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 our fifth and final episode, Nick talks about what the future looks like for the Palermo family … and its family of brands.
Learn more about this season here, and tune into Troubleshooting Innovation on Apple or Spotify.
Joanie Spencer: Nick, welcome back to our final week.
Nick Fallucca: Thanks. I’m excited to be here and talk. The future of Palermo is the future of food and everything in between.
Spencer: I love it and I’m feeling better, but I still haven’t gotten my voice back. I’m so sorry.
Fallucca: That is okay.
Spencer: I’m going to leave most of the talking to you. Okay, so this question is one that I love to ask long-standing baking companies, and I especially love to ask generational bakers. How do you balance tradition with innovation? That can be a fine line to walk, especially in the pizza market. So what’s the key there for you?
Fallucca: There’s a couple of ways you can look at the balance between innovation and tradition and what the future holds. As a company and organization, it’s important to make sure that you are maintaining this organization for a long time, which means that you’ve got obligation to your co-workers, your community, and that means that while tradition is important, I think tradition and maybe your values is what’s most important, and certain things that are off limits.
So whether it’s you know, the way you treat your employees, your customers, what you put in your products, how you view food, those are traditions that, yeah, we’re not going to change. But if somebody wants us to put Korean beef onto an Italian pizza crust, you know, the Italians might be rolling in their graves, but if that’s what the consumer or the customer wants … If somebody’s going to pay you to do that … We’re not this altruistic company that, oh no, pizza must be Neapolitan pizza with San Marzano sauce and only buffalo mozzarella — I love that pizza, and I think that’s a great pizza — and if somebody wants to buy that pizza, I will sell you that pizza.
But if somebody wants a Korean beef bulgogi or tandoori chicken pizza, or they want just a bunch of pepperoni on a pizza … you know, it’s funny, Italians don’t put pepperoni on pizza; you won’t find a pepperoni pizza in Italy. And if you do, it’s not a real pizza. They’ll put salami picante, or if you see pepperoni, it’s actually peppers. Nobody in Italy who makes pizza does pepperoni, and so even that’s not traditional, but it’s what the number one pizza in America is.
So we don’t balance from a topping or a flavors or a crust, it’s we want to provide solutions, and that solution might be different to you versus someone else.
Spencer: I’ve asked that question so many times, and I think you’re the first person to really like align it with values. Tradition means values. That’s a really good way of thinking about it. And I’ve talked to a lot of generational bakers. One in particular, she told me that, you know, my dad never would have made some of the decisions that I made for the company. But it’s a different time now, and I made decisions that are what’s best for the company right now, not 30 years ago. So I thought that was really interesting, too. I think values are the things that never change.
Fallucca: You’re absolutely right. People’s desire for different food products, whether thin or thick or stuffed or folded or heart-shaped, I don’t care. I have a preference, and I know what I like, but I’m not going to make you eat what I like. I’ll show you what I like, and I’ll try to sell you what I like, but if you don’t want it, that’s okay. That’s the way I look at things.
Spencer: So last year, you and I visited while we were at IDDBA, and we chatted about the health benefits around fermentation. So Palermo’s is breaking a lot of ground in that realm, specifically with your pinza. Do you think you’re where you need to be, or where you want to be with pizza, or is there more innovation to come there?
Fallucca: You’re never where you want to be. I mean, because once you get to where you want to be, then what, right? How many people get to where they want to be, and they’re content staying in that place? So I think our pinzas are the best out there, but comparison is also not good. You don’t want to compare yourself with others. You want to compare yourself to your vision of what the best can be, and that vision should always change.
I will put our pinza against anyone else in the world, but are we there yet? Never. We will always continue to innovate, to make things better, not just our mindset. Continuous innovation in everything we do, continuous improvement, always looking and reflecting back. How can we be better?
Spencer: I’m guessing that pinza was not a short process for the R&D and to launch this. So if you think about how long that took, was it typical? How far out do you need to look when you’re trying to identify a trend and figure out what’s going to be sticky?
Fallucca: So identifying trends is important from a timeline, because it’s important to go and see these trends in different parts of the world. And different parts of the world might be in your backyard, if you’re lucky. But you have to understand what people are eating, how they’re eating it and why they’re eating it. And you start to capture, are there multiple people doing this, or just one? Is there just one little pizzeria in Rome doing this thing? Or is this starting to take off?
