General Assembly Holdings Limited (the “Company” or “GA Pizza”) (TSXV: GA), a premium pizza omnichannel consumer packaged goods (“CPG”) brand, is pleased to provide a corporate update to investors. GA Pizza will host a webinar to discuss the Company’s 2022 outlook on February 15, 2022. Details are provided below.
“The culture of GA Pizza has always been about innovation and expansion,” said Ali Khan Lalani, Founder and CEO of GA Pizza. “We expanded from operating a fast-casual restaurant to launching the world’s first direct-to-consumer pizza subscription service. That successful model helped us evolve into the omnichannel CPG brand we are today. Despite pandemic-related challenges, based on preliminary results, during the fourth quarter we generated total revenue of $1,075,581, a 49% increase versus the same period last year, with the wholesale business showing an increase of 103% year-over-year.”
“With the early success of our premium, naturally-leavened frozen pizzas in the wholesale grocery channel and recognizing the potential to recraft the frozen pizza category, we wanted to share with investors the growth opportunities that we expect for the coming year.”
Retail: The clear path for growth
GA Pizza is currently available in over 100 stores, mostly in and around the Greater Toronto Area. The majority are specialty stores, with the remainder in the food, drug, and mass (FDM) category. Early indications at FDM retailers are strong, with velocities in-line with frozen aisle averages, despite the Company’s limited brand awareness in retail.
In the months ahead, GA Pizza expects to announce several retail partnerships with major FDM banners, with GA Pizza products listed for both in-store shopping and retailer-branded direct-to-consumer (DTC) delivery. This will further the Company’s efforts to expand across Canada in 2022. To help investors better understand our progress to date and longer-term opportunities, the Company is introducing a new formal reporting measure:
Retail Doors: During the fourth quarter of 2021, the Company successfully increased the size of its retail footprint by 27%, from 98 total doors at the end of Q2 2021 to 124 at the end of Q3 2021. By the end of 2022, the Company expects its frozen pizzas to be available in over 400 stores.
Production: Innovation-driven capacity to scale
In September 2021, GA Pizza opened a new bespoke, purpose-built master production facility called Marycroft in Vaughan, Ontario (the “Marycroft Facility”), which now supplies its retail and DTC channels. Currently, the Marycroft Facility produces up to 100,000 pizzas per month, with approximately 150,000 per month expected by the end of Q2 2022 and 200,000 per month by the end of 2022. Within its current footprint, the Maycroft Facility has the space to increase capacity over time to supply the growing demand for our premium frozen pizzas in retail. Over the coming quarters, we expect to continue to update investors on our progress towards our production goals and are introducing one new metric to watch:
- Billed-to-Baked Ratio: During Q3 2021, the Company sold 136,000 pizzas versus total production in the quarter of 120,000 pizzas, representing a Billed-to-Baked ratio of 113%, with better than expected sales being filled from pre-built inventory. This ratio is expected to fluctuate in the upcoming quarters based on the new retail relationships introduced in a given period, as these typically bring large initial orders. This ratio should stabilize as the business grows in scale at retail.
The current cost to manufacture pizzas at the Marycroft Facility remains high due to the Company being at the early stages of its revenue growth plan. The Company expects the cost-per-unit to produce pizzas to decrease as the Marycroft Facility increases output and optimizes processes, allowing for more aggressive retail pricing without sacrificing margins.
GA Pizza also has a Good Manufacturing Practice (GMP) audit scheduled for the Marycroft Facility in Q2 2022. The Company is also pursuing a Global Food Safety Inspection (GFSI) audit, a benchmark required to meet U.S. Food and Drug Administration (FDA) standards and that many large multinational retailers mandate. We expect the successful completion of these important regulatory steps will open a new tier of retail doors for the Company in the future.
DTC: The key to product discovery and brand-building
GA Pizza started with a first-of-its-kind pizza subscription model but has since introduced both one-time purchase and gifting options. Demand remains strong for the DTC offering, driven by the expansion of markets served in Ontario and the addition of British Columbia’s Lower Mainland. GA Pizza’s convenient eCommerce platform (backed by a user-friendly website) and strategic marketing efforts make the consumer play a significant role in the DTC channel for the Company, serving as an essential tool for product discovery and brand-building. As the Company’s distribution model has evolved, so has its go-to-market strategy within the DTC business, with the focus now turning to cost-effective customer acquisitions. This should lead to more profitable growth over the coming quarters.
Other opportunities identified for growth and margin expansion:
- Restaurant: The Company continues to innovate at its flagship restaurant to diversify revenue streams, amid ongoing pandemic restrictions. This includes more efficient take-out and delivery service and incremental revenue opportunities (such as a new general store shopping experience). The Company is also exploring potential opportunities to grow the GA Pizza footprint in a strategic and sustainable manner. The Company should have more to share on this in the second half of 2022.
- Product innovation: The Company was built on its chef’s innovation, which continues as its research and development team explores new product opportunities. The Company is developing a plant-based pepperoni and updating its plant-based margarita frozen pizza, and workshopping dough- and sauce-specific stock keeping units (SKUs).
- Brand partnerships: GA Pizza is exploring high-level brand partnerships, including the possible development of co-branded products.
- Leadership: GA Pizza has been strategically bolstering its leadership ranks, adding four key executive positions earlier this year.
- Margins: The Company has secured a permit for a Canadian Dairy Commission rebate, which should positively impact on restaurant margins. Additionally, as the business scales in the wholesale channel and the incremental cost per pizza decreases, gross margins are expected to increase accordingly.
