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 3, we tap into Nick’s product innovation expertise and learn what it truly takes to make craft pizza at scale.
Learn more about this season here, and tune into Troubleshooting Innovation on Apple or Spotify.
Spencer: Hi, Nick! Welcome back.
Fallucca: Thanks. Thanks for having me again. Looking forward to chatting more about some innovation and product development.
Spencer: Okay, so this is like your sweet spot this week. I am excited about this one, too. I’m going to start off with calling out your title because, as a writer and editor and grammarian, I notice little word nuances. And so your title is chief product and innovation officer. How is that different from, or maybe the same as, product innovation? What’s the difference between ‘product and innovation’ and ‘product innovation’?
Fallucca: Well, I think innovation, you know, what we look at, is innovation in everything we do. And it’s not just innovation around product. It’s innovation about how we think. It’s innovation of how we work with our employees. It’s innovation of how we sell. Its innovation of everything. Because there’s the product side, which is great, and I think we talked about it earlier. I can come up with a million different innovative products that are delicious and taste great and whatnot, but that’s only part of it. It’s maybe how you go to market, how you package your product, how you talk to consumers. And how do we think internally as well? And so that’s where it transcends into both.
Spencer: Okay, yeah, that makes sense. And in the first week of our conversations, you did talk about how just the term innovation can be a little bit nebulous. It’s just so open to interpretation. So, when you think about what innovation means to you, what do you wake up thinking about every day in terms of innovation?
Fallucca: I mean, a lot of pizza for sure. And I think it’s evolved. And, you know, every day, I think I’m good, I realize that I can always be better. It’s like Game of Thrones. ‘You know nothing, Jon Snow.’
I’ve realized that the more you learn, the more you learn you don’t know. And so even our innovation process has evolved into just launching items because they are cool and unique and different. And like, ‘This is cool and unique, I’m going to buy it.’ But do they care? Do they understand it? What is this unmet need that this item is solving? And it’s a combination of both. There’s a few products that didn’t have an unmet need, at least, that were known, and have been wildly successful.
You think of the iPhone. Like, well, I already have a camera, I already have a notebook, I already have my cell phone. Like, I don’t need all those things into one thing, but then you know that changed everything.
Red Bull was like, ‘Let’s make a product that tastes worse than a Coke, costs more, has more sugar. And you know what? Let’s not do any traditional marketing. Let’s just fly people out of space. And, you know, race Formula One.’ So, there’s some things that break the mould of that unmet need. And sometimes we still shoot for those, but at the end of the day, what we’ve kind of come to learn is being a, you know, solution-based organization for that unmet need.
And that’s different from a like as a brand versus a private brand versus a foodservice manufacturer. And so all of those areas have a different demand set. Sometimes it’s the demand of the buyer, sometimes it’s the demand of the consumer, and sometimes it’s the need of the operator. And so, the way that we look at innovation now is not just testing. Does this Stuffed Crust Pizza appeal to the Screaming Sicilian consumer, but is the idea of a stuffed crust, an item that transcends across the world of food? Is this something that multiple people want and need, and why do they need it? And so, we’re in the infancy. And, you know, I think what’s exciting is that we will always be in the infancy of this stage of innovation because it’s evolving so fast. And the way that we look at trends are so different today.
In the past, we’d have to travel to a location to understand that food culture — it’s still the best way — and you know, I’m actually off to Italy to try some new trends in food. Or you had to have publications or reading books from different places. But now with LinkedIn, Tiktok, Instagram — all these places where all these food trends are just, you’re just inundated with — it’s an amazing place to gather them.
