Greater's Ice Cream (11 page)

In all, there are a total of forty-five retail operations, plus its ever-expanding online business. In recent years, Graeter's Ice Cream has also started dabbling in social media, including Twitter and Facebook, which has a fan page with more than fifty-five thousand fans and encourages customers to post photos of the biggest chocolate chips they've found in the ice cream.

Going forward, Graeter's Ice Cream, like any small family business, will be beset with challenges. One of them, however, is not the recession that hit the country hard in 2008. “I think it's been so dramatic,” said Richard Graeter, fourth generation and current CEO of the company, “but it has not affected us dramatically.”

Louisville franchisee Jim Tedesko agrees. “The recession in a sense helped our business. In 2009, we had our best year ever,” he said. Tedesko suspects it was because consumers were willing to spend a little extra money on good ice cream that had the added bonus of being locally produced.

Richard points out that being somewhat recession-proof has been something of a hallmark of Graeter's. Even during the Great Depression, Graeter's endured and even expanded. “You'll pinch pennies, maybe not go out for dinner. But ice cream is happy. You can take the family out for ice cream and for a dollar or two more have the best of the best.”

The ice cream market is more competitive than ever. While sales of ice cream in the United States are expected to grow from $24.6 billion to $26.5 billion by 2014, overall the market is considered fairly saturated. The per capita rate of consumption of ice cream has gone down from 22 quarts in 2001 to 20.1 quarts in 2009.

Few truly new innovations have come to market, with the exception of Dippin' Dots, small beads of ice cream flash-frozen in liquid nitrogen. They were introduced in 1991 and have become popular at malls and sports venues but remain a relatively small part of the market. Mix-in stores, such as Cold Stone Creamery and Marble Slab, are another niche market in the ice cream business.

Frozen yogurt is starting to make a strong return with the introduction of new soft serve frozen yogurt shops such as Pinkberry and Red Mango. Sales growth of ice cream didn't quite reach 3 percent from 2005 to 2009, but frozen yogurt sales grew almost 9 percent during the same period.

But in the frozen dessert market, ice cream remains king. The ice cream market can still be divided into four categories: economy (low milk fat, high overrun), regular (higher quality but still bargain-priced), premium (higher milk fat and lower overrun; includes branded and private labels) and super-premium (with high milk fat and very low overrun). In addition, a new category, known as artisan, now exists. Many cities have local ice cream makers turning out fine products, such as Madisono's Gelato in Cincinnati and Jeni's Splendid Ice Cream in Columbus.

Richard says that artisan products, however, are a different niche in the ice cream market than Graeter's. In fact, he thinks Graeter's doesn't truly fit into any of the categories. “Graeter's is a niche in and of itself,” he said.

The company is still family owned, the ice cream is made the old-fashioned way and, unlike Jeni's with its exotic flavors such as Cherry Lambic and Salty Caramel, Graeter's flavors are “good, old American flavors.” The most exotic flavor at Graeter's, Richard says, is the black raspberry chocolate chip, which also happens to be the company's number-one seller.

Manufacturers of all kinds of ice cream compete fiercely for space in the grocery store freezer. The two biggest super-premium brands remain Häagen Dazs (owned by Nestle) and Ben & Jerry's (owned by Unilever). Together, Nestle and Uniliver own roughly 44 percent of the entire U.S. ice cream market. National brands have deep marketing pockets and snazzier packaging to achieve name recognition with consumers. These companies can also attach to trends quickly, as in the reduced-fat ice cream market.

A health and wellness revolution has caused ice cream producers to add ingredients with perceived health benefits, such as probiotics and omega-3 oils, to their ice cream so they can tout the “healthfulness” of their ice cream.

Another trend continues to be the removal of “bad” ingredients such as fat and sugar. National brands, as well as other Ohio ice cream producers such as Pierre's in Cleveland and Velvet Ice Cream in Utica near Columbus, have capitalized on the low-fat segment by adding more flavors of their “slow-churned,” low-fat varieties. A half-cup serving of Edy's Slow-Churned ice cream (Edy's is owned by Nestle and sold in western states as Dreyer's) contains a little more than a third of the calories and a quarter of the fat of a half-cup serving of Graeter's.