We’re trying to work on a process to define some of this and get some consumer feedback and insights. What do they want? Why do they want it? What is this unmet need? What problems it’s solving? But sometimes it’s just, you know what? I’ve seen a lot of pinza out there. This is a thing. Let’s start working on it. You start working on it and then you start having retailers or customers say, “Oh, what about pinza?” We’re like, “Oh, funny you asked. We’re working on it.” And so then you get this like reassurance, because everyone starts asking about it.
With pinza, you know, three years ago, it wasn’t as well known. A couple years ago, more pinza. Now at the Pizza Expo, it’s all pinza. I mean, everything is pinza, pinza, pinza, which is great. I mean, we built a facility that can do pinza. I’m glad that we’re seeing this, this trend just blowing up. But what’s next? And that’s what we’re starting to work on, is what is next? We’ve got a virtual vision board that we can start to play with and talk to consumers about, and say, “Do you even know what this is? And if I tell you what it is, do you know? Do you care? Would you buy it?”
And I won’t give any secrets, but I will talk about one of my favorite items. I love Arancini, or Suppli, Italian rice balls. Arancini is mostly from Sicily, where it’s your meat and cheeses in the very middle and then surrounded by rice and then deep fried. Suppli is that same thing, but all the rice, meat and cheese is mixed together and then breaded and deep fried.
And I was like, “Oh, these are, like, the best street food, the best snack food.” They’re such a perfect item. It’s got protein and rice, it’s amazing. Let’s test this concept. We test the concept, and it was like the lowest rated concept in all of our concepts we tested. But it’s all over Italy. I’ve started seeing it more on restaurant menus now. I’ve seen a couple items at grocery stores.
We wouldn’t make Arancini, but maybe we would distribute it, or maybe buy a company that can do it, or something. But it’s something that I was very passionate about, that we saw this trend, but it hasn’t really taken off here yet. So there’s a whole bunch of other things like that that we’re doing this research on to find out if consumers even know or care about this latest and greatest thing that they should be eating.
Spencer: Interesting. I was going ask you, is it easier to innovate a whole new style of something or to reimagine what already exists?
Fallucca: I think it depends on what context, whether it’s commercial, like development, commercialization, or just being successful at marketplace. And so like, I think the easiest thing to do is just at least for us, is just innovate some random thing and commercialize it and launch it. But that doesn’t matter. What matters is if people are going to buy it, right? Otherwise, what’s the point? So it’s easier to probably reimagine or to improve upon something that’s already out there. For us, while we didn’t see pinza out there, per se, we started to see a lot of people wanting something that eats more like a restaurant. Well, what are the restaurants doing? Okay, well, they’re doing 24-hour dough. So we know as table stakes, it has to be 24 hours, and so why not incorporate high hydration, and why not incorporate a wood fired, because you started to see a lot of wood fired pizzas out there.
We started to see a lot of restaurant pizzas out there. Restaurant-inspired, my favorite, you know, inspired by a restaurant. And so we knew that if all we could do better is just a 24 hour dough as a par-baked crust, that alone was an industry need. So we’re building upon better. Everybody knows, at least in today’s day and age, a wood fired style pizza, like a CPK or Wolfgang Puck. They’ve normalized wood fired pizza. That alone is something we can improve upon, where like pinza or these other styles are still bleeding edge.
Spencer: I’m going to ask a weird question. Do you think just calling it wood fired pizza like, lends credibility, because of California Pizza Kitchen and Wolfgang Puck. Is it one of those things that consumers are like, ooh, wood fired, and they don’t even really know what it means?
Fallucca: Oh, for sure. I mean, I think the best style of pizza oven is a deck oven, like a big like a Blodgett deck oven, you see like in a New York pizzeria that’s been around for 50 years. That is the best oven you can make a better pizza in that oven than everything else out there. However, it’s not sexy. It’s a gas deck oven. That oven is going to outlive the restaurants, the owners, like that oven is , bulletproof, and so it’s the marketing appeal to wood fired. If it’s a solely wood fired oven, you can smell it, and maybe, if you’re using, you know, cherry woods or whatnot, can you taste the wood fired versus gas? I don’t know. Let’s say, the sake of this podcast, I’ll say yes, you can taste the difference. But it’s more about that high heat, that blistering, the look, the fast bake. Here’s a dirty little secret that comes from the dough. If you have a really great, high hydration, long-fermented dough, topped simply and you put into an 800 degree oven, you’re going to achieve that.
