they don’t guarantee long-term placement of your frozen pizza on shelves. They just guarantee you a test period to see if your brand sells well. If it does not sell well, you have spent all that money to create a frozen pizza brand with no place to sell it. Plus frozen pizza is a perishable item, so you can’t just sit on your product if your slotting period is unsuccessful. This is the biggest barrier for people looking to break into the frozen pizza industry. Costly slotting fees will prevent from getting your frozen pizza brand off the ground, so it’s important to ensure you have the capital to account for slotting fees before you venture into the frozen pizza market.
Note that the bigger the supermarket brand, the higher they will charge for slotting fees. A good way to get your brand name out there is to start small. Don’t target big-name grocery stores such as Kroger first. Target small and local grocery stores or co-ops first. Farmers markets are also a great way to get your pizza in front of customers and test it. These channels will charge less to feature your product and let you get some feedback on quality before spending a lot of money getting it on big grocery store shelves.
Packaging Costs
It’s difficult to create a frozen pizza brand without finding and working with a USDA-certified co-packing facility. You need to make inventory that is USDA-certified, and a big part of that is packaging. Co-packing costs will represent a significant chunk of your expenses. Small frozen pizza makers don’t have millions of dollars to build their own factory, so you will have to pay a co-packing facility to do it.
You will also have to pay to develop a nutritional label and design the packaging. You will then have to pay more to mass-produce that packaging. You may also want to be halal- or kosher-certified to ensure more people can consume your product.
It can cost millions of dollars to package your frozen pizza, and you will have to sell the pizza you developed within the 18-month shelf life of frozen pizza or else sell it at a discount or dump your product entirely.
Storage and Shipping Costs
Unlike canned foods, frozen pizza is not a shelf-stable product, which means it has different storage requirements. I can take a canned food product and ship it from a dry warehouse. Frozen pizza must be stored frozen and maintain frozen temps while it is being shipped. The cost of storing a frozen product and shipping it will be higher than shipping dry goods. However, shipping frozen goods will cost you less than shipping produce because the shelf life of a frozen pizza is longer than fresh, never-frozen products.
Stiff Competition
Even if you successfully develop your frozen pizza brand and get it on the shelves, you must deal with a lot of competition at the grocery store. Frozen pizza is an entire section at the grocery store, and you will be competing with big brands such as DiGiorno, smaller brands looking to capture the same space in the market, and even the grocery store’s own brand of frozen pizza. There is no shortage of frozen pizzas for consumers to choose from, and it will be hard for many smaller brands to capture market share.
It typically costs $100 million to make consumers aware of a national brand. A vast majority of small frozen pizza brands will not have that much capital while the big brands have enough money to advertise during the Super Bowl. A new frozen pizza brand will require lots of capital to compete, or it will have to capture a consumer demand that isn’t being met in the frozen pizza market.
Find a Business Partner
At the end of the day, it’ expensive to start a frozen pizza brand, and capital is hard to come by these days. My advice for people looking to break into the market is to not go in it alone. Find a business partner with a midsized company that can help you fund the marketing or partner with a manufacturer who can help you with development costs. You either need to increase your access to capital or reduce your cost, and a joint partnership can benefit all parties involved.
Gary Pryor is an accomplished food manufacturer and restaurant developer. Pryor owned and operated multiple co-packing, USDA-certified pizza and extruded dough manufacturing companies in McPherson, Kansas, Pomfret, Connecticut, and Waupaca, Wisconsin, where he made Gino’s East Frozen Pizza, one of the most successful frozen deep-dish pizzas on the market. Pryor also owned and operated the Boombozz Craft Pizza chain in Louisville, Kentucky, and Gilbert, Arizona.