But what do you do with it? Right now, we’ve got a list of 150 concepts that are, I think, really cool, but you might think they’re cool. And on paper, you might say, ‘Yeah, I think I’d buy that item.’ But when you go to the grocery store or you go to the restaurant, are you going to pick that or are you going to pick something that you know? That’s the key is, will you purchase it? Will you purchase it again? And on a larger scale, how many people are going to purchase it on a given day or given week? Because velocity is all that matters. Otherwise, like, we can have the greatest thing, but if nobody buys it, and nobody buys enough of it, well, you’re off the shelf, or you’re discontinued, or the LTO is going to stop because, you know what, not enough people are buying it. And it’s not Amazon, where you can have a million things on the marketplace. And grocery, especially frozen grocery, you have a set amount of space. And if you’re not performing, you’re out. If you’re a foodservice operator, you’ve got a fixed amount of space in your in your cooler, your freezer, and if your item’s not moving, that means it’s taking up valuable space. It’s getting old. It’s going to have scrap and it’s going to cost them money. And they’re struggling too. So, it’s all about that velocity. And so that’s the way we think of innovation now, versus like, let’s make a cool something, because that’s, that’s easy.
Spencer: Let’s apply this to your new Pinza product. How did you know? Was it just, just the common knowledge that European trends will eventually make their way over to the US, and it was, like, really strong over in parts of Rome? Or do you have instinct? How does it work?
Fallucca: It’s a little bit of gut, little bit of instinct, little bit of data. And so, if people that have been to Europe, they’re like, ‘Hey, I was eating pasta, and I was eating pizza, and I don’t feel bloated. I don’t know what it is. I come back and I eat a sandwich or a pizza, and I just I feel like garbage. I don’t get it.’ There’s this health aspect. And if you look at the way that there’s health fads and there’s health trends and there’s this real, real good eating. And when you look at the way that the Europeans treat food, they’re not spraying their foods with herbicides and pesticides like we are. They have a different relationship with their food, especially with breads. They’re fermenting it. They have this high hydration.
And so, we saw the way that health was trending, and we know that the combination of high hydration, long fermentation is just as a much less glycemic index than your traditional breads. And we knew that their products are cleaner. And so we knew that was something that was starting to bubble up, was starting to become relevant. And I’ll give my one hot take is that the new food pyramid, there’s a lot of it that’s based on science. And I’m in the food industry, but we haven’t done ourselves the biggest benefit by some of the things that we’ve done, whether it’s, you know, complex carbs or sugars. I mean, Americans don’t like moderation either, so eat your complex carbs and sugars and meats, but it’s about moderation. And so, what we saw is this health trend, right? And we saw that all Italians were eating this Pinza style, which is crazy, that all Italians can agree on something other than the Italian soccer team and their love, or dislove, for the Ferrari Formula One team.
And then we got to our side of the world. We did some testing, not just on pizza, because nobody knows what Pinza is, even today. I’ll digress. We launched a branded product called Urban Pie Pinzza. We trademarked the name ‘pinzza,’ not the way it’s spelled, but different way, p-i-n-z-z-a, the way it sounds. And it was in an oval form. That’s the way that Pinzas were in Italy; that’s the way it is in Italy. Nobody knew what it was. They loved it when they tried it, but nobody got it.
What we found is that it’s, we changed it to a round format and just call it a Roman-style crust, and it’s still a Pinza. Like, ‘Oh, okay. It makes more sense. It’s round. It’s a pizza. I get it.’
But why we felt the conviction — is not just pizza, but again, it’s all of our retailers — not all of them, a lot of them are saying, ‘I want a wood-fired crust. I want something that has, you know, true fermentation notes. I want sourdough. I want Neapolitan. I want this, this age, this flavor.’
As a manufacturer, we just couldn’t get there without this type of line, and so we didn’t invest in a Pinza line. We invested in a capability that is not available today. It wasn’t available until we did this. So that’s where our conviction lie, was not just saying, ‘We’re making a line that does one sole thing. We’re making a line that can do a lot of things that we have all these data points — we’ve done consumer testing that they understand wood-fired, they understand sourdough, they understand Neapolitan.’ So they understand things that are, you know — to the people in food or Italians, like, ‘Oh my gosh. Like, a wood fired been around forever.’ Wolfgang Puck and CPK, like, they’ve done this for how many years at the restaurant. And you’re starting to see wood-fired now make it to grocery. It hasn’t been until recently that wood-fired has even gotten to grocery.