Now, maybe some of these, like Blodgetts, they don’t get to 800 so you’re not going to get that really fast singe, that fast bake, also that locking of the moisture. So you get a lot of quick bake. It locks in all that moisture. The name wood fire alone now carries that image. If I tell you wood fired pizza, you just probably think, you know, a little bit of charring on the edges, big pillowy crust. That’s what I envision when I think wood fired. That’s what the consumer thinks when they go to the grocery store and they see a wood fired pizza like, “Oh, I’ve seen all these wood-fired grills across America, or wood-fired pizza on the menu.” All the oven companies have done a really nice job of marketing it. So, like a couple out there that are pretty prominent, and then you got guys like Uni or whatnot that have these home wood-fired pizza ovens that have also lent credibility to the name wood fired. So the consumer is inundated, and they know that now, versus pinza. It’s going to take some time and education to educate them on that.
Spencer: Okay, so let’s talk about some other like maybe more tangible consumer issues. I’m curious to just get your take on how they’re impacting innovation for you, like I said, fermentation. I mean, you’re nailing it. And you know, we talked a lot about, and you mentioned it a couple weeks ago, just how easier to digest pizza is in Italy than it is here, and a lot of that has to do with the fermentation, and gut health is something that’s really important right now. So I think you’re serving a need with that, in addition to all the other needs that you’re feeding with the pinza product.
Fallucca: What we’ve what we know, is that when you have high hydration, so more water than other typical pizza products, up to 85%; long fermentation, so 24 plus hours; and then with pinza, it’s got a combination of flour, rice and soy. So it’s less traditional wheat flour. The combination of those three things, you just have less glycemic index on that product compared to products that don’t have that. And what that means is that people that have little bit more gluten sensitivities or whatnot, they tend to feel better eating this product.
I can definitively tell you that the glycemic index level is lower on our item than other items. What we haven’t done the research on is, how do I prove that you feel better because of it? You can replicate the stomach, but I’d have to lock you in a room and make you only eat this. And that means that, you know, you couldn’t eat anything else. And so it’d be a difficult study, and we’re still working on that study.
Spencer: The pizza elimination diet?
Fallucca: Yeah, like, how do we really test? Also from education, I’m not going to put on the pack, “lower glycemic index.” I could, but what is the emotional benefit? I feel better eating this pizza than other pizzas out there. That’s what I need to convey. So what’s really cool is, on top of that, there’s new studies coming out that say, when you freeze your product and then rebake it or toast it, it even drops your glycemic index lower. So even if you just get like bagels from the grocery store and throw them in your freezer and then toast it later, that freezing effect also breaks down some of the gluten as well.
So, we’re trying to bundle this up into some easy-to-digest package. No pun intended, actually, yes. Pun intended, easy to adjust package, to talk about the benefits of our product because there is something out there. And this is where, again, we talked about in previous episodes, our brand versus other brands. We can explain the benefits with science backed up, but I would love to lean on other people’s expertise to say, “How do you communicate this best?” I hope all of our listeners today will say, “Oh, I’m going to go buy this pinza because it tastes better, but a longer form discussion about why it’s got a lower GI level and why it makes you feel better.
It’s hard to convey when you’re walking past the grocery store aisle. Our benefit also is that we sell into foodservice. Maybe if we get lucky, that operator is able to convey it in a much more meaningful way than we can. Or if it’s at a restaurant, I might come up to you your waiter, “Hey, we have this new pinza on the menu. We done some studies, and it’s got a lower glycemic index than traditional pizzas, and it’s going to be better for your gut health.” They have a better chance of explaining it.
Then when you’re walking past a frozen aisle and you see 150 different pizzas, you don’t really have time to sit there and determine one is going to be best for your gut. We don’t want to lie. Whatever we say on pack needs to be spot on accurate. So I might say better for your gut? Well, is it better for your gut or my gut? I don’t know, but I can definitively tell you it’s got lower glycemic index.
