A new flavor Featured

7:00pm EDT January 30, 2005
Not long after Richard Graeter and his cousins, brothers Bob and Chip, purchased the family business from their parents in late 2003, effectively ensuring fourth-generation ownership of Graeter's Inc., the trio sat down with a business consultant to determine how to guide the ice cream company's future.

The meetings focused on three things -- streamlining Graeter's image, beefing up its online sales and establishing an expansion plan for the 135-year-old company's long-term future.

"Brand management, brand identity, logos and all that nonproduct-oriented type of thing was stuff that my father and uncles (didn't worry about)," Richard Graeter says. "They were just making the ice cream and getting it out in the stores. My aunt was worried about getting the doors opened on time.

"They were so close to the day-to-day operations of the business that they never had the time to pull back and look at the strategic part. That's what the three of us are doing."

Graeter, who pursued an accounting and finance degree at Miami University before earning a law degree from the University of Cincinnati, recognized early on that a successful past didn't guarantee a successful future. In fact, less than 3 percent of family-owned businesses ever reach the fourth generation.

Graeter's, itself, almost didn't make it. The company's ownership transfer to Richard, Bob and Chip required more than three years of planning and a family business consultant to end the squabbling among the third generation of Graeters.

But that's all in the past. Today, more than a year after Richard, Chip and Bob reached an agreement among themselves and with their parents, business is booming.

Richard, who serves as president and CEO of Graeter's Franchising Corp. and Graeter's Inc., oversees a two-fronted operation -- a 12-store ice cream retail business that employs more than 300 people and generates nearly $14 million each year; and a 25-store franchising operation.

Under his leadership, Graeter's has updated its image, strengthened its foundation and expanded its reach. To accomplish this, he recognized essential components that simply had not been previously necessary. He, Chip and Bob have rebranded the venerable Cincinnati icon and set it on a solid path for its next phase of growth.

Streamlining the brand

There are few companies in Cincinnati with more name recognition that Graeter's.

"I could probably put it in a brown paper bag and wouldn't have a problem (selling it)," says Graeter.

However, knowing the Graeter's name and being able to identify its logo are two different things.

"Our brand appeared probably five different ways in our stores," Graeter says. "The Columbus stores had their look and feel, we had ours. The Kentucky ones were a little different, even the stores in the same city were a little different. Our Kenwood store looked different than our Western Hills store."

And that, he says, created identity problems that had the potential to hamper expansion.

"We thought that if we were going to franchise, we needed to have those essential foundation blocks - the brand ID and the store look and feel. In a very big way, the projects my partners and I have worked on are building blocks."

The idea of developing building blocks for a 135-year-old company may sound strange, but for any consistent growth strategy to succeed, the brand is an essential component. Companies go to great lengths to protect their brands - consistent brands provide consumers with trust and reassurance that if they purchase a product, it will be the same quality no matter where they buy it. The same goes for consumables, such as ice cream.

So last May, with the help of Cincinnati-based branding firm Libby Perszyk Kathman Inc., Graeter adopted various components from existing logos and compiled them into one streamlined version, rolling out a new corporate logo and an updated package design.

"We now have a very high-end, classy, professional-looking logo," Graeter says. "Our pints carry that logo and our candy and bakery product line will soon be carrying it. We also have gift cards that have that identity."

This achieved Graeter's most important building block -- a consistent, upscale look that could compete nationally.

"(The) brands now look and feel the same caliber as the quality as, say, Godiva chocolates," he says. "There is a big difference between one that has been well-thought-out and executed and one that has been done on the side, as a secondary product or project, over a hundred years. That's what we had. We haven't had a real brand other than the quality of the product.

"People recognize Graeter's, but I wanted them to recognize the brand and identify it together with the ice cream."

Reaching the masses

Even with a new brand identity in tow, for Graeter, as with his parents and grandparents before him, the business remains about one thing -- the ice cream.

"It is what it is because it's special," Graeter says. "It's made two or three gallons at a time."

The process, called the French Pot method, is the backbone of the company's long-term success. But because of its manufacturing limitations, Graeter's French Pot method for making ice cream is its greatest weakness as well as its greatest strength.