So, our conviction lies in our capabilities. And I bring it back to our team’s execution of something. And our customer relationships. We have a relationship with every retailer in the country, and so we know that they’re looking for this type of product.
Spencer: All right. So then as far as the team, what did the learning curve look like for creating this high-hydration crust and having a brand new facility? Were there people in the other facilities who were like, ‘I want to learn how to make this kind of pizza’?
Fallucca: Yeah. So, we took some of our development team, whether it’s food scientists or chefs, and they’ve been working on making the product by hand, like, just learn the product by hand. And they’ve been doing that, you know, the last three years.
From an operations standpoint, the team that we brought in, we brought them in — some of them a year before we opened the facility — to learn our company, our processes at our other facility. And then once the equipment was solidified, going over to Italy or our domestic partners and working with our equipment manufacturers on the on the equipment and making our product at each of the locations. So with our mixer, we would go to that location and we’d make dough, and then we’d bake it in a random oven. Then we’d go to the bakery line, and we’d mix it with a random mixer, make it in the equipment, and bake in a random oven. And then we’d go to the oven, supplier sheet it, mix it different equipment, and we’d bake it on that line. Our development team and our operator, and our core operator and leadership at the bakery, they were making this product so often, they were commissioning the equipment with their knowledge of making this product. So, by the time it came here, they were so knowledgeable about the product, the dough, and how it should stretch and feel and look and taste, that when we started commissioning everything together, they knew what was right and wrong because they’ve been working on it for a couple years.
And so even some of the operators we’d send over to the equipment manufacturers to learn that equipment on location. And a lot of them, when we hired them, they were working at our Canal Street location for most of their job. But then part of their day would be learning this new equipment as well. So, it’s not just, you know, sitting idly. They’d be working on our other mixers or other bakery lines or in other parts of the business. But then slowly, they would just gradually increase their time focusing on this to the point where, when this line is being commissioned, then all of their time is on this new line.
Spencer: Wow, that’s really well thought out. I have heard operators say like, ‘Boy, you know, I wish the ones who are writing the checks for the equipment would talk to us or let us tinker with equipment before they buy it, so that we can either give our opinion or share our voice, or just so we know what we’re getting when it’s commissioned, so that we don’t just have to be like, how do we figure this out.’ That just takes training to a whole new level. And I guess it’s necessary because we’re not just talking about new equipment, we’re talking about creating an entire new product line. But to go two years before you even start up a line, learning about the product is pretty incredible. Does that do anything for retention? That’s kind of a side note.
Fallucca: I don’t know if that does per se, but we’ve had a lot of this team for a long time. We’ve had, we brought in a few new people that have some expertise in different areas. But a lot of the team we’ve had has been with us for quite some time in — at least, from like the R&D side — and the operator side, a lot of them have worked at Palermo’s at the other location. So, you know, so luckily, you know, some of them are long term employees we’ve had, and the new ones that are new are really engaged.
Spencer: Well, I mean, if that’s how you are always treating your employees, with engaging them, with helping them learn something, instead of just throwing them into the fire, so to speak, I wouldn’t be surprised that you have a lot of longtime employees. Like, that’s a big investment, and you wouldn’t want to walk away if you were an employee, if you put all that time into learning about it, why would you want to walk away from it when it’s ready to launch?
Okay, so what are the biggest challenges overall with manufacturing a craft style product? Because, you know, there’s always that, ‘Okay, well, if it’s made on machines, is it still craft? Or ‘If it’s made at scale, is it still artisan?’ How do like R&D and operations and innovation. How do you guys all work together so that you can make it on a line but still have it be an authentic artisan product?
Fallucca: I mean, I think this one, specifically, because of the nature of the product, is so difficult to work with. The machine was developed to handle this product in a way that other equipment couldn’t do. So, it’s not like we’re, you know, recommissioning like a Rheon line. You know, Rheon lines are great, but they’re not going to help you develop your cell structure like this kind of line. They’re really great for other products, but they’re not made for this.