Most commercial ice creams already use industrial ingredients that mimic the luxurious mouthfeel from butterfat and eggs, which are too costly and too perishable to add on a large scale. Some of the ingredients are natural, like carrageenan, which is extracted from algae. Others, including mono- and di-glycerides, are synthetic.

Some of these ice creams, such as Edy's, use so much of these stabilizing ingredients that it actually prohibits them from melting, as ice cream should. In an article in
Cook's Illustrated
magazine comparing supermarket vanilla ice creams, Edy's Grand Vanilla was not recommended because of its “fluffy, marshmallow-y texture.” The editors also noticed that when left sitting at room temperature for twenty minutes, it didn't melt. (Graeter's was not included in this comparison because, while it is sold at supermarkets, it is not a national brand.)

When it comes to low-fat ice cream, the newest ingredient is a manufactured version of a protein found in fish, along with a low-temperature extrusion process that increases the creaminess of low-fat ice creams. But these ingredients are not
ones Graeter's will even consider. The ingredients in Graeter's Ice Cream remain just cream, sugar, eggs and flavorings.

The low-fat segment remains one in which Graeter's refuses to compete. “No. Emphatically, no,” said Richard about adding a low-fat line to the mix. “That's just not ice cream. Dessert is an indulgence. Have a reasonable portion for dessert and take a walk.”

Richard believes in “real” food, the kind preached by well-known author and food philosopher Michael Pollan, who has written books such as
The Omnivore's Dilemma
,
In Defense of Food
and
Food Rules
. Graeter's does not, Richard says, give the “slow-churned” varieties a second thought. “They're using technology and stabilizers and ingredients to try to give the mouthfeel of a full fat product without being one. I would rather just have cream, sugar and eggs.”

Graeter's has always, however, offered no-fat fruit sorbets that are truly just remnants of the very first ices before cream was introduced. For a short time in the '90s, the company also had a line of low-glycemic ice creams at the retail stores, but they were not aimed at cashing in on diet fads. “We did experiment with low-glycemic, not for diet reasons, but for diabetics,” Richard said. “It was pretty good. Diabetics loved it.”

Unfortunately, the supply of the sweetener that they used in place of sugar because it did not cause sugar levels in the blood to spike was not reliably available. “We decided it was not our niche,” Richard said, though he noted that he wouldn't mind having a low-glycemic offering if they could find the right ingredients to make it.

Nonetheless, locally, Graeter's has done very well in Kroger stores in the Cincinnati area. Krogers sells more Graeter's Ice Cream than Häagen-Dazs and Ben & Jerry's—and at some stores more than both of them combined. Cincinnati is the only place in the country, possibly in the world, where those
two internationally known super-premium ice creams are not number one and two in sales at grocery stores.

Unlike other companies, Graeter's holds back on promoting one of the biggest strengths of its product: that it's all-natural. It's obvious in the ingredient list, but it's stamped in only small letters on the lids of the pints. “We've been careful to make a quality, all-natural product without trying to hype it,” Richard said.

Häagen-Dazs, on the other hand, released a new line of ice creams called Häagen-Dazs Five, emphasizing that each one contained only five ingredients. The catch? The majority of its ice creams, aside from those with candy or cookie pieces, had always had just five ingredients. The “new” line of ice cream was little more than a marketing ploy.

To compete with all of the different ice creams currently on the market, Graeter's has decided to take its ice cream into new markets outside of Ohio and Kentucky. But instead of opening more retail stores, they'll be selling pints at more grocery stores. To cover the product needed to move Graeter's into more markets from Denver to Houston to Atlanta, in 2009 the company announced plans to build a new plant. The twenty-eight-thousand-square-foot facility located in the Bond Hill area of Cincinnati is scheduled for completion in mid-2010.

The plant is necessary, the third generation says. “They're marketing faster than they've got room to support it—ice cream wise, I mean,” Dick said.

