Welcome to Season 18 of the Troubleshooting Innovation podcast. Nick Fallucca, chief product and innovation officer at Palermo’s, explores what leadership, product development and growth look like for this third-generation pizzaiolo. Sponsored by HaFSBX.
In Episode 2, Nick walks us through how Palermo’s has grown from a neighborhood pizzeria to a nationally known pizza brand and private-label pizza manufacturer.
Learn more about this season here, and tune into Troubleshooting Innovation on Apple or Spotify.
Joanie Spencer: Hey, Nick, welcome back to week two. Thanks for coming back. I hope I didn’t scare you away.
Nick Fallucca: Nope, I’m back. Excited to talk more pizza.
Spencer: We’re just going to jump in. You know, last week, you walked me through, like, there was an evolution of this company and this family business. So, can you sort of walk me through, from your perspective, the stages of growth for Palermo’s and what role you played in each stage?
Fallucca: So, in the 60s — restaurant — I wasn’t born yet. In the early ‘80s, we grew into a frozen pizza company, and we were just a small brand. We were selling just Palermo’s brand, just selling into local grocery stores, bars, restaurants, etc. And then in 1989 we got into private label, and we did the first rising-crust pizza for private label. Some people might debate that, and, you know, so be it.
But we are, you know, leading innovation at that point. I have been with a company over 20 years, and so when I started, one of the projects that we had was called Primo Thin, and it was the first ultra-thin premium pizza in the marketplace. And that got nationwide distribution through Costco and helped us build our first big manufacturing facility.
And so we’ve always had this, this mindset of, I don’t know at the time if it was innovation, but just making a better product, doing something better always, you know — today it’s continuous improvement — and always learning and whatnot. At the time, it was just how we operated. So in 2003 that was the first, you know, ultra-premium product. Got nationwide distribution. And then in 2006 we opened our new facility on Canal Street. It was a brownfield, rail yards, and we were the first company to put our roots in this Menominee Valley in Milwaukee. And one of the ovens that we purchased was this amazing hearth oven from Italy. Stone fired. We still have that oven today, and talk a bit more about that, but at the time, we were like, ‘There’s no Italian product on the market.’ Everything was just — even our thin crust was really good, but it’s a thin crust pizza — and we needed to come out with amazing Italian products.
We launched a product called Hearth Italia. And we had things like kalamata olives and pesto and artichoke hearts, things that are, you know, pretty common today. The time, it wasn’t, and it just failed completely. It was a huge bomb. And people just, they didn’t know. They didn’t know what it meant. They didn’t understand the concept, and that was kind of our first foray into understanding. In the restaurant, you can make them a great food that they like, and they eat it, and they give you feedback. But in the world of retail, there’s so many choices to pick from, and it’s a very competitive market of all the different types of product. And at the time, people just weren’t ready for an ultra-premium Italian pizza that was pretty closely related to, like a somewhat like a Neapolitan pizza.
A movie that I love is called The Big Night with Stanley Tucci. He and his brother — Primo and Cecondo, Italian immigrants — they open this Italian restaurant. And they’ve got all the traditional foods, and it’s just amazing, but nobody shows up. And down the street, you have this — I think it’s set in 1950s — you know, this other Italian restaurant that’s just making your, you know, spaghetti and meatballs and, you know, not traditional Italian food, but they’re just, they’re so busy. And these brothers, they can’t understand, ‘Why is nobody coming to our truly authentic Italian restaurant?’ And the great line is that you have to serve the customers what they want first, then you can serve them what you want.
And it’s interesting because you have to educate your consumer about even just your brand of like you need to trust this brand to try something new. And we don’t always listen to that because we think that our product is better than you know what the consumer mindset is.
That was 2006 and we were, at that time, really big and private label. We had some quite large accounts, and that helped us continue to grow our business. And our Primo Thin brand was doing really well.
