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Cincinnati’s Graeter’s Ice Cream Acquires Franchised Locations in Kentucky and Indiana
CINCINNATI, OH (September 24, 2018) – Effective today, Graeter’s Ice Cream, a family-owned craft ice cream manufacturer since 1870, has executed an agreement to purchase the Graeter’s Ice Cream scoop shops currently operated by its last franchisee, Tedesco, LLC. The stores are located in Louisville and Lexington, Kentucky and Indianapolis, Indiana. The Company previously acquired all of its Ohio franchised stores in June of 2010. With this acquisition, for the first time in over three decades, all Graeter’s Ice Cream parlors will be owned and operated by the Graeter family. Customers should not notice any immediate changes in the day-to-day operations and guest experience.
“Serving our guests the best tasting, handcrafted ice cream, in family-friendly stores, is the centerpiece of who we are” said Richard Graeter, fourth-generation owner and CEO of Graeter’s Ice Cream. “ We hope to retain and rely on the current team members in our scoop shops to help us complete a seamless transition that continues to serve our loyal customers in these markets.”
“It’s been very fulfilling to be able to serve the Indianapolis, Lexington and Louisville communities under the Graeter’s brand name,” shared Jim Tedesco, the current franchise owner. “I am proud of what we accomplished in our 20-year relationship and now look forward to the next chapter in my career.”
Graeter’s Ice Cream produces craft ice cream using the small batch, artisanal, French Pot process, dating back over a century. Graeter’s has won the hearts of ice cream enthusiasts across the country as well as the respect of the nation’s most influential foodies. Winner of the 2015 Munchie Award for best ice cream in the United States, and publicly recognized by celebrities, People Magazine and local magazines as the city’s “best ice cream”, the Cincinnati-based company remains family-owned and operated and continues to handcraft ice cream 2½ gallons at a time. Today, Graeter’s has more than 50 retail stores and ships over 300,000 pints annually for online mail order sales. Graeter’s can also be found in more than 6,000 grocery stores in 46 states.
Graeter’s Ice Cream is an ice cream chain that got its start over 145 years ago. Louis Graeter started the business in 1868, when he began selling ice cream at neighborhood street markets in Cincinnati, OH. In 1922, Louis opened the first Graeter’s ice cream parlor and soon began expanding throughout the country. Today, the fourth generation of the Graeter family owns and operates the company and there are over 50 neighborhood store locations across the country. You can also find Graeter’s in grocery stores including Kroger, Whole Foods, Meijer and Jewel-Osco.
In this interview with Richard Graeter, President and CEO of Graeter’s Ice Cream, he shares the history behind Graeter’s, how they compete on a national scale and what has been their key to maintaining quality over the last 145 years in business.
Tell me a little bit about Graeter’s Ice Cream. How did the company get started?
Richard: Graeter’s is a family owned and operated, Cincinnati based ice cream brand that’s been around for four generations! Our ice cream is made in small batches, 2 1/2 gallons at a time, and every pint is hand packed. As the landscape of the food industry continues to shift with each passing trend, the fourth-generation of the Graeter family continues to handcraft their ice cream the same they have been since 1870, 2½ gallons at a time. An emerging trend among consumers, craft ice cream is defined as small-batch, locally produced, and handcrafted – traits that Graeter’s Ice Cream has embodied for over 145 years. Today, we are the only commercial ice cream manufacturer to still use the French Pot process, which produces an ice cream with a uniquely dense and smooth texture, and allows the formation of our signature gourmet chocolate chunks.
How do you market Graeter’s Ice Cream and what are your marketing challenges?
Richard: We take great pride in marketing Graeter’s. First and foremost, our scoop shops let consumers experience Graeter’s first hand. All the marketing in the world pales in comparison to the most important moment of truth: tasting Graeter’s for the first time. With one taste, the shopper instantly understands the Graeter’s difference, and it is that personal experience that will drive them into the grocery store as well as to our online store where they can order ice cream for home delivery. Secondly, we focus heavily on social media, staying in close contact with each fan and offering them a more intimate look at the company. Public relations, too, helps us to promote the Graeter’s brand to a wider audience, promoting special events like our truck tour, and community engagements, like our sponsorship for the Western and Southern Open Tennis Tournament.
