CEO Rich Graeter, right, celebrated the deal that expanded to Kroger grocery store sales across the country with George Denman, vice president of sales. (Photo courtesy: Graeter's)
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Chip Graeter, left, who oversees retail stores, came to watch his cousin, CEO Rich Graeter, right, tell RCI conventioneers about the family business. They were joined by their aunt Kathy Graeter, a third-generation owner. (Photo by Bob Driehaus)
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Bob, Rich and Chip Graeter are fourth generation owners of the iconic ice cream company. (Photo courtesy: Graeter's)
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The 93rd annual Retail Confectioners International convention and expo took place in downtown Cincinnati the week of June 24. (Photo courtesy: Kim Hadhazy, The List)
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The RCI's 600-plus member companies consist of mostly family-owned small businesses and some larger ones. (Photo courtesy: Kim Hadhazy, The List)
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Sweet success: Graeter's CEO shares story of family business at candy convention in Cincinnati

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CINCINNATI - Rich Graeter admitted to a crowd of candy and ice cream makers that his family had to scrap its old model of making ice cream in four two-gallon copper pots like it did when he was a boy. In their new plant, they use 32 two-gallon pots.

Therein lies the root of the continued sweet success of Graeter's, the fourth-generation ice cream maker which has scaled up production to service more than 6,000 grocery stores and specialty shops in nearly every state, as well as operating 30 ice cream parlors.

When Graeter's built a new plant in Bond Hill in 2010, the company refused to alter the labor-intensive process that yields small batches of ice cream so thick that every one of the 4 million pints made annually needs to be hand packed.

A new generation

Graeter, the company's CEO, told the story of the family business at the Hyatt Regency in downtown Cincinnati during the 93rd annual Retail Confectioners International convention and expo. The RCI's 600-plus member companies consist of mostly family-owned small businesses and some larger ones. 

Rich and his cousins, Chip and Bob Graeter, assumed leadership of the company in 2007, aware of the responsibility of preserving a family brand that dated back to 1870. An amazingly low three percent of family-owned businesses make it to the third generation, according to RCI. The cousins didn't want to be the ones to blow it, Rich Graeter said.

"We all know the story. The founders work hard, scrimping and saving every penny, they give it to the next generation, and they blow it all," he said, eliciting laughter.

The cousins decided that the future lay in preserving the quality of the Graeter's product but making a whole lot more of it and distributing it nationwide. Until then, only 20 regional grocery stores carried the ice cream.

The Graeter's method

Graeter's make its ice cream using the French Pot method founders used, putting cream, milk, sugar and eggs in a two-gallon pot and slowly spinning that pot in a larger drum that's filled with ice, water and salt to freeze the mixture. The company has added refrigeration and motors to do the spinning, but the method and ingredients remain the same.

That's in stark contrast to industry standards for even luxury brands, which use a continuous freeze method that sends the ice cream mixture through a long refrigerated tube that squirts out a cold, liquid goo that has to be set aside to freeze. Graeter's ice cream is ready to go when it leaves the pot, though it is made colder for shipping. 

"There's nothing better than a spoonful right out of the pot," Rich Graeter said.

Preserving the product while scaling up meant building a new $12 million plant, which came online in 2010. The only changes in quality were good ones, according to Graeter's. There is continuous refrigeration from pot to truck – the whole plant is kept trucks back up to a dock door that creates a seal between truck and building – and automation like wrapping machines that improved efficiency post-production.

Growing pains

Graeter credited Kroger CEO David Dillon with "holding his hand" through the process of scaling up. Incrementally, Graeter's added its ice cream to 2,200 Kroger stores and affiliates. Since then, it has been successfully introduced throughout the country to another 4,000 stores, including some Meijer, Marsh and Costco, Whole Foods, Safeway and Fresh Market stores.

There were major growing pains as the family came to grips with how complicated – and expensive – it is to convince grocers in new markets that their ice cream was worth selling and that they could sell enough of it to justify the shelf space.

"If I knew then what I know now, Idon't think I would have had the nerve to undertake a national expansion," Graeter said.

The family hired a vice president of sales – whose paycheck is bigger than the CEO's, Rich said – as well as a public relations firm and a broker.

The team was up to the challenge, and the distribution network is still growing – at the family's pace. They recently turned down Wal-Mart, deciding that they would be better off without the world's largest retailer potentially undercutting the rest of their buyers and even their own ice cream parlors.

"They just didn't align with what we want to be," Graeter said. "We're not looking to grow as fast as we can. It's about knowing what you're comfortable doing and being satisfied with that."

Chip Graeter, who oversees retail stores, was at RCI supporting his cousin. After the presentation, he said business has been good. He knows this from reviewing balance sheets behind a desk but also from dishing it out himself.

Chip works at the Kenwood location most Friday and Saturday mornings for a couple of hours "keeping my feet wet," he said. "My favorite part of the business is interacting with customers."%page_break%

A crowd favorite

Stephen Libs, of Stephen Libs Finer Chocolates of Evansville, Ind., is a second generation chocolatier and a fan of Graeter's.

"They have something special going on that they can keep it going into the fourth generation," he said. "It's all about the product."

Lynn Wockenfuss, an owner of Wockenfuss Candy of Baltimore, was impressed by the family story. Her initial reaction: "Where's my sample?" she asked.

Her husband is the third generation owner of their business, and she admired Graeter's for being in the minority of family businesses that make it.

Pam Dolle, of Dolle's Candyland in Ocean City, Md., said she's been a fan of the ice cream since her daughter's mother-in-law introduced it to her.

Since the 1950s, Graeter's has sold flavors that include chocolate chips – more appropriately called boulders, due to the process of pouring molten dark chocolate into the ice cream mixture and breaking up the hardening chocolate with a wooden paddle.

Each pint's number and size of chips is a mystery until it is eaten, and the variations have shocked some new customers.

"Most complaints outside of the Cincinnati area are along the lines of, 'I have these massive chips in my pint!'" Rich Graeter said with a smile. He knows it's a good problem to have.

Copyright 2013 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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