A Conversation with General Assembly’s CEO

Sophic Capital client General Assembly Holdings Limited (GA Pizza) [TSXV:GA, OTC:GASMF] is a restaurant company with a fast growing, premium frozen pizza business. While the business started as a fast-casual restaurant, it quickly evolved to become a brand-focused consumer packaged goods (CPG) play that makes delicious pizza available to everyone, everywhere. GA Pizza currently operates through three main distribution channels: 

  • Direct-To-Consumer (DTC): GA Pizza Club, the Company’s premium frozen pizza subscription and direct-to-consumer offering, has shipped over 65,000 boxes since its September 2020 launch. The pizza gifting platform allows consumers to send chef-curated pizza boxes and gift cards to friends and family.
  • Wholesale/CPG: Focusing on premium and multi-unit grocers as well as securing national distributor relationships to scale the Company’s grocery presence as production increases.
  • Restaurant & Experiences: The birthplace of the Company’s signature naturally leavened personal pizzas continues to be a culinary destination for customers and a strong revenue generator.

We caught up with GA Pizza’s CEO Ali Khan Lalani to learn more about the Company and the long-term opportunities that exist in disrupting the frozen pizza category at retail.

Sophic Capital - Logo - Colour

GA Pizza CEO Ali Khan Lalani

Ali, tell us about why you founded a pizza business, and what business experience you bring?

I would consider myself a lifelong student and someone who learns best through experience. My passion for food and hands-on-learning has taken me across the globe, including a trip to Italy in 2016, where I was fortunate enough to experience the art of pizza-making in two of the most historic cities: Rome and Naples. During that trip, I had a bit of an epiphany on pizza dough: I believed I could bring a Neapolitan style sourdough to the Canadian masses. This wasn’t just a dream: I had spent almost a decade managing and owning franchise restaurants. At 26, I started off as one of the youngest franchisees in Swiss Chalet history; I owned two locations, which I transformed into model operations in a pretty short period of time. After that success, I was asked to advise other franchisees on national media campaigns and franchise restaurant designs. So, I knew the business well enough to know there was real potential in this new pizza concept. That was, essentially, the genesis of GA Pizza.

So, what happened with GA Pizza following that epiphany, and what drove you to move towards a more CPG focused business model?

General Assembly Pizza Location on AdelaideGeneral Assembly Pizza opened in 2017 as a fast-casual pizza restaurant in the heart of Toronto with a mission to bring people together over pizza. And I can proudly say we’ve held steadfast to that mission in our restaurant, winning numerous accolades along the way. People love our pizza; it is clear both in our communications with our customers and the strong repeat business our restaurant sees.

Nearly three years after opening, we decided to leverage our product strength into developing a freezer-to-table consumer packaged goods line. It was not without its challenges, as moving a restaurant-quality pizza recipe into a frozen product requires significant trial and error (not to mention launching an entire new direct-to-consumer business is not without its challenges). But we finally figured it out, and our direct-to-consumer business was born.

And as our frozen pizzas began gaining in popularity, we looked to further growth by raising $13 million in February of 2021, ahead of our direct listing in June 2021. The main goal of the financing was to help construct a state-of-the-art frozen pizza facility in Vaughan (just outside Toronto). We feel like we are raising the bar on frozen pizzas with GA Pizza’s sustainably-forward, freezer-to-table consumer packaged goods, revolutionizing our relationship with frozen pizza. Our CPG line currently includes eight different pizzas, six of which are meat-free or plant-based.

How has the strategy shifted since going public?

When we started down this path, we were quite new to the CPG side. We thought we could sell subscriptions at a reasonable cost of acquisition, and it would come with a sticky recurring revenue stream. And at the start of the pandemic, this was mostly true. However, we quickly realized that consumers in this new world like to experiment with flavours, and their tastes are ever changing.

So, while we were acquiring customers at a reasonable level, we weren’t first-order profitable, and the consumers weren’t as sticky as we had hoped. The biggest issue was we had a lot of people who signed up for subscriptions and then immediately cancelled. We have since added one-time purchase, which has curbed this behaviour considerably. Now the average subscriber stays for about six months in total. However, despite this change, as we have scaled the cost of acquisition kept rising and the low-hanging fruit of long-term monthly subscribers started to wane. And we kept receiving feedback that consumers wanted to grab a pizza from their local store; or they only wanted one and wanted it to be a convenience purchase. So, we pivoted, and now we’re evolving into a full omnichannel brand.

