Pizza grown to become Cappellos best seller

Pizza grown to become Cappello's best seller

Cappello's, the US frozen-food business, is looking to make further inroads into the country's mainstream grocers after attracting fresh investment.

US private-equity firms Alliance Consumer Growth (ACG) and Finn Capital Partners have backed Cappello's as part of the Denver-based firm's Series B round.

Cappello's, which markets pizzas, pasta and cookie dough made from almond flour, described the round as "significant" but declined to disclose how much the company had raised.

The business, set up in 2011, has its biggest retail customers in the US "natural" channel, including Whole Foods Market.

"We have good distribution in a lot of the larger natural retailers in the US, but we're also starting to make a push into conventional," Cappello's co-founder and co-CEO Ben Frohlichstein said, pointing to listings at grocers including Harris Teeter, Raley's and Walmart.

Frohlichstein, who set up Cappello's with co-CEO Stacey Marcellus, suggested mainstream US retailers were increasingly looking to stock brands offering "cleaner" recipes.

"Obviously Whole Foods has been akin to this for a long time but I really think [conventional retailers] are leaning into this. They know it might take a little bit longer to build but they can see the long-term trend that consumers really want clean ingredient ledgers, want products they can trust and that they feel like they're doing better by eating. I don't think that's going away."

Frohlichstein declined to disclose Cappello's annual sales but said the business "grew at almost 70%" in 2019. Cappello's, he said, "would have been really happy" with growth of 40-50% in 2020 and, despite Covid-19, the company is set to exceed that rate of expansion. "There's no doubt that the in-home orders and a lot of the folks going into the freezer provided a lot of tailwinds for the brand this year," he said.

Sales were also given a boost by the ability of Cappello's to get products into store during the early weeks of the pandemic, Frohlichstein reflected. "We activated hundreds of thousands of consumers in the span of maybe three weeks. These are a lot of folks who weren't necessarily looking for a grain-free option or an almond-flour crust but, by being in the freezer and feeling like they had to load the pantry, we were able to get in front of a lot of consumers across all three of our segments of our portfolio."

Asked how much of those new shoppers and higher consumer demand Cappello's thinks it can retain, Frohlichstein was optimistic. "We've had now a couple of months to look at the data and the consumption has not gone down. It's really remained very strong," he insisted. "Traditionally over the summer you see a little bit of a dip in sales in the freezer anyway. We didn't experience that really for the first time since we started the brand and, going into the fall, we've got some really great promotional activity coming up, specifically with Whole Foods, and I think we're going to continue to see really strong sales into the spring."

The firm's first product was frozen pasta but its best seller is now frozen pizza. Frohlichstein described pizza as "probably one of the most competitive frozen categories" in the US and, while he believes the make-up of the company's products offer "a lot of value" to consumers, he acknowledged the funding from ACG and Finn Capital would strengthen Cappello's promotional strategy. "I think we'll be able to go a little deeper and we'll certainly be able to continue to promote as we scale which is really important too," he said. "No doubt we'll be able to be even more surgical and maybe impactful with our trade spend."

Looking to 2021, Frohlichstein said Cappello's sees a "similar kind of trajectory" for its sales, helped by distribution gains and plans for new products across its three segments. Asked if Cappello's believes it can grow its underlying sales, he added: "Growing velocities and growing the current points of distribution for us are almost more important to us than taking new distribution.

"One of the ways we've grown the way we have over the last several years is that it hasn't been a shotgun approach to just taking whatever we can get. It's been taking thoughtful distribution with customers that we feel like we can build a relationship with, actually make an impact with and to grow our business together, and then leaning into that through strategic trade planning, and thoughtful promotional activity."