Preliminary Fourth Quarter Revenue
- Achieved fourth quarter revenues in 2021 of $1,075,000, a 49% increase compared to the fourth quarter of 2020, but down 17% versus the third quarter of 2021. The decrease versus last quarter was due to the Company refocusing its growth efforts toward wholesale, which is expected to generate meaningful growth in 2022.
- DTC fourth quarter revenues in 2021 increased by 273% to $617,000 year-over-year, but were down 25% versus the third quarter of 2021, due to the Company refocusing its efforts on the higher-margin wholesale channel.
- Wholesale fourth quarter revenues in 2021 grew 103% to $247,000 versus the fourth quarter of 2020, but were down 21% versus the third quarter of 2021 as the Company had benefited from a large initial inventory purchase in the prior quarter. This revenue line is expected to increase in the coming quarters as new large retailers come online.
- Restaurant fourth quarter revenues in 2021 decreased by 51% to $211,000 year-over-year, but showed an increase by 40% versus the third quarter of 2021. Despite reopening its newly renovated flagship restaurant, the COVID-19 Omicron variant led to more restaurant closures, limiting restaurant revenue generation for the quarter.
“As we start taking advantage of the most high-potential opportunities before us—including the rapid expansion of our retail footprint—we’re redefining how we measure success,” said Mr. Lalani. “I am looking forward to sharing our progress through our new suite of strategic key performance indicators (KPIs) in the coming quarters.”
Webinar
GA Pizza Founder and CEO Ali Khan Lalani will further discuss GA Pizza’s commitment to innovation and share more on his outlook for 2022 in a webinar on February 15, 2022. All potential and current investors are encouraged to attend.
- What: GA Pizza: CEO Outlook Webinar
- Who: Ali Khan Lalani, Founder and CEO of GA Pizza
- When: Tuesday, February 15, 2022 at 12:00pm EST
- Register: https://bit.ly/3gsqPe4
About GA Pizza
GA Pizza began its life as a fast-casual pizza restaurant in the heart of Toronto. Four years later, we also offer a freezer-to-table consumer packaged goods line and a revolutionary direct-to-consumer eCommerce experience—not to mention a pizza box with more than one pizza in it. Our ambition? Make delicious pizzas available to everyone, everywhere. We’re always working to take pizza to new heights—from showing the world that better pizza is possible, to finding new spaces and places to deliver unrivaled pizza experiences. Find us in your freezer or visit gapizza.com for more information.
Visit invest.gapizza.com or gapizza.com for more information.
Cautionary Notice
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Information
This press release contains statements which constitute “forward-looking information” or “forward-looking statements” (together “forward-looking information”) within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs, and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes information regarding the following: expectations relating to growth opportunities, retail partnerships and retail doors; anticipated increases to production capacity at the Marycroft Facility; expectations regarding the fluctuation and stabilization of the Company’s billed-to-baked ratio; anticipated decreases in costs-per-unit; expectations regarding regulatory processes and audits; expectations of increase of gross margins; and expectations relating to final Q4 2021 financial results.
Investors are cautioned that forward-looking information is not based on historical facts but instead reflect the Company’s management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance, or achievements of the combined company. Among key factors and risks that could cause actual results to differ materially from those projected in the forward-looking information may include, without limitation, the following: there being no market for the securities of the Company; the Company’s limited operating history; global economic risk; COVID-19’s impact on the Company; the general economic environment; cybersecurity risks; financial projections may prove materially inaccurate or incorrect; the Company may experience difficulties to forecast sales; general competition in the industry from other companies; management of growth-related risks; reliance on management; risks relating to insurance; changes in food and supply costs could adversely affect profitability and ultimately our results of operations; our business could be adversely affected by increased labour costs or difficulties in finding suitable employees; changes in customer tastes and preferences, spending patterns and demographic trends could cause sales to decline; changes in nutrition and food regulation; failure to establish our master production facility; failure to expand production capacity; disruption at our facilities; government regulation of the food industry creating risks and challenges; risk associated with food safety and consumer health; changes in internet and social media search algorithms; risks associated with leasing commercial and retail space; third party reliance for shipping and payment processing; environmental laws; we may not persuade customers of the benefits of paying our prices for higher-quality food; our marketing and advertising strategies may not be successful, which could adversely impact our business; requirements for further financing; the Company may prioritize customer growth and engagement and the customer experience over short-term financial results. For more information regarding risk factors, see the Company’s final non-offering prospectus dated May 13, 2021. This forward-looking information may be affected by risks and uncertainties in the business of the Company and market conditions.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated, or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
Cautionary Note Regarding Preliminary Revenue Disclosure
The results discussed herein are a preliminary summary and are qualified in their entirety by reference to the audited financial statements and accompanying notes (the “Financial Statements”) for the period ended December 31, 2021, and related management’s discussion and analysis (the “MD&A”) of financial condition and results of operations, which the Company expects to release on or around April 15, 2022. Upon release, the Financial Statements and MD&A will be posted to the Company’s SEDAR profile at www.sedar.com. Readers of this press release are encouraged to refer to the Financial Statements and the MD&A for complete details about the Company’s results for the period ended December 31, 2021, once available.
1 All Q4 2021 financial information disclosed herein is preliminary and unaudited and is qualified by and subject to the reported audited financial results for the period ending December 31, 2021, expected to be reported on or around April 15, 2022. See “Cautionary Note Regarding Preliminary Revenue Disclosure”.
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