Spencer: Have you ever thought about like working with a dietitian? Because I know a lot of dietitians are becoming social media influencers now and talking about what they eat. Maybe there’s an opportunity there.
Fallucca: Yeah, that’s a great idea. We want to clearly define our research. Once we’ve poked all the holes in our research, then go into someone and say, “All right, what are your thoughts? You poke holes in our research now.”
Spencer: I like that. It’s important to be able to poke holes in your own research. That’s what good research is. What about issues like the hard ones, like economy and affordability and the Make America Healthy Again initiative and the new dietary guidelines. How do you see those impacting how you innovate?
Fallucca: I think the most controversial is the new dietary pyramid, and depending what industry you’re in on the baking side, you could look at and be like, “Oh my gosh. They’re saying that you shouldn’t eat any breads and carbs.”
But let’s be honest. No one looks at that and thinks, “Oh, I’m going to fundamentally change the way I eat because I see this new pyramid.” The trust in our government is not very high right now, or it never has been. Who knows? I’m not a political; I don’t care. As long as you eat my pizza, I’m happy.
Our opinion all along is: A) moderation and B) eat foods you make at Whole Foods; they’re probably better for you. Look at the way my grandparents ate. Now, that’s not always as easy, and you have to be educated in the way to prepare some of these meals. That’s probably actually a cheaper way to eat as well. I’d love everyone to go buy a Screaming Sicilian, but if you go to a Costco and you can buy bulk rice, bulk flour, you can make a lot of foods at home very affordable.
Now there’s also the thing of food waste. I was talking to someone recently, and we, like, throw away like, 40% of our food in America. I don’t know if that statistic is right or wrong, but I know that we throw away a lot of food in my house, and sometimes when you cook, you cook too much versus more portion-controlled items. Waste is a major issue in manufacturing, but nobody wants waste, right, for sustainability? But also cost. You don’t want to just throw stuff on the floor. So manufacturing is forced to reduce waste.
We talked about where I think the future is going. I think: A) is people being educated themselves on what is healthy to them. What does their body need as far as nutrients? My body loves carbs versus my body does not like really fatty foods. Other people can eat ribs and wings all day, but they can’t touch gluten, and so that’s why, to me, I don’t really care about the pyramid one way or the other, because you should find out what’s best for you and eat that product. I do see people becoming more educated with food. I do think that you should find out what your body likes, but I also see a lot of things trending towards individual sizes. And it’s interesting because, like, the shift for us, going from like a 12 inch pizza to a four inch pizza, let’s say it sounds simple, but is wildly complicated. All of our machines are set up for traditional size: packaging machine, the pallet configuration, the trucking like, everything is set up for that traditional size. Now, our new facility can do small sizes, which is great.
And I think, to get back to, like, affordability and waste, let’s say hypothetically, I could just get, you know, my three to four meals a day with just the portions that I need. That should, again, altruistically or theoretically, control the waste and cost. Let’s say you’re buying a box of cereal, but you’re only eating half. That box of cereal it might be cheaper, but you’re still throwing away all this thing. Or let’s say you’re living alone, and you’ve got a pound of ground beef, are you going to eat all that ground beef? You’re going to get sick of it and say, “I can’t make any more tacos. I’ve taken the extra ground beef and now I’ve made chili. I’ve used more ingredients to make something else,” But who makes a small pot of chili, right?
I think we’ll start to see a lot of people move towards individualized health for them. I hope so. I really do. And then individualized portions, which are challenging for the food industry, but I see a lot of people … it’s kind of like with pinza … I’m starting to see a lot of people ask for smaller sizes, individualized portions, because let’s say that there’s four of us at the grocery store I’ve got an option, kind of going back to feeding the family, delivering for your family. I know my whole family’s going to buy a cheese pizza, right? If you like pizza, you probably like cheese pizza, but now my daughter won’t eat pepperoni. Okay, so do I have to make a separate pizza, or, like, pull half of the pepperonis off? But let’s say my wife and I want something unique. I want burrata or pancetta, or I’m gluten free. By going to that individualized size, you’re not going to buy four different frozen pizzas for your four different family members. At least most people won’t. It’s just too much product; you get back to waste. But if there’s a Korean beef bulgogi pizza and a margherita pizza and a basic cheese, you can buy four pizzas, and they put them all in the oven, and each family member now gets their own full portion of whatever that product they like is, and there’s probably a better chance of selling more Korean beef bulgogi pizzas as an individualized portion versus a full size unless you go into a party and you’re feeding a whole bunch of people a 12-inch Korean pizza. That might be too much, whereas a six inch or a five inch, it’s not going to go to waste.