So, this equipment is all made to gently handle dough that’s high hydration and long fermentation. So, I think from a great quality product, it’s not us who believes that — we do — it’s our customers who are saying this is as good or better than anything else, whether it’s a restaurant or handmade. That’s our bar. Our bar is the best of the best. If it doesn’t meet that, then we’re not we’re not satisfied. We don’t have a bar of a ‘machined product.’ Our bar is the best of the best.
Spencer: So, it’s really about just paying attention to every single step of the process and then finding equipment that supports that?
Fallucca: Correct.
Spencer: Okay, that sort of is that puzzle piece that fits into that big picture.
So Palermo’s is known for high-quality frozen pizza, just like you said, like the best of the best, and that’s your bar. But it really is more than that. it’s a business that goes back generations, and it’s really what your grandfather, the level of quality, that he expected. How do you balance innovation in a company that goes back so far with such deep roots? how do you keep making the next big thing that is still up here? I think of like gymnasts, you know. they’ve got to get another turn off the bar, or whatever. An ice skater has to do an extra spin, but they have to execute it perfectly. So how do you keep innovating and still live up to the standards that you’ve had since the ’60s?
Fallucca: I mean, I think you know, for us that this is kind of what we do. We listen to our customer, we listen to our consumer, we listen to our employees. But then it’s continuously pushing the envelope of what’s possible, and then having the operational support to do so, because, you know, we’re in a unique space that not everybody wants to have this level of detail or intimacy and speed at which we can, we can operate. So, it’s just, it’s our way of life. It’s just, it’s how we it’s how everyone in the organization operates. And it’s not a company for everyone.
We are very fast paced, and food industry is very complex. It’s very demanding. So, it’s not a place for everyone who you know, each of our developers, I mean, I don’t know how many projects they have. Maybe 20, 30, projects at a time. We’re developing, you know, probably 20 different new items right now here at West Milwaukee at any given time. And they all have complex recipes and formulas and require trial runs and different levels of engagement with our quality team, as far as the plan in order to use some of these raw materials. And so, it’s complex, but it’s exciting.
We know that what we’re doing, it’s a bit organized chaos. Because it’s perfection at the point of when you need perfection. So, at the time of launch — so once you get to commercialization — you know it needs to be done safe. It needs to meet our food standards. It needs to meet our specs, from whatever that customer spec is required. It needs to meet the throughput in order to justify the cost. But before then, it’s a bit wild west. It’s like, sometimes we’re, we’re putting the wheels on as we’re landing the plane.
When we did a project with Netflix and Walmart — our Surfer Boy Pizza — for the show Stranger Things, from ideation to launch in less than six months for a nationwide rollout at Walmart. So, when our team is like, ‘Let’s just go at this,’ our ability to quickly execute, develop, ideate extremely accurate and quick is unmatched. And what our customers see is our ability to work with them on what do they need, what are their solutions. And the hardest point is, what is that right price point for innovation? What is that right price point for customization? We can’t be everything to everyone. We probably can’t sell a $13 Pinza at McDonald’s, but maybe it could be a bun that goes on their LTO.
So it’s maybe saying, ‘Hey, like, you want a pizza with San Marzano tomato and stracciatella and real roasted garlic, and you want it for 35 cents?’ I don’t, I don’t think that’s going to work. So, it’s like, what does that right fit for you as a customer? The right fit for Walmart is different than the right fit for Wegmans, which is different than the right fit for McDonald’s. And so, it’s understanding, intimately understanding, the needs of that customer so we can provide the correct solution for them. And hopefully we’re courting people that have enough volume to make this customization worth our while.
Spencer: So with 1000 employees, you are, by no stretch of the imagination a small business. But you’re not, like you said last week or the week before, that, you’re not this big conglomerate that has to just crank everything out according to one specific process. You have that agility of a smaller company. That’s a really unique fit.
