Podcasts

The (Sweet) Secrets to Graeter’s Success: Balancing Tradition and Innovation

How does a 145-year-old, family-run company continue to grow and innovate while staying true to its core values?

Louis Graeter began selling ice cream in 1868 at street markets in Cincinnati, Ohio. Since then, Graeter’s has evolved into a popular, craft ice-cream brand with more than 40 retail locations and over 300,000 pints shipped annually via online sales. The product is also available in over 6,000 stores in 46 states. Oprah Winfrey herself is a fan, calling it “absolutely the best ice cream I’ve ever tasted”.

CEO Richard Greater discusses the challenges of rising above a competitive market and the business strategies that have fueled company growth (as well as some missteps). He also provides advice on how to build a successful business long-term.

 

TRANSCRIPT

Greg Corombos: Hi I'm Greg Corombos our guest this week on expert insights is Rich Graeter of Graeter’s Ice Cream. The business has been around for 148 years. And it's a fantastic combination of nostalgic tradition as well as terrific innovation. So how does the company balance those two priorities and what has made this business such a great success? And Rich, thanks so much for being with us.

Richard Graeter: My pleasure to be here today.

Greg Corombos: Well, as I've found out in the background materials here, you still make ice cream by hand in French pots, which it's probably not the fastest way to make ice cream, although it might be the most delicious way to make it. But you're also embracing great innovations such as, you know, partnering up with microbreweries and online applications and finding ways to make people notice what you're doing. So talk about embracing and protecting the tradition that you've had for a century and a half, as well as understanding how to advance your business by embracing what's modern.

Richard Graeter: Well protecting the tradition is pretty easy. That is, we just do the same thing that my great-grandmother Regina Graeter did back over 100 years ago. And that makes ice cream using French pot freezers. That's an old technology that nobody uses anywhere anymore today. But it's the only way we know how to make ice cream. And it makes the best product possible. So we're kind of stubborn in that.

Innovation, on the other hand, comes in with things like flavor development. Flavors are always changing. We make flavors today that I'm sure Regina and never would have imagined and working with new partners. So we are now well beyond Cincinnati and new cities with brick-and-mortar stores all the way across the country and in grocery stores. So that's something that was a big innovation for us this generation.

So it's a matter of protecting what's important and then being willing to strike out and try new things, too.

Greg Corombos: Obviously this business has been in your family for many generations. Is this something you were excited about, from a young age to one day be a big part of? Or was that something that you were told that you’d be part of?

Richard Graeter: Probably a little bit of both. You can't grow up in this city with the last name Graeter and not have this just part of your life from almost my earliest memory. People love Graeter’s ice cream. They've grown up with it. And so when they hear that your name is Graeter, that's what they want to talk about. So it really does become part of your identity.

And I know when I took my kids to preschool, the same thing happened to them. And I saw it happen. So it's really part of who I am and who every member of our family is. I know that my father was very proud when I decided to come into the business, as my cousin's father was as well, and I have two kids. And I'm hoping that one and hopefully both will follow into the family businesses as the fifth generation. But I didn't feel that I had to, but no one told me I had to. But maybe I did feel that was the heritage that I needed to follow.

Greg Corombos: Rich, just a moment ago, we talked about balancing tradition and innovation. And you mentioned on the tradition side, it's pretty simple...This is the way we've done these things over the last 148 years. And that's the way we want to keep doing it.

But when it comes to determining which sorts of innovations you're going to embrace, that takes a little bit more time to probably evaluate because there's a lot of different avenues you could pursue. But ultimately you need to determine which ones are right for you. So how do you kind of sift through and figure out what's the right way to go?

Richard Graeter: Trial and error is certainly part of it. You know, we have tried things, and we see other people doing things in the industry. And so you know it's tempting to follow other people's success. And that's also a dangerous temptation because it rarely works.

In one recent example, we made gelato. We saw another company come onto the scene and really hit it with gelato. And Graeter’s...the French pot process is basically a gelato process. What makes gelato is it’s very low overrun, meaning you don't have air mixed into it. And it's also lower in butterfat. Now Graeter’s is pretty high in butterfat, so we're basically a high butterfat gelato. But when we saw this other gelato really finding success, we thought well, maybe the American consumer is really interested in this now. And so we tried it, and it just...it bombed. Did not go over it.

I think the reason was because people saw us as ice cream. And I think really the reason this other company succeeded was not because they were gelato. I don't think people cared about that. But it was in a really cool clear package with a screw top lid. And now the package sold the product, not gelato.

And we’ve seen more trends. There's frozen yogurt, which is kind of the zombie desert. It just comes, and it dies, and it just won't stay dead.

I'm not a fan of frozen yogurt because I eat yogurt every morning for breakfast. But it's not dessert. Now there are these better-for-you ice creams...are very trending right now. But we have zero plans to introduce a healthy dessert. Dessert is supposed to be decadent and indulgent. And Graeter’s is all about that

Greg Corombos: Your product is now sold coast to coast. You've got nearly 60 different shops, and you're very active online as well. And so obviously that looks a little bit different than 148 years ago. So when did the bulk of this expansion take place? And how do you determine whether or not you want to open a new shop here or there, or expand in other ways?

Richard Graeter: You mentioned online briefly. That was an innovation as well. We were probably the first ice cream company to sell ice cream online, most mostly because nobody thought of buying something frozen to have delivered. But we started doing that in 1995. And we're probably the largest company, the largest online retailer of ice cream.

But as far as our growth, what really drove that was, well, every generation’s job is to improve upon the business, you know. Make sure you keep true to the core, which is how we make ice cream, but to make it better. And our generation started...what fueled the growth was, we brought in some outside experts.