Then in 2013-14, we saw what craft beer was doing to the big brewing industry. And it was just, it was just taking the share. And we’re like, ‘We should do the same for pizza.’ So, we had this big project to figure out: How do we bring this craft style pizza to the marketplace? We have to make the best crust, the best toppings. And it can’t be, you know, just what are the frozen toppings? But what are restaurant toppings? What are they using?
One of my favorites is that we love Belgioso cheese. And, you know, we still use some of their cheese today. But it was a retail fresh mozzarella puck in a MAP-packed, and there was, like, I think, like, seven pieces of fresh mozzarella in a pack. Well, the end two pieces were just the little ends on an oval shape. And in manufacturing, you want everything to be the same. And so, they were probably, you know, 30% of the weight of the middle slices. And so, A — we had to open up these small MAP packages and hand-apply them on our pizza. And you had these two end pieces. So, you could either, you know, over apply by 30% or under apply. And so obviously you can’t under declare. So, we have to, you know, we’re overusing this fresh mozzarella by like 30% and you know, fresh mozzarella is not, it’s not cheap. But what, what that forced us to do in operations was say, ‘All right, how do we have a manufacturer come in and make a custom, you know, fresh mozzarella log that we can, we can make online?’
And so, you know, Screamin’ Sicilian really took us to that next level. And they’re now our biggest brand as a company, and it’s sold in almost every retailer across the country. So, you know, that was our big thing. And we’re like, then we came out with Urban Pie, which was a similar concept, but more upscale flavors. At the time, people were saying, you know, they wanted these unique toppings, unique flavors. And that product is still very strong today in the natural channel.
Then we kind of went back to innovating, to innovate. So, we launched some unique items before COVID. And so back to my role, I, you know, around the time of Screamin’ Sicilian is where I had oversaw marketing and R&D at that time. So, my team developed and launched that Screamin’ Sicilian product. And so that was, that was a pretty fun product. And even just the name of it, we’re like, ‘What do we call this unique product?’ Well, my grandfather, you know, was Papa; we called him Papa. And we’re like, ‘Well, we can’t call it Palermo’s’ because, you know, you don’t call the top Chevy a Cadillac. You call a Cadillac a Cadillac, even though they’re both GM. So, we knew we couldn’t call it Palermo’s. Said, what were we going to call it? Well, there’s a story where my grandpa used to fall asleep on his donkey, and it would bring him into town and, like, what if we call it the Wandering Donkey Pizza Company? Like, that’s kind of fun, but I don’t know. And then, like, ‘Okay, well, he’s always, he’s always screaming.’ But he was like, ‘I’m not screaming, I’m just talking. That’s just the way I talk.’ Like, that’s it. Screamin’ Sicilian. That’s, that’s how we came up with the name, Screamin’ Sicilian.
Spencer: I love that. And I have to say, I can identify with ‘I’m not yelling, I’m just talking,’ because I’m really loud too. Screamin’ Sicilian really does stand out on a on the shelf in the freezer case. I see it all the time. And so now when I see it, I’m going to be like, ‘I know who the Screamin’ Sicilian is.’
Fallucca: It just continues to win all these awards, even today, as you know, best frozen pizza. And we have numerous awards, whether it’s, you know, Thrillist or Eat This, Not That, or Yahoo! or MSN, like, top frozen pizzas, and Screamin’ Sicilian’s always at the top of the list.
So it’s been, it’s been really exciting having that brand be impactful for us. And what that does, it helps us understand the consumer insight. So now we’re not only in with major retailers for private label, but also for our brand. And so, we really get to understand how the buyers are thinking from a private brand perspective, but also from a branded perspective, of like, ‘What are the needs of that retailer?’ And it’s very different by a different retailer, and depending on what buyer you have at what moment, it always changes. But we get to, we get to learn that perspective, which has been, you know, incredibly impactful for us.
Spencer: Okay, so I want to say this out loud, just so hopefully I don’t forget. When we get into, like, expanding the brand and the product development, I’m going to add a question because I would love to call back on the you got to give consumers what they want, and then you can give them what you want. But when you have buyers, that sort of changes that dynamic when you’ve got to figure out what buyers want. So, I don’t want to forget, I don’t want to derail this conversation, but I want to go back to that and talk about the buyer dynamic too.