Fallucca: Yeah, we pride ourselves in being a customer-intimate company, and agility is important because, you know, it’s the needs of the retailer, and also it helps us out. Like retailers or foodservice operators, they have certain launch windows, whether it’s a Q4 reset or, you know, a testing at this time. We can wait, but then you lose a whole year. And we’re realistic too. Sometimes you want something that’s super unique; it’s going to take some time if you want to do it right.
But we also have a large portfolio of things that we’ve done, or we have in our stock inventory, or we make a lot of already. So, you know, we’re talking about innovation, but we make a lot of your everyday items. We make a large percentage of the, you know, nation’s rising crusts pizzas in the grocery store, or, you know, thin crust. So, if you come to us and want a new thin crust or rising crust, we do that every single day. So, for us to do that is, is very simple; we’ve done that a lot. Or you want one of our stock items from our new facility, here’s the order form for US food, Cisco, PFG, etc. You can go and you can buy a case at a time.
So, we have the systems in place in order to either give you a really great stock item that we’ve been producing for years. Or if you want to work with us and customize, depending on your volume and your scale, we’re more than willing to put all the stops and just put a full tactical team and get this done.
Also, the infrastructure. We talked about innovation in our team, we have this flexibility. But we have lots of teams that don’t have the flexibility. You know, the people shipping out products every day, the people that are on the line, manufacturing to spec to recipe, the people who are doing payroll. There’s no wiggle room there. You know, let’s say if you’re off on your shipments by 5%, that could mess up your inventory or whatnot, wildly. If you miss payroll by a few percent, that’s a lot of people. So, there’s some areas where there is zero tolerance, there is this process. And so, a lot of our organization has these incredible processes that allow teams like us to think visionary, but also tactically go and win business.
Spencer: That’s really about infrastructure and having a solid infrastructure to allow the creativity that’s required to innovate.
I’m going to ask one last question, and this is sort of around just the skepticism that’s kind of out there with food manufacturing and this negative connotation that comes with processed foods and not having a definition for ultraprocessed foods. And there are people who get confused and think, you know, ‘If it’s made on machines, it’s ultra processed,’ which isn’t — we know, you and I know — that’s not true. But there are skeptics who might say that a pizzaiolo — did I say it right — they doubt it can truly exist in a manufacturing setting. So, what do you say? If it’s manufactured at scale, is it still artisan? And what’s the key to holding onto the craft?
Fallucca: I can’t speak to other organizations, but I can speak to us. I would, I would challenge anybody to ‘out pizza’ us, whether it’s our knowledge of flour, of dough, of the sauce, of what makes a great pizza, great, whether it’s in any style of pizza. And I think it comes back to that, that passion, that knowledge from the people who are developing and creating and understanding why they’re making what they’re making. So again, we can make you a great, you know, value thin-crust pizza, but we can also make it a truly artisan product. That is, it’s using all the components in the process of a way that a sole operator would do it. It’s just based on our passion for the product and our knowledge of what makes a truly great pizza great.
And we also admit things that we can’t do. There’s things that we know that we can’t manufacture, and we’re not going to pretend that we can manufacture. But the things that we do claim that we’re going to do, we’re going to do it better than anybody, as far as it comes to the knowledge of pizza, the knowledge of doughs. And there’s individual people that we rely on too. Relying on our suppliers, going to shows, talking to industry experts. So it’s not just our opinion, but it’s the taking the knowledge of the industry experts and making that quality product. I think, also, just our ability to talk at detail of any of our products and the ‘why’ behind them and what makes them special. And just our passion for producing a great a great product.
Spencer: That’s a really good note to end this week on.
Fallucca: Well, thanks. It’s always a pleasure to talk and looking forward to next week.
Spencer: Yes, and so next week, you’re going to put that marketing hat back on. We’re going to harken back to your education and marketing and really talk about what it took for nationwide expansion and how you’re growing the brand. And I cannot wait to talk about the Stranger Things pizza because I am a Stranger Things junkie. And then we’ll close off the week after that with future of innovation. But next week talking about the branding is going to be really cool, so I can’t wait for that. Thank you so much, Nick.
Fallucca: Thank you. We’ll talk to you next week.