"You can't make our ice cream on a modern machine," Graeter says. "We basically had to design our own machine that gave the same quality of the French Pot ice cream as machines made before 1908. It still only makes two gallons at a time."

And in a world where mass production rules and competitors can churn out hundreds, if not thousands, of gallons of ice cream quickly, having to manufacture your own machines one at a time for franchisees or company-owned stores presents another set of growth challenges.

"We're not going to build a giant plant somewhere to ship our ice cream across the country. That defeats the purpose of Graeter's ice cream," Graeter says. "The product doesn't travel well. It's not meant to sit on a shelf in a warehouse, to be shipped in trucks and then sit in a back room waiting to be stocked. National brand ice cream actually has a shelf life of a year. I can't imagine and don't want to eat ice cream that's more than a few weeks old. Ours isn't.

"At any one of our stores, at any Kroger's store, you can get ice cream that's days and maybe a couple weeks old, at most."

This helps explain why, despite numerous requests, Graeter and his parents have not expanded nationwide as quickly as other specialty ice cream shops.

"People ask why we're not coast-to-coast," says Graeter. "That's because we're making about as much ice cream as we can make here. Our goal is to be the very best ice cream. The other ice cream companies are all about franchising. Their No. 1 goal is to sell another franchise."

So while Graeter gets calls almost daily from entrepreneurs who want to introduce the Graeter's brand to markets beyond Cincinnati, Columbus, Dayton, Northern Kentucky, Lexington and Louisville, he and his cousins have settled on a more controlled process for adding franchises.

In the meantime, Graeter is reaching the masses in a more high-tech and targeted way -- through his company's Web site at www.graeters.com.

Relaunched in late 2003, just before the purchase agreement that transferred ownership of the company to Richard, Bob and Chip, Graeter's online store provided an immediate ability to compete nationwide, albeit in a somewhat limited manner.

Consumers can purchase the company's ice cream in specially made six- or 12-pint reusable shipping coolers and have it shipped via next-day air across the continental United States. The company's other products -- candy and gift certificates -- are also offered through its online operations.

"We use old-world technology to make the ice cream," says Graeter, "and new-world technology to deliver it."

Expanding the company

One of the biggest mistakes generational owners commit is trying to run the family business the same way their parents or grandparents did. Graeter and his cousins refused to fall into that trap.

"Our consultants were very adamant about that," Graeter says. "They said, 'Look, you guys, if you are out there driving and loading trucks and making ice cream, you can't possibly plan where you want the business to go five or 10 years down the road because you're worried about the next five or 10 minutes.' That's the real critical difference between our fathers' generation and ours."

Instead, they've set up a management structure that allows them to focus on their strengths. And, for the first time, they've hired nonfamily members to fill out the senior management team.

"In the past, you had employee members and you had Graeters, and that was that," Graeter says. "There was no in-between."

Graeter sought to fill that "in-between" with strong team members who could serve as a link between the family members and the company's other employees.

"The most important thing was (to find) someone who was as dedicated to the quality of the product (as we were)," he says. "Someone who cared about it, who looked at that ice cream or candy or bakery item as it's going out the door, knowing that they were wrapped up in it. Our name is on that, and we want the best to be out there carrying our names."

Graeter says he found two of those people already inside the company -- one managing the bakery and another in ice cream operations.

Adding them to the team -- and having them oversee those key aspects of the business -- allowed Richard to focus on his role as company leader, managing the accounting, legal, finance and marketing functions of the business. Bob oversees all plant operations and Chip is the trio's natural salesman, designing and managing the company's retail sales.

The moves led Graeter to work on developing incentives beyond ownership for the new senior managers. "That's another project we're working on," he says. "Obviously, with a small corporation, there isn't stock, so you look to use other ways to benefit them -- salary and bonus. You're basically trying to give them the incentive to stay for a long time. If they stay for 10 years and contribute to the company's success, at the end of that time period, there'll be a nice pool of wealth created for them."

But despite all the changes, all three Graeters are interested in one thing -- ensuring the product's quality.

"We could try to do 100 different things, extend our brand to different product areas," Graeter says. "But Graeter's is ice cream. And when you get back to the product, it requires hard work and staying true to who you are."

HOW TO REACH: Graeter's Inc., (513) 721-3323 or www.graeters.com

Amanda Wurzinger contributed to this article.