When plans for the new plant were announced, in the midst of the recession, the city of Cincinnati was especially pleased.
“Graeter's is a Cincinnati institution,” said Mayor Mark Mallory. “It is exciting to see one of our hometown, family companies grow and succeed.”

The city has also put its money behind the expansion, offering Graeter's a 4.5-acre parcel on which to build the plant as well as a low-interest loan to fund the construction.

When the expansion is complete, the company will go from having fourteen ice cream machines that can make 300,000 gallons of ice cream a year when the plant is at full production to double that with an additional ten machines plus room to expand capacity to up to 1.5 million gallons a year.

Another big change is the new plant's shrink-wrap facility for packaging—something that used to be done by United Dairy Farmers—and a large freezer to store ice cream after it's made. This means the ice cream can get to the far-away stores in a matter of days. Unlike mass-produced ice cream, which may be as much as a year old by the time it hits the supermarket freezer shelves, Graeter's is just weeks, maybe even days, old.

“It's an exciting time,” said Chip. “It's either the smartest thing we ever did or our kids may hate us forever, if we laden them with this huge factory. It's a great product. And I think people will want us in other places, too. That's what we're betting on.”

But some things in the new plant won't change at all. The new machines will run virtually the same way as the old ones, churning out just two to three gallons at a time. And the raw ingredients won't change at all. The dairy products for the ice cream will still come from Trauth Dairy in Newport, Kentucky, and from Smith Dairy in Orville. Vanilla beans will be ground with sugar before being mixed in for the vanilla flavor. Strawberries and peaches will be added at the beginning of the freezing process so that they will be broken down into smaller pieces for those two popular seasonal flavors. And the black
raspberries for the company's number one flavor will be pureed, the seeds removed and then cooked down and sweetened to intensify its flavor and color. None of that will change.

Richard said when he started with the company in 1989 it was a $5 million company, freezing 100,000 gallons of ice cream a year. When he and his cousins took over in 2004, they froze 200,000 gallons. In 2010, it will be a $35 million company when all the franchises are included, producing 300,000 gallons of ice cream each year, fifteen times the production of twenty years ago. “We have seen steady growth for the last one hundred years. We're probably on the cusp of an atypical growth,” Richard said.

Nonetheless, by national standards Graeter's is still small. Pierre's, another family-owned one-hundred-year-old Ohio ice cream company was worth $37 million in 2007. At its peak in 1982, Häagen-Dazs sold sixty-five million pints a year and was worth $115 million before it was sold to the Pillsbury Corporation in 1983. Ben & Jerry's, before it was taken over by Unilever in 1998, was worth $237 million.

Richard also points out that, like Ben & Jerry's, Graeter's has always been a good corporate citizen; it just doesn't trumpet its social mission. “Every good decent ethical company should behave in a decent way. You pay a fair wage, good benefits, use the best ingredients,” Richard said. “We're involved in charities, public radio. We've done it for one hundred years. We just don't turn it into a marketing gimmick.”

Despite the excitement of the new plant and anticipated growth, both the third and fourth generations enter into the new decade with guarded concern. “I'm excited about it but there's still quite a bit of trepidation. I'm still very nervous,” Chip said. “We're still a very small business really. Ben & Jerry's and Häagen-Dazs could crush us easily. Our product is still so handmade and hand crafted. Can it handle going beyond our little border? Our little area? I think so.”

Kathy believes it can, too, as long as the company maintains the ice cream as it is. “We have to be very careful about it and make sure the product maintains its integrity,” she said. “I'm confident we can do that. I think this is a good direction to be going. The markets we're going in have had some exposure to the product, and so far it's been accepted.”

Franchisee Jim Tedesko feels more ambivalent about the expansion. “I think it's good. It will bring brand awareness on a national level,” he said. “But on the other hand, it's kind of nice that we're local and unique.”

Tedesko says many people in Louisville bring out-of-town guests to the Graeter's Ice Cream shops for something locally produced. “If everyone can get it, it's not as special of a treat.”