And that's the other secret to success is realizing that you don't know everything. And it's good to bring in new folks. We have a team now that has a lot of non-family members on it. And I think that's really part of the secret to our success.

But about 10 years ago, we brought in some production experts, and they helped us get more out of our existing plant. And so when we had, you know, using the same machinery, just by running smarter by, you know, measuring the output of machines and focusing on ones that weren't up to snuff--just things like maintenance.

So anyhow with it, with the additional capacity, we then were able to test going out into new markets without having to build a new plant. And when that was successful, that led to ultimately building a new plant. And in 2010, we opened that plant and it's the latest and greatest and the most modern 19th-century technology.

Meaning that it actually was a blend of the old and the new. I mean you might have heard of Jim Collins and “good to great” and “built to last”. He preaches that you preserve the core, but stimulate progress. And this plant is the epitome of that, the core. We have 37 French pot freezers making ice cream two gallons at a time. But wrapped around with those French pots is the latest in modern technology for a dairy plant. And what that's all about is really food safety. I mean, that's one of the big challenges that has faced the industry is, you know, making a safe product. And that requires rigorous discipline.

So with that new plant, we were able to then continue the expansion. As far as retail stores, we’re now in, I think, nine cities. And we're not looking to grow as fast as you possibly can. We've seen a lot of people crash and burn doing that. we're kind of...we have 60 stores or 50 odd stores. We’re carefully expanding. And that really, I think, has been the hallmark of our family is, you know, we invest for the long term, and we're careful.

Greg Corombos: Well, that certainly explains how you've been so successful over these many decades. And Rich, one of the things that you, of course, have to deal with when you're expanding is dealing with different jurisdictions. Whether it's another city another county, even another state. And so then you have to be able to meet all the different compliance obligations. Any significant challenges there for you? And how did you go about making sure you took care of everything on that front?

Richard Graeter: A big legal bill! You know, where we make all of our ice cream out at one spot here in Cincinnati, Ohio. And that's, you know, most of the regulations are coming in the manufacturing of the product. So we really only have to comply with Ohio's laws, which, incidentally, are...Ohio’s a dairy state, Ohio's dairy regulation, that's pretty darn rigorous compared to other states. So we're already complying with probably some of the strictest laws in the nation. And then the federal laws on top of that.

So what we have done, how we comply, we have a food safety...a quality assurance expert is on staff. So 10 years ago, food safety was just part of everybody's job. Today, we have people...that's their only job. They're dedicated to that. It's still part of everybody else's job. But we have a whole department now dedicated to food safety, which is compliance with the sort of the federal and state regulations

And other states, you're serving. You’re more like a restaurant. And so the regulations, it's very different. And you may still have food safety to comply with, but it's pretty much the same from state to state, the regulation of restaurants.

Greg Corombos: We're talking with Rich Graeter of Graeter’s Ice Cream. And Rich, just a couple more questions in our last minute or two here. And we've talked about this next question a little bit. But I want you to take us a little bit deeper. Because people love family-owned businesses that have been in the same family for generations, 148 years. You don't see that too often. And people know because you do honor that tradition. They know what they can get from you. And they know they can count on you. So how does that legacy influence how you run your business, as opposed to maybe if you're just starting your own business right now?

Richard Graeter: Well, when you're in business for the long term, you run it very differently than if our plan maybe was just to run it and sell it in 5 or even 10 years, I mean, my cousins and I will invest in stores, and we sometimes scratch our heads and say it'll take until our grandkids are around to pay it off because we invest heavily in putting a first-class store together. And if we were not a family business, or if we had venture capital behind us, you know, you got to answer to guys who have ledgers and metrics. And they might not think that it was worth it to put in a nice granite countertop on your ice cream fountain as we do.

So, you know, it’s kind of liberating. Graeter’s is just owned by my two cousins and me, nobody else. We don't have to answer to anybody else. And so we can run it for the long term for the next generation. And that's what we do. And that's very different from non-family businesses.

Greg Corombos: What advice do you have for other business owners who either are following their parents' footsteps and keeping the business going, or they've just started their business or maybe have a few years ago, and they'd love to make it one that stays in the family for a long time?

Richard Graeter: Well, again, I think one of the secrets to my generation’s success is that we've built a team. I mean, you can't do it alone. So getting a team of players that bring expertise that you lack and making them part of that leadership team is really, I think, one of the most important things our generation has done to preserving success for the future, to make sure it lives on.

And if it's not adding people to your team. It's also knowing when to get help. We've also relied on consultants who are not on our team as an employee. So don't try to go it alone is probably my best advice to anyone looking to start or get into a business.

Greg Corombos: As we close here, Rich, you used the word decadent not too long ago. So I'm not sure any of our listeners heard a lot of what we said after that, because they’re still thinking about the ice cream. How can folks find you online?

Richard Graeter: Graeters.com. But you got to make sure...you kind of have to spell “Graeter” wrong to spell it right. The “a” comes before the “e”. So G R A E T E R S. And we’re also on Facebook and Twitter and all that other social media stuff that my kids know about that. I don't know...if you go online, you can find out where we are. And you can even order ice cream right there.

Greg Corombos: Outstanding. Rich, thanks so much for the time today. Congratulations on your family success. And we wish you much more of it as the years go by. Thanks for your time.

Richard Graeter: Thank you for having me.

Greg Corombos: Rich Graeter of Graeter’s Ice Cream. I'm Greg Corombos reporting for Expert Insights.

 

 

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