Great Ideas for your Small Business:
Serve the Market’s High and Low Ends
One of the most successful and creative entrepreneurs I know built an incredibly lucrative frozen-pizza manufacturing business by serving all ends of the pizza market with specific products.
A former potato saleswoman, Kathy Taggares cashed-in her condo, jewelry, and insurance policies in 1989 to buy a nearly defunct salad dressing factory from Marriott Corp. She named the company K.T.’s Kitchens. A few years later, she added pizza crust to her product line. She eventually added a full line of frozen-pizza products. In 1997 she made a staggering 125 million pizzas.
With 2001 sales around $40 million, she’s definitely doing something right. Taggares has mastered a full spectrum of approaches to marketing her products. This ability to tailor the same product to suit many customers applies to other businesses.
In her case, K.T.’s provides products for the low, middle, and high end of the pizza market by creating lines of different private-label products. The mix is about one-third high, middle, and low price points, Taggares said.
If you think “pizza is pizza,” think again. At the low end of the market, she sells pizza in bulk to public schools and the military. K.T.’s also produces a line of mid-priced pizzas for club stores like Sam’s and Costco. At the high end, K.T.’s creates gourmet pizza for Trader Joe’s.
Because the ingredients for making any pizza are basic- ally the same, with only the toppings changing, Taggares saves thousands of dollars by buying flour, spices, sauce, and toppings by the container load. The bustling factory, featuring one of the largest commercial freezers in southern California, has the largest refrigerated USDA processing room on the West Coast. K.T.’s runs several production lines at once; some workers are making big, low-cost pizzas for Costco, while across the way, others are carefully hand-stretching crusts for upscale lines. Taggares continues to focus on making all kinds of pizza for a variety of customers.
“The biggest benefit of a diversified product mix is to spread my risk,” said Taggares. “At first, I didn’t have enough money to develop and market my own brand, so I got into food service, selling to schools and doing private-label packing for others.”
Maintaining multiple product lines has another strong advantage: “It helps even out the sales year-round,” she explained. “During the summers, school business is down, but club store business is way up.”
I asked Taggares if her multiple product approach would work for other entrepreneurs. “It depends on the flexibility of your product line,” she said. “We can serve pretty much every segment of the market with the same type of equipment. It wouldn’t work if you needed different equipment to make different products.”