Fallucca: Okay, yeah, great. So then, you know, just kind of getting, you know, in the COVID, we had some really unique products that we developed. We had a partnership with Leinenkugel’s, and we put beer in our crust. We partnered with Johnsonville to have brats and sausages on our pizza. We had a hemp seed pizza for Urban Pie. We had a broccoli cheddar crust for Urban Pie. We had a sweet potato crust, cauliflower crust. We had all these really unique product lines, but then you got into COVID, and at first there was a big spike of these unique products. But then also, you know, our demand just shot up in COVID. And after that first kind of wave of people eating all random things, like, you know, ‘I just want a great pepperoni pizza. I’m so burnt out. I just want something I know is going to be great, and I’m not willing to try something new.’
And so we went back to the basics of saying, ‘All right, our Screamin’ thin crust and our Screamin’ traditional crust, those just really shot off because people just wanted really, really good versions of something they know. They don’t want a duck fat burger. They just want a really good regular, you know, burger with butter burger or something.’
So what we kind of looked at our mindset is like, what are better ways to do familiar and what are things that people know and are excited about? And so what that’s brought us to today is looking at regional and international crust types.
We can be very innovative and create something that no one’s ever heard of. But what’s better for the consumer is a better version of something they already know. So, whether it’s a Detroit-style pizza or a tavern-style pizza, or a stuffed crust pizza or a New York-style or a, you know, Roman-style flat bread, which, you know, our new facility is based off of this type of product.
And so that’s what we’re finding the industry is looking for, not just now in brand, but private brand, but also in the foodservice world, is just high-end, thoughtfully crafted products that are as good or better than anything you get at a restaurant. And so cross-platforms is really where we’ve done a lot of the focus. Because, you know, at the end of the day, people are buying pepperoni, multi meat supreme and cheese. Those are the top four varieties across the country. And whether it’s a chicken bacon ranch or a barbecue chicken — or you name that other fun variety — it’s a niche. And there’s a place to play in that niche. But you know, when it comes to that new platform, our focus is on these really great crusts.
Spencer: Okay, you mentioned the new facility. So, with this evolution and this like wave of innovation that is constant for you all. You have three plants now, is that right?
Fallucca: We do, yeah. So, we’ve got our main facility has four topping lines and three bakeries, and our facility in Jefferson has two topping lines, and then our facility here in West Milwaukee is a bakery.
Spencer: Okay, so what kind of technology — and strategy behind knowing what technology you need — how do you streamline those? Like, how long did it take to say, ‘Okay, this one needs a bakery and topping lines. This one needs just topping lines.’ How do you get them all together?
Fallucca: It’s a combination of customer need, you know — so rather the retailer need at the time — and industry need. So, at our main facility in the Menominee Valley, obviously pizza topping is something that is what we do. And then we’ve always done a hot-pressed item. And so, what that is, is your thin crust item. So that hot press comes down, and, you know, makes a thin cracker crust, or a tortilla-type crust, or something that is thin and crackery. And you want that skin on both sides, so that when you bake it at home, you get a nice crisp.
We have our sheeted line at Menominee Valley, and that makes your more traditional — it’s a stone-fired — so it makes our Screamin’ Sicilian crust. And so that was, those were kind of our mainstay bakeries. And then we were buying a lot of rising crusts from suppliers. And we still, you know, we still buy some today. The cost of repatriating, it makes sense. And so for that, it was just a straight, you know, just ROI saying, ‘We can do it ourselves.’
And then our facility in Jefferson, same thing. We’ve outgrown our capacity, and we’re co packing. We have a lot of co-packers, so the cost of co-packing is better just for us to do it ourselves. And a lot of that is also, was also a private label, and you can’t co-pack private label. Otherwise, the person’s just going to go to that co-packer. And so, so for us, you know, though, some of those were just based on we already had the business, and so just repatriating it.