The most important challenge in marketing is cutting through the clutter of brands that do not live up to their own hype. Today, even the world’s largest corporations claim to be making “craft” or “artisan” ice cream, and the overuse of these terms by companies large and small who fail to live up to the promise risks making them meaningless. Our challenge is to prove to the consumer that not all craft claims are equal, that there is a difference in quality, and that they need to take care not to be fooled by false marketing. Authenticity is the key, and there are very few brands that actually deliver on the promises that they make. My challenge is to make sure that Graeter’s delivers and exceeds consumer expectations every single time.
How do you compete with other ice cream brands?
Richard: We compete with other ice cream brands simply by making a superior product. For over 145 years, our single-minded dedication to product quality has established the Graeter’s brand and earned a strong and loyal following among our customers. The market today is being flooded with new ice cream innovations, from ice cream made with nitrogen before your eyes to the use of trendy, exotic, or even weird ingredients that seem more intent on surprising rather than delighting. These products often come with a surprisingly steep price tag. While we are uncompromising in our continued dedication to heritage of quality, we try not to take ourselves too seriously. It is, after all, just ice cream. And traditional American ice cream at its core is a simple pleasure.
We don’t get much more exotic than Black Raspberry Chocolate Chip, which is our most popular flavor, and frankly, I think that our plain vanilla (which is made with fresh ground Madagascar Bourbon vanilla beans) is pure perfection. The neat thing about Graeter’s is that we serve the entire family. Grandma and Grandpa can order traditional favorites like Butter Pecan, Mom and Dad can get more sophisticated scoops like Black Raspberry Chocolate Chip or one of our new gelatos, and the kids can delight in childhood favorites like Cookies and Cream. We serve the entire family, while remaining an affordable luxury. Hand made quality is expensive, and we do cost a little more than the national brands, but we keep our price below that of the other trendy brands that you may find on shelf today.
What are your biggest challenges?
Richard: It is crucial for the Graeter’s Ice Cream team to be full of great people. The secret to our success is a strong team of A-players. Finding the best people is very difficult, but we have been very successful in attracting the best and brightest to join the Graeter’s team. With a strong team, no challenge is insurmountable.
What are the pros and cons of the franchise model?
Richard: We no longer offer franchises. While we do currently have one franchisee, we decided that the only way we could guarantee our quality was to keep everything within the family. Franchising is a strategy for fast growth, and you can get rich quick with this model, but you can fail pretty fast too. The Graeter family has opted for slow and steady growth, and our vision is to continue to build our legacy of quality and pass it on to the 5th generation of family leadership.
How did you start expanding the business and what was your process for sourcing new locations?
Richard: We began our expansion back in 2007 with a test market at King Soopers stores in Denver, Colorado. The success of that test led to our expansion to additional markets, which led to the need for a new production facility, ultimately enabling us to expand to even more markets so that now, you can find Graeter’s in most states. Our most recent expansion was in the southeast with our introduction in Harris Teeter stores this spring. Even though we have been expanding distribution, you won’t find Graeter’s everywhere or in every grocery chain. Many big box retailers are simply not right for our brand, and sometimes the most important decision is deciding to say “no” to a growth opportunity.
Equally important for us is our network of Graeter’s retail stores. Finding the right location for a retail store is more art than science, and location can make or break a store. Graeter’s retail stores allow consumers to experience our brand in person, which then leads to higher purchases at the grocery store. Our grocery sales are much higher in markets where we also have Graeter’s retail stores, which is why we are aggressively expanding our network of retail stores. In the last year or so, we have opened seven new stores, including one in Oxford, home of my alma mater Miami University, our first store in Chicago, and we have two more stores set to open this fall. We are actively pursuing a second Chicago location, as well as two locations in Cleveland for next year, and perhaps Nashville after that. Our vision is to be the premier ice cream in the Midwest.
How do you source your ingredients? How has your model changed since the beginning and What did you learn along the way?
