Grace’s Kitchen Upscale SellsMajor Retailers Melt for Frozen Upscale Dinners.
With entrees such as mustard-crusted ahi tuna nicoise, it's not your father's frozen TV dinner. But Ballard-based Grace's Kitchen Inc. is betting the nation's time-starved gourmands will soon acquire a taste for its upscale frozen dinners for two.
In the past 12 months, the number of stores selling the company's frozen dinner kits has increased from 30 to about 1,000, Chief Executive Jaap Langenberg said. He estimates Grace's is now producing about 60,000 meals a month for grocers across the country.
Just last week, Grace's signed up East Coast grocer Shaw's Supermarkets Inc., which has 153 stores in six states.
But the lion's share of Grace's current expansion has come through recent distribution deals with discount warehouse retailers Costco Wholesale Corp. -- which in late January became the first warehouse club to carry Grace's products -- and Wal-Mart's Sam's Club.
Costco and Sam's Club each now account for about 10 percent of the company's revenue. Other customers are mainly independent, specialty or natural foods grocers, such as Matthew's Thriftway in Bellevue's Lakemont area, Urban Vines in Seattle's Mount Baker area, Larry's Markets and Whole Foods Market.
Grace's offers a simple concept: a restaurant-quality meal for two that sells at a reasonable price ($12 to $20) and can be prepared in 30 minutes tops. Consumers assemble the vacuum-packed ingredients themselves, following simple directions that include suggested wine pairings. Ingredients are organically grown, and either raised or caught through sustainable practices.
For its warehouse club customers, Grace's developed two special steak dinners. Sam's Club offers sirloin for two at $11.99, while Costco sells a steak dinner for two for $19.95 that contains two aged, 8-ounce New York strip steaks topped with crimini mushrooms and red onions, garlic parsley french fries, asparagus spears and apple crisp for dessert.
"You can get the same quality steak as they serve at Daniel's or the Metropolitan for under $20," Langenberg said. "That's an obvious value that has wide appeal."
About 80 percent of Grace's customers are women who spend about $74 a week on groceries and range in age from 30 to 55 years old. These consumers typically buy their bulk items at discount warehouse clubs such as Costco, and shop at upscale specialty groceries for other items.
The real jump in Grace's growth came early last year after company executives changed the design of their dinner boxes and made them smaller, Langenberg said.
"The grocers were saying what's in the box is fantastic, but it was too big for the premium shelf space at eye level," he said. The smaller box -- which chopped packaging costs by 70 percent -- now includes "romance copy" about Grace's credo of no menu planning, no preparation and no preservatives. Most importantly, said Langenberg, "There's a big sexy shot of the food wrapping the front of the box now."
Once the new packaging came out, the product took off, he said.
Founded in late 2003, Grace's Kitchen started out offering cooking classes for folks who wanted to make their own gourmet dinners to freeze and reheat. But the company overhauled its business plan after participants asked if they could buy the meals already mostly fixed and frozen.
The company was started by former University of Washington manager Britt Freda along with Mike Buhrmann and Steve Anderson, two former AT&T Wireless executives who are now partners in the Kirkland-based venture capital firm, 1024 Partners LLC. The Kirkland VC firm wanted to invest in a consumer products company like Grace's Kitchen in order to diversify an investment portfolio dominated by software companies.
Since they didn't know much about cooking, the founders hired former Cinnabon Chief Executive Kern Gillette as CEO and recruited chef Hollyce Snyder to develop the product line. Snyder's resume includes working at Jeremiah Towers' well-regarded Stars restaurant in San Francisco.
So far, Grace's Kitchen has received about $3 million in funding in two investment rounds from 1024 Partners and local high-net-worth angel investors.
Grace's will go out for another $3 million round later this year, Langenberg said. The company is in the black and anticipates producing $7 million in revenue this year.
Langenberg was hired in the fall of 2004 after Grace's previous CEO Kern Gillette left to join Bellingham-based grocer Brown & Cole as vice president of finance and administration.
One thing Langenberg quickly noticed is that there are few premium products in the frozen dinner niche. That means the company also has fewer benchmarks for figuring out what entrees would persuade consumers to pay a premium price.
That's meant some hard-won lessons. One example: Consumers drew the line at Grace's lacquered poussin.
"It was an $18.99 way of saying glazed chicken," Langenberg said. "If people spoke a little bit of French, they thought it was fish; if not, they thought it was possum."
With only a dozen employees, Grace's has been able to meet increased demand for its products by relying on other vendors to prepare vacuum-sealed packets of ingredients that meet its specifications. Up to five companies may be involved in preparing any single meal, Langenberg said.
While the vegetarian mushroom risotto cakes are one of Grace's best-selling dishes, future offerings will include more seafood and meat dishes. That's because there are more companies competing for a share of the well-established market for vegetarian products.
“Lemley Design revitalized our brand, repositioning it and repackaging our products to push our line beyond the boundaries of the frozen prepared meal category. Our refocused brand shows consumers that they can purchase gourmet quality, all-natural meals in the frozen food aisle. We were such a hit at The Fancy Food Show that our distribution has increased from 30 stores to over 1000!” —Jaap Langenberg, CEO, Grace’s Kitchen
Contact Jean Jones Puget Sound Business Journal jlj@bizjournals.com • 206-447-8505x118
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