Now our new facility in West Milwaukee was a whole different story. And so, you know, one of the things that we — we knew that we had a gap — is anything that had high hydration, long fermentation, slash wood fired. The products were either coming from Europe or some domestic but they’re pretty expensive, but they weren’t exactly what we wanted. So, we knew that there was a trend that was something that we just we couldn’t offer. We could buy it and top it, but we couldn’t actually make it. And then, you know, we were out in Europe, and everyone in Italy is fiercely competitive about their product. You know, I have the best pasta, I have the best pizza, I have the best this or that. And, you know, even just the same item made slightly different. They probably had wars over back in the day. I think they did have, like, pasta wars.
Spencer: You know, that’s the next Food Network show!
Fallucca: Pasta Wars! Yeah, yeah. And, you know, in Sicily, you got your Sfincione. In Naples, you have your Neapolitan style. And the North, you’ve kind of got your Alsatian style pizza. And in Rome, historically, they just had a called, like Toglia, which is like this, long, thin pizza that they would basically tell them how much you want with your hands. They say, ‘Quanta,’ and you just, kind of, you know, say, ‘I want this much.’ And they cut with the scissors and throw it back in the deck oven. But then somebody came out with an item called Pinza, which is high hydration, long fermentation, and it’s just a completely different product.
We started seeing this all over Italy, whether it was the north or the south, all the auto grills on the highway would have a Pinza item. And we said, ‘We’re going to do this. We’re going to we’re going to buy a line that can do high hydration, long fermentation, wood fired.’ So we, we met with a supplier, we bought the equipment. And then it’s like, ‘Where the hell we’re going to put this?’
And then we went back and forth on where we’re going to put this equipment, and we ended up with a new facility here in West Milwaukee.
Spencer: To be honest, that really isn’t how I thought the story was going to go because typically you build a new facility because you’re out of capacity or because you’re planning for growth, for your current product lineup. But you all had a vision for a new product, for innovating a brand new product and bringing a new product to market that you believed so strongly in, you were willing to buy a line and build a facility to house that line.
Fallucca: Right.
Spencer: That’s a big risk.
Fallucca: It is a big risk! Yeah, for sure, it’s a huge risk. But, you know, we have very strong conviction in the product. Nobody else has this technology in North America. So, for us, if you build it, they will come. And then we are very confident in our products. They’re amazing.
We’ve had such incredible customer visits recently. Everyone just, they rant and rave about the product, about the building, our team and their knowledge, and, you know, the time and effort we put into this development of this product and the process and all the intricacies of this line. It’s not going unnoticed. And we’re so proud of the product that we’ve made. And we see, you know, what that consumer need is. If you look at, you know, either in the in the world of foodservice, you know, labor is getting tough.
So, we had met with someone recently, who was like, making their own dough. I’m like, ‘Oh my gosh, I couldn’t imagine, at a multi-unit chain, making your own dough.’ It’d be so hard. I mean, and you think about really good dough, it’s, is your what’s your room temperature? What’s your dough temperature? What is your pH? Like, all these things that we’ve automated now, and you’ve got, you know, an hourly employee making it.
And then even just, you know, this style of product is so unique that you can’t make it. Unless you’re unless you’re a true pizza pro, you’re not making Pinza yourself. e had our team over a year just learning how to make it by hand because it’s such a delicate product. It’s got 85% hydration, 24-hour dough, and it’s just like this wet, sticky … if you go on Instagram and you search high hydration, we see these big liquidy does, and that just make this beautiful bread. So, yeah, I mean, we’re proud of it, we’re excited, and it was a hell of a risk. But we’re, we’re happy we took it.
Spencer: Oh, and was it like everybody knew, like there was consensus from the get-go? Or did you have to have hard conversations with your dad and uncle? Were they like, ‘Dude, you’re crazy’?
Fallucca: No, they’re the ones who said, let’s go.
