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.
A PLAN AND A PLANT
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.”
A SPECIAL CONTRIBUTION
Graeter’s Ice Cream has undertaken a fair amount of charity work, including the development of a new flavor for a special little girl.
In 2006, the Desserich family of Cincinnati received devastating news: Their five-year-old daughter, Elena, was diagnosed with brainstem glioma, a deadly form of pediatric brain cancer. She died a few months later.
The Desseriches were determined not to let their daughter’s death be in vain, so they set up a foundation, The Cure Starts Now, to educate, aid and fund the research for a cure for pediatric brain cancer. As part of their first gala fundraiser, they approached the Graeters for a contribution.
Richard said the Graeter family was touched by the story and offered to sell the opportunity for one person to create a new ice cream flavor in Elena’s name. The ice cream would then be sold at the retail outlets for one month, and a percentage of the profits would go to The Cure Sta
rts Now.
The flavor, Elena’s Blueberry Pie Ice Cream, went on sale in July 2008. It sold out in two weeks. “We had to scramble to make more,” Richard said.
The Graeters decided to make Elena’s Blueberry Pie Ice Cream a permanent flavor, available by the scoop and by the pint at retail stores, select grocery stores and at their website, with a portion of the proceeds continuing to go to the fund. In 2009, Graeter’s donated $15,000 to The Cure Starts Now. In addition to helping to raise more funds, they sell the Desseriches’ book, Notes Left Behind, which is filled with the drawings and notes Elena left for her family in the months before she died, tucked into books on the bookshelf, between the dishes in the china cabinet and in briefcases and backpacks.
BAKED GOODS AND CHOCOLATE
Despite the bright future for the ice cream, the future of the candy and bakery business remains in limbo.
“The candy business and bakery business have remained flat. We’re really just trying to make it reasonably profitable in those areas,” Dick said. “We lost so much money that the ice cream business has carried the bakery business.”
The family is divided on what to do with the bakery and chocolate business, which is only available in the retail stores in Cincinnati owned by the family. Richard would like to see it go away, but Kathy wants it to remain. While Dick recognizes the bottom line, he also feels the bakery adds something to the Graeter’s stores that customers can’t find elsewhere.
“It lends a lot of mystique to our retail stores that you don’t have at other stores,” Dick said. “Our stores are pretty neat stores. They’re confectionary stores. You can find these three really really good products that you can’t find somewhere else. We don’t necessarily convince all the people of that all the time, but it is true.”
Glass cases at Graeter’s in West Chester are filled with chocolate confections and fresh-baked cakes and pastries. Courtesy of Ken Heigel.
Richard takes a more logical approach. “I think we have a really great bakery,” he said. “The problem with the bakery line isn’t the product. The problem is people have changed their shopping patterns. They don’t go to stores anymore to get bakery products. They can get it at grocery stores. They can get it at the gas station. Either get people to your store or you need to take your products to them.”
Richard hopes to develop a line of Graeter’s bakery products that could be sold in the freezer section of grocery stores, something customers could warm or bake at home that would be different, and perhaps even better, than what they can even get at Graeter’s stores now.
The candy business, which has been a part of Graeter’s since its inception, presents similar challenges. Kathy loves the chocolates, so much so that she’ll only allow herself to eat the filled Easter eggs after the holiday for fear that she would eat too many of them every day if she had that unlimited supply.
But Graeter’s hardly has an exclusive edge on the candy market. “Wholesale candy is a very competitive business,” Richard said. “There are a lot of big candy companies: Ester Price, Russell Stover.” Richard feels he can’t compete with them, even though he knows his chocolate is better than both.
The new plant, he says, will focus strictly on ice cream, and, for now, candy and bakery items will still be produced at the Reading Road facility.
GENERATIONAL CONTRIBUTIONS
In looking toward the future, the fourth generation also is mindful of what previous generations brought to the business. “Each generation has its contribution,” Richard said.
The first generation created and then expanded the ice cream business. The second generation expanded to the bakery business. The third generation reinvested in the current business, closing stores that weren’t profitable, expanding into franchising and getting into supermarkets.
“My dad, my two uncles and Kathy ran the business twenty or thirty years,” Chip said. “They made sure they didn’t take a lot out of the business, and neither do we. We’re making sure we can pass it on to the next generation.”
Richard agrees. “We inherited a business, or purchased a business, I should say, that was significantly better off than the one they inherited,” Richard said of his father, aunt and uncles.
