Today, Cincinnati houses a population of more than 300,000 and more than 2 million people if surrounding areas are included. It is the third largest city in Ohio, behind Cleveland and Columbus. It is home to numerous businesses, including Procter & Gamble, Kroger, Federated Department Stores (owner of Macy’s and Bloomingdale’s) and Chiquita Brands International.
Over the years, the city has been the birthplace of many famous—and some infamous—people, including abolitionist Harriet Beecher Stowe, entertainer Doris Day, film director Steven Spielberg, crooner Rosemary Clooney, pop singer Nick Lachey, talk-show host Jerry Springer, disgraced Cincinnati Reds player and coach Pete Rose and mass murderer Charles Manson.
Cincinnati was the home of one of the worst rock concert tragedies in U.S. history, when eleven fans were killed and dozens injured in a rush for seating at a sold-out concert by The Who at Riverfront Coliseum in 1979.
The city again drew national attention when the Robert Mapplethorpe photo exhibit opened at the Contemporary Arts Center in 1990 and its director, Dennis Barrie, was indicted on obscenity charges because of the graphic sexual nature of the photographs. Barrie was acquitted of the charges later that year, though the trial brought the question of what constitutes art to the national forefront.
Race relations remained an ongoing challenge for the city. Riots broke out in 2001 after an unarmed black man was shot, and the police department was accused of racial profiling. Many people feel these riots cost the city its bid to host the 2012 Summer Olympics.
At the same time, however, the National Underground Railroad Freedom Museum honoring the city’s important work on the Underground Railroad was being planned. It opened in 2004, and to date, it has brought in almost one million visitors from across the country and around the globe.
Cincinnati Reds owner Marge Schott, who died in 2004, caused her own race relation debacles over and over in the ’90s with her racist comments and professed admiration of Adolf Hitler. These views led to her one-year suspension by Major League Baseball and overshadowed her acts of kindness and generosity.
Beloved Riverfront Stadium was demolished in 2002 to make way for a new ballpark. The Great American Ball Park, where the Reds play, opened a year later, built next to the site where Riverfront had stood. It is smaller than Riverfront, seating just over forty-two thousand, but is praised for its breathtaking views and innovative features, including Italian marble mosaics and a riverboat deck, as well as its tribute to Reds’ history.
The Cincinnati Bengals, who had shared Riverfront with the Reds, got their own new football stadium down the street: Paul Brown Stadium, named for the team’s original owner. Paul Brown holds sixty-five thousand people. The Astroturf of Riverfront has been replaced with FieldTurf, an artificial surface that more closely mimics natural grass. The Bengals, who went to the Super Bowl twice in the ’80s, have yet to win the World Championship.
Through the decades, Cincinnati has also developed its own food culture, including Skyline Chili, which started in 1949 and serves its thin chili (with more aromatic spices than fiery heat) over spaghetti or on hot dogs topped with a cyclone of thinly shredded cheddar cheese. La Rosa’s Pizza, with its sweet tomato sauce and crispy crust, started in 1954 and has become an institution, as has Montgomery Inn, known for its fall-from-the-bone, sweet-smoky barbecued ribs. The restaurant started in Montgomery north of Cincinnati in 1951 and now has a location on the Ohio River downtown, as well as one in nearby Fort Mitchell, Kentucky, and Dublin, a suburb of Columbus. (By the way, Montgomery Inn serves Graeter’s Ice Cream for dessert.)
Through it all, the Queen City has remained home to Graeter’s Ice Cream, one of the oldest family-owned ice cream businesses in the country.
The company still offers eight “original flavors,” including black cherry, coffee, strawberry and butter pecan, and a handful of sorbet flavors, such as strawberry. In addition, Graeter’s makes ten of its ever-popular chocolate chip flavors, including Buckeye Blitz, toffee chocolate chip and, of course, the customer favorite, black raspberry chocolate chip. Seasonal flavors such as pumpkin, cinnamon, peach and tangerine rotate in and out during certain months.
The retail stores continue to offer many of the same sodas, milkshakes and sundaes they’ve made for nearly one hundred years. Now there’s also a signature sundae commemorating the company’s history: the 1870 Tower. It features a chocolate bundt cake filled with hot fudge and a scoop of black raspberry chocolate chip ice cream, drizzled with more hot fudge and then topped off with whipped cream, chopped pecans and a cherry.
The oldest Graeter’s store in Cincinnati sits on Hyde Park Square. Courtesy of Ken Heigel.
The West Chester store combines the new look and feel with the same old-fashioned charm. Courtesy of Ken Heigel.
In the Cincinnati area, Graeter’s Ice Cream has fourteen retail stores. In Kentucky there are fourteen stores plus two in Indiana, owned by two franchises. The Columbus area has eleven stores, plus another four that the same franchise opened in Dayton. One Columbus store and two Dayton locations are housed in the same building as another Ohio favorite: City Barbecue.
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.”
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 Starts 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.
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.
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 enjoys 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.”