Spencer: Wow, that’s, that’s really cool. Yeah. So, okay, so you said, very casually, ‘So we bought a line.’ What kind of priorities when you’re making those kinds of capital investments in a new facility or for a new equipment line? What do you prioritize? Because I feel like — your uncle is very pragmatic and operational — he probably has different priorities or things that he’s thinking about than you do, when you’re, thinking about how to make the product and really innovating on the product. So, what do those conversations look like when you’re making those investments?
Fallucca: I mean, priorities are filling up the line, but filling it up with, you know, at a margin we want to, we want to make. So, we’re not just going to, we’re not going to give away this product because it’s the only one in North America. And so what my priorities are, it’s a combination of lots of things. It’s finding the right customers for this line, and then making sure the product is perfect. And by perfect, it’s whatever perfection needs for the end consumer. And so, you know, perfection at retail means that it is, you know, within your weight tolerance, and it fits into your retail carton. For foodservice, it’s that your, you know, your case weight is spot on, and it meets the needs of that, that operator. And then from a taste and a texture and consistency, that if you buy a crust from us today or six months from now, it’s the exact same crust, and there’s no fluctuation in height, width, all the things that are needed. But then also, because of the nature of this product, it’s very complex. And if you’re off on any of your things up front, on your mixing, your product won’t eat well. It might be too tough, or it might be floppy. There’s all these things that really start with the that initial mix, and the temperatures of that mix, and making sure that your pH is right, your temperature and your ingredients are spot on. And then, you know, as you go through this 24-hour dough process, every setting is spot on, so that end product is perfect.
And we have some stock items that we’ve made, but then everybody wants a custom item. And so, it’s working with the development team, the sales team and the operations team here to say, ‘This is what, you know, what we’re showing to XYZ customer.’ And what’s fun is that it’s all different. You know, people want different salt levels or different heights and weight, you know.
So, what’s exciting also is that this is not just the Pinza line that makes Roman-style pizza. If you think about any good restaurant pizza, it’s usually high hydration, it’s usually long fermentation, and then we have a wood-fired oven. And so, we’re not selling a pizza crust anymore. We’re selling a baked good. And it could be a pizza crust, it could be a flatbread, it could be a roll, it could be a bun, any in between. And so, whether you’re cooking this in a Turbochef or an impinger or your home oven, we need to know how you’re going to prepare it. So, we’re really focused on that operator as well. To say, ‘You tell us how you’re going to prepare it. Are you going to put meat and cheese and just fold it and eat it? Are you gonna put meat and cheese and fold it and then bake it? Are you gonna do open-faced? And how are you baking it? Are you baking it through an impinger or a deck oven?’ And all these things matter because if you’re a custom buyer of this product, we need to custom-tailor all of our settings starting back at that mix to make sure that it’s right for you.
Spencer: So then, how complicated is it to incorporate all of that into a streamlined production schedule, where sometimes the facilities are working with each other and sometimes they’re independent of one another?
Fallucca: I mean, scheduling is probably, you know, one of the toughest jobs, and I’m glad I don’t have that. And understanding what your line time needs to be in order to support the demands of different customers and different customization is definitely something that is a huge challenge, especially across four bakeries, six topping lines. That’s one of the hardest jobs for sure.
Spencer: Like, even just trying to get my head around it makes my brain want to, like, sort out the wires. It’s a lot to take in, especially for me. I’m just a journalist. I couldn’t, like, that’s way too complicated for me. But like you said, you have certain people who are very skilled in those areas. So, when you look at like your people in your team, because I do know, from what I have read about you, you constantly reference the people and the team. How does teamwork — and corporate culture — how does that impact innovation that leads to growth?