I think as the industry figures out how to make smaller portions, it’ll be easier to control waste and eventually control costs. Unfortunately today, my labor and overhead rates to make a large and a small are the same. Some pizza manufacturers have customized their lines to do 500 small pizzas a minute, which is efficient for them. So I think the industry might go that way.
Spencer: It’s going to be interesting to see, like in the next five years or so, or like at the next IBIE, in a couple of years, what the equipment technology looks like for creating smaller portions.
Fallucca: Yeah, it’s not just the there’s the crust aspect. Got your topping aspect, and you’ve got your then your packaging. And packaging is a whole other world. We could spend another three podcasts just on different packaging for different pieces of equipment, different places in the grocery store, versus at your home, versus this or that.
Spencer: So we’re going save that for Pack Expo later this year. I just asked a couple of really heavy questions, so I want to lighten it up a little bit and talk about leadership and thinking about the future and the notion of family. It’s a family-owned business, but I get the feeling that family means more to you than just the bloodline or the name. How do you see everybody at Palermo’s as sort of part of the family, and how does that all carry the idea of the values into the future?
Fallucca: I think I’ve mentioned before, we try to say we’re not a family company. We’re a privately held company. Because probably how we are at the family dinner table is maybe not how we want to be as a, you know, as a leader. The Italian family is loud and opinionated and all that comes out, obviously. But it’s not do unto others as they would have do unto you. It’s do unto others of how they want to be treated. I think that’s the mentality of leadership. We’ve got our missions and our values and our core competencies. It’s being fair and direct. It’s challenging each other. It’s always innovating. So on our website, we’ve got our Palermo way. It’s a bunch of core values that we try to live by, and that’s how we look at leadership is servant leadership. It’s focusing on the people’s development. So there’s a whole lot of ways that we try to incorporate into our into our work always.
Spencer: What are your like this one’s pretty ethereal. What are your hopes and dreams and goals for the company for the next decade? I think it’s continuing to be a solution-based provider for the food industry. It used to just be frozen pizza. Now it’s we’re in the world of foodservice. We love food, and we love sharing that food with others, but we love sharing the food in a solution-based manner and understanding the needs of others around us. And the needs might be of our retailers, it could be of our consumers, it could be our employees or our community and so and everyone has the different needs set.
For us, it’s just being a solution to their problems. It’s like when somebody comes to you with a problem, anybody can come to you with a problem, right? But only a select few can say, “Hey, I’ve got this problem. Here are three different solutions. And here’s my recommendation.” It makes your job so much easier. And so that’s what we can do with our retail partners and say, “You have this problem where you want to do x. Here are some different options we have for you. We recommend this option. Now, if you want one of the other three recommendations, we can go down that path as well.”
Instead of saying, “Oh, we need to sell more pizza.” Okay, well, sure, don’t we all? It’s providing that solution, and that’s what we want to continue to do I should say
Spencer: Nick, I don’t know a better way that we could end this month than on that sentiment, so what do you say we call it a podcast season now.
Fallucca: It’s been great. I’ve enjoyed talking to you about pizza and product development, and I can’t wait for this to continue and for us to talk again soon.
Spencer: Yeah, this was awesome. Thank you so much for taking so much time with me. It has really been an incredible month getting to know you and sort of peeking behind the curtain at Palermo’s. I appreciate it, very insightful, very entertaining, and when I’m in the store and Palermo’s in the freezer case, I’m going to be like, “Oh, I know them.”
Fallucca: It’s been a lot of fun. And thank you very much.
Spencer: Yes, thank you. Have a good one, Nick.
Fallucca: Take care. Bye.