Richard: We source the highest quality ingredients for Graeter’s Ice Cream, from fresh local Ohio cream, to black raspberries grown on family farms in Oregon’s Willamette Valley, to the world’s finest vanilla beans from Madagascar. What we put into our ice cream is as important as how we make it. The only thing that has changed is that we need more ingredients today than we did in my father’s day. Now, we buy entire crops a year in advance, and may carry a million dollars in inventory of raw fruit and nuts. But that is the only way to ensure that we have the quality ingredients that we need on hand. You can’t just go out and buy some things like Willamette Valley black raspberries, you get one chance a year to get them and then its gone. And since Black Raspberry Chocolate Chip is our most popular flavor, we cannot afford to run out!
Did you use any investment funding to get started? What were the advantages or disadvantages?
Richard: We remain 100% family owed. Because of our 145-year history of successfully managing our business in a careful and conservative manner, we have found that conventional bank financing is always available when we need it, which isn’t often. Coming from a thrifty Germanic heritage, we prefer to finance our growth out of cash flow. That limits growth somewhat, but that is not necessarily a bad thing. When you have third party investors, you focus changes to short-term quarterly metrics and purely financial measures of return. By being 100% family owned, we look long term, sometimes generations into the future, and can consider non-monetary returns on investment that would never show up on an investor’s financial statement.
Who do you admire in the industry and why?
Richard: I admire every little guy out there with a passion for making something different and better than anything else on the market. I go to a trade show called The Fancy Food Show in New York City every summer to share our ice cream with thousands of professionals in the specialty food industry. I always take time to walk the aisles and sample products, and I meet some pretty incredible people who are as passionately dedicated to making the best possible product in their category as I am to making ice cream. These passionate men and women are my heroes – each and every one of them – as I appreciate the sacrifice and struggle that comes with trying to bring a quality brand to market. Unfortunately, it is often not the best quality product that wins out. The barriers to getting a specialty product on shelf are extremely high, and expensive, and sadly, many consumers will never get the chance to try many of the wonderful products I find at the show. For example, my favorite Greek yogurt is Fage – it is the Graeter’s of Greek yogurt – but it is almost impossible to find. The big corporate brands soak up all the shelf space, making it very difficult for smaller quality brands like Fage to get a fair shot. We are competing with Nestle and Unilever for space in the freezer, and it can be very difficult for us when they can spend millions and millions of dollars to incentivize retailers to take space away from little guys like Graeter’s so that they can fill the shelves with lower quality products.
How do you know when and what to delegate to your team?
Richard: I do not micromanage my team. In fact, any CEO who does is an abject failure, as he or she must not trust their team to do the job that they were hired to do. I sleep pretty well at night knowing that I have a team of A players that are uniquely qualified to know more about their area of responsibility than I do. My executive team meets as a group weekly, and everyone is expected to bring important issues in their area of responsibility to the table. We openly discuss important issues, solicit recommendations, and make decisions by consensus. If even a single member of my team objects, that is a big red flag warning me to check my assumptions.
Do you have any “growth hacker” tips for entrepreneurs looking to take their business to the next level? What examples do you have of things you did that set yourself apart from the rest?
Richard: Since it took us over a hundred years to expand out of the city of Cincinnati, I’m not sure that anyone can accuse us of being growth hackers! I think that the most important thing is to welcome help, and even to look for it in unexpected places. We used to do everything ourselves, but you can only do so much on your own. Our growth curve began when we hired consultants with expertise that we lacked, and continued by adding senior level nonfamily members to our team, and accelerated by forming strategic alliances with third parties like suppliers, customers, and even competitors. The best growth hack is finding people and partners who want to grow with you.
What advice do you have for businesses that are having a hard time trying to figure out how to scale their business?
Richard: Small brands succeed in differentiating their product, usually based on quality. Authenticity is critically important when growing a brand, and by that I mean that you must resist the temptation to compromise on what established your brand when trying to grow it. In the ice cream category, I have seen it all too often. A small craft ice cream maker starts out with one shop making ice cream in the back room and begins to win a loyal following, but then turn to co-packing (which means a larger third manufacturing actually makes the product and merely puts the little guy’s name on the container) in order to expand. What you end up with is mass-produced ice cream whose main difference is fancy marketing and a higher price point, but is no longer a small batch artisan product. I understand the temptation, as working with dairy products in a small manufacturing environment can be a perilous endeavor, but you can’t compromise your brand just to feed growth. Some people want to get rich quick then sell out. My motivation is to build on my father’s legacy and pass it on to my children. My partners, who are my cousins, share in this vision.