Fallucca: Yeah, I mean, it’s a combination of, I would say, organized chaos. Because you look at like a craft, you know, structure, someone that has like this, like just such as detailed process. This is exactly how you have to evaluate and test and, you know, it’s just, it’s arduous. And it the development time, it takes forever. And for us, that’s not acceptable. We have a customer come out, and we’ll work with them, and we’ll do trial runs ahead of time, and when they leave, we have sample requests, and we get them out to them as soon as possible. You know, we have some prioritization ranking, but we also rank it on customer size and customer fit. And right now, in the early stages, it’s, ‘Listen, we’re going to do whatever it takes to fill up this place, doing it safely, making it quality.’
All of our facilities have over an A rating from the BRC. Those are non-negotiables, but there’s going to be some tension as far as what products we’re going to run today, how many trial runs can we do in a day, and what the recipe might be. Quite frankly, we just sometimes don’t know. We think we have a recipe that we’re going to go with, and we make it on the line, and it doesn’t turn out. So unfortunately, we’ve just, we’ve wasted that day. Not wasted; we’ve learned something new that day, what works and what doesn’t. So, every day, you know, is a learning. And I tell a team is, especially in the innovation and development side, ‘You’re not going to get it right the first time.’ If you do, you know it’s a one in a million because it takes time, and especially for custom development, they’re going to want to have their mark on it. And then gets to a point it’s like, ‘Okay, now this is what we can do. We’ve done this trial this many times. This is it. This is, you know, the product that we can make.’ But we’ve been really fortunate with our development team. And we have really good, healthy tension of what R&D wants versus what engineering can do and what operations is capable of doing. Then you throw in what sales wants and or what the finance wants! How much does finance want to make? What does sales want to sell it for? And what can operations actually do? So, it’s fun.
Spencer: Or how much — how little — does finance want to spend to get there.
Fallucca: And, you know, especially as relates to capital, I mean, we, you know, we spent a lot of money on this and then, but there’s still a lot of unknowns. We’ve built a lot into it, but also we have a lot of open space to figure out what the next piece of it is, which is really exciting.
Spencer: And I do feel like it is a more modern way of thinking with the ‘Build it and they will come.’ I think the previous generation was you work and work and work until you know — you take on business until you’re at capacity — and then when you’re at capacity is when you need to expand, whether another line, add onto the building or get a new facility. Whereas, I talk to more bakers who are not the old-school way of thinking, that are like, ‘We’re going to create the capacity, and then we’re going to we’re going to build the business into it.’
Fallucca: I think it needs to be a combination of both. And you have to have the current infrastructure to support that. And so that’s where we’ve been fortunate to have that infrastructure to support this, and we have a good customer base already. So it’s exciting.
Spencer: This was a really detailed timeline of the evolution of this company. And if we think back to last week’s conversation about what Papa Palermo started, do you think he could have predicted where the company would be today? How do you think he would react to everything that you’re doing?
Fallucca: I think he would be extremely proud of the of the product we’ve made, of the team we have, and, you know, the scale of what the business became.
Spencer: That’s so cool! I think so too. I mean, he sounded like he was very entrepreneurial, and just with that first frozen pizza product that he started with, someone just challenging him to make something better than Stouffer’s. And he didn’t sound like he didn’t balk at that challenge. That was what put you on the path to what you’re doing today. Do you think you have a little bit of your grandfather in you?
Fallucca: For sure. He had this, definitely a passion. He had this vision of what’s right and a vision of how to do things, and he wasn’t going to stop until this vision was executed. And I feel like that’s, that’s kind of what I have.
Spencer: Strong convictions.
Fallucca: Conviction, yes.
Spencer: Well, those are all the questions for this week. Nick, what an interesting conversation. And there’s one thing that I am going to take into my daily life and my business, and that is, if something goes wrong, it’s not time wasted or a wasted day, it’s you learned something.
Fallucca: Exactly.
Spencer: And I think that’s really valuable for innovation
Falluca: Always. Yeah.
Spencer: Okay, next week we’re going to talk a little bit more about product development, but really get into the artistry of it all while producing at scale. So I can’t wait for that one. So thank you for this week, and I will talk to you next week.
Fallucca: Alright, take care, talk to you soon.