We see a large opportunity in the premium frozen pizza category and have seen great success in broadening our distribution footprint. We still offer direct-to-consumer pizza, but now we understand this channel as a best-in-class brand awareness and product discovery tool—not to mention a valuable feedback loop for product innovation. We give more pizzas away than we might have at the start, but it leads to a lot of brand affinity, and with the pizzas now available in local grocery stores, where consumers can get them whenever they want. 

Sophic Capital - Logo - Colour

And you mentioned you see a big opportunity in premium frozen pizza. Can you please elaborate?

 Frozen foods is a massive market and is expected to increase by over 40% from 2018 to 2026, reaching over US$360 billion. Within frozen foods is a growing market for at-home pizza experiences, with the global frozen pizza market expected to exceed US$25 billion.

There has been rising demand for ready-to-eat food coupling with the growing popularity of pizza among the young food-focused generation and the working-class population. Traditional, cheap frozen pizzas, or what we refer to as “Big Pizza”, will always have a market; however, we’re seeing a lot of consumers who want premium pizzas; pizzas made from high-quality ingredients like our plant-based pies. 

I feel that the pizza community we have built is only going to get stronger. I say this because e-commerce sales almost doubled in order volume from 2020 to 2021, because of COVID-19, and we are well positioned to capitalize on this growing trend with our new website and online offerings.  

How is the retail business going so far?   

So far so good. As we mentioned, retail is quickly becoming the most important sales channel for GA Pizza. Our pizzas are now available in more than 100 stores, and we expect that number to increase significantly in 2022. We’re supporting this channel with our new master production facility in Vaughan, Ontario, which currently has a peak capacity for 200,000 pizzas per month – which could support up to 400 total retail stores. We expect to ramp to 150,000 pizzas per month by the end of Q2 2022. Longer-term there are opportunities to expand capacity further as the business grows.  

We recently announced a new wholesale distribution agreement with UNFI Canada, which is the Canadian subsidiary of the largest publicly traded grocery distributor in North America. The arrangement will see UNFI Canada list GA Pizza’s premium pizzas to buyers across its network of more than 5,000 Canadian stores. 

We also formed a sales partnership with Propel Natural Foods, a national CPG food broker. This partnership gives us the infrastructure and expertise to sell into natural, grocery, mass merchandise and club retail channels. This is key in helping us scale our retail footprint.

Lastly, we are also in a five-store pilot program with Fortinos Supermarket, a grocery chain owned by Loblaw Companies. We expect to expand to all 23 stores in the coming months.

Sophic Capital - Logo - Colour

You seem confident about the growth potential here. When can our readers look forward to buying General Assembly pizzas at their local grocery store? 

In the Greater Toronto Area, they are pretty easy to find in stores now, and will become easier very soon. Keep in mind that our first and only restaurant is in downtown Toronto, and until recently we only delivered within the GTA, so that’s why we’ve built our initial retail channels there. Now that our new facility has opened, we are starting to expand our footprint, including launching direct-to-consumer in British Columbia at the start of December, with retail launching in early 2022. 

But what really gets us excited is that our pipeline for future retail expansion is growing every day. We are in talks with one of Canada’s largest grocers about online delivery. That would bolster our direct-to-consumer sales and could launch in a few months. We are also in discussions with that same grocer on mainline retail, about the possibility of adding four of our SKUs to 80 of their retail locations. We have already started to build a relationship with Loblaws through Fortinos, and the initial results are quite positive. Right now, they are selling over 30 units per week/SKU, and this is providing us (and them) with the confidence to look at expanding our presence.  

In terms of our geographical footprint, we are actively looking for opportunities to expand across Canada. As mentioned, we launched in British Columbia in December, and we are also in conversations with several large grocery stores in the province. We expect continued retail wins in the coming months across the country and will be putting out more formal projections on retail door expansion in the coming weeks. 

Coming Up… 

In part 2 of our interview with General Assembly Pizza [TSXV:GA, OTC:GASMF] CEO Ali Khan Lalani, we will learn about the Company’s: 

  • Direct-to-consumer model as it relates to building brand awareness;
  • Strategic initiatives, and;
  • Long-term growth plans.
Sophic Capital - Logo - Colour

Sign up for all Sophic Capital reports at https://sophiccapital.com/subscribe/