“Our contribution is what’s happening now, the next plant,” Richard said. “We’re working with Kroger to sell Graeter’s in other cities. Shipper business, getting ice cream over the Internet came up. Some things you keep the same, like the ice cream. Some things you change, like your store locations.”
“I don’t see shrinking our retail footprint, but I don’t see building fifty more stores,” Richard said.
Right now, 60 percent of the business is retail, 20 percent shipping and 20 percent grocery. With the projected expansion into new markets, Richard said in ten years he sees grocery sales being 50 percent of the family business. But he’ll keep some products exclusive to the retail stores, partly to keep customers coming back but, again, as a matter of practicality.
“We do what we call bonus flavors, flavors just in our stores, something special that you have to come to Graeter’s to get versus something you can get at Kroger,” Richard said. “A flavor has got to really hit it big to make it to Kroger now. Because we have to invest a lot. The development of the flavor is the easy part. The art, the packaging, all of that? That costs thousands of dollars, and it can take a year.”
The family says there are no more plans for additional franchises, either. “They have been successful, but at the same time you have a lot less control of the product,” Kathy said.
In fact, in June 2010, Graeter’s Ice Cream bought back the Columbus and Dayton franchises owned by Maury Levine and Clay Cookery. The office in Cincinnati now operates all of the Ohio stores. While the Graeters were happy with the franchises, they saw the purchase as an opportunity to build the relationships with Columbus and Dayton customers. Richard also says buying back the franchise helped the family maintain control of the product and the brand.
We don’t want other people making our ice cream. Franchises really at the end of the day are all about franchising. I mean, whether it’s ice cream or pizza or tacos. When you make franchises it’s about growth, growth, growth. You lose control of it. Usually, the brand gets destroyed in the process.
We were at a point a couple of years ago where we asked, do we sell twenty new franchisees and teach them how to make ice cream and send them out into the world? Or do we take the risk and invest the money in ourselves in making a new ice cream plant to make more ice cream to supply Kroger? And that’s what we decided to do.
When moving into ownership of the company, Richard knew it couldn’t stay exactly the same and survive. “Growth can be your enemy. People say you have to grow or die. That’s not entirely true to me,” Richard said. “We could have stayed as is for a while. But you can only do that if you keep the group small. Our challenge is to grow at a pace where we don’t lose what’s most important, which is the quality of the product.”
And like the generations before them, this generation is doing more than making a living for themselves. “We’re custodians for our turn. It’s our job to make it better, to keep it in the family,” Richard said. “Part of what I think is if you set up your kids with a big pot of money in a trust fund somewhere, what kind of life is that? But if you leave them a business that requires effort to keep going, you get a better person out of that. I think we all share the same sentiment.”
Chip echoes that idea: “We’d still like to keep it a family business. I want my kids to do whatever they want to, of course, but that opportunity will be there for them, that’s the idea.”
Richard said he’s received many offers from people wanting to buy the company. But unlike other small ice cream manufacturers that eventually sold to large corporations, the Graeters want to keep the company in the family. “If I had a nickel for every offer, I’d be rich,” he said. “We have never seriously considered an offer.”
The fifth generation of Graeters e
njoys the fruits of the family business. Courtesy of Graeter’s Ice Cream.
Kathy is proud of where the business has been and where it’s going. “I think it’s great heritage to have something that’s been in your family for 140 years this year,” she said. “A pretty amazing event actually.”
ACCOLADES
Even without the expansion efforts, Graeter’s Ice Cream is reaching a wider market than ever, to a great degree on the wings of all the positive press.
Talk show and magazine mogul Oprah Winfrey was brief but complimentary in the recommendation of Graeter’s from her magazine in 2002: “You haven’t tried ice cream till you’ve had Graeter’s. The butter pecan is Stedman’s favorite, and mine, too.” Winfrey also talked about Graeter’s on her television show the same year. The day after she mentioned Graeter’s, the company shipped four hundred boxes of ice cream to people all over the country—up substantially from the forty they usually ship.
In June 2004, Cincinnati magazine declared Graeter’s black raspberry chocolate chip ice cream one of the foods that “define” the city, along with Virginia Bakery Schnecken, Trauth Dairy’s Sour Cream and Kroeger & Sons Sausages. Here’s what the magazine wrote about Graeter’s:
How do you make great ice cream? Ask any member of the Graeter’s family, and they’ll tell you the same way they’ve been making it since 1870—in small batches, in a “French pot” freezer, with the best ingredients available…The careful tending produces a particularly dense product, perhaps the reason why a pint of Graeter’s will serve four handily.
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