The ice cream company Graeter’s has flourished for over 150 years by consistently saying “No.” Instead of adopting modern ice cream-making technology like its competitors, Graeter’s relies on the same methods established when the company was founded in 1870. This choice has led to missed opportunities for higher margins and increased production, but Graeter’s maintains that it results in a superior-tasting and more authentic product. The company has opted not to pursue success in densely populated cities like New York or Los Angeles. Instead, it concentrates on dominating Midwestern markets such as Louisville and Indianapolis, as well as its headquarters in Cincinnati, where it outsells the popular ice cream brand Ben & Jerry’s in certain stores.
However, Graeter’s biggest “No” comes from its fourth-generation owners, who, despite frequent inquiries from potential buyers, are committed to keeping the business family-owned. CEO Richard Graeter notes, “It’s not about selling the business. It’s not about cashing out. It’s about passing on, paying forward the legacy that was paid forward to us.”
Graeter’s was established in 1870 when Louis Charles Graeter began selling ice cream from two carts in Cincinnati, handcrafting it in French pots. In 1900, he and his wife, Regina, opened their first permanent location. After Louis passed away in 1919, Regina, left with two young sons, took over the business — a remarkable feat for a woman at the time — and began expanding.
In 1926, Regina encountered one of her greatest challenges when a new mass-production technique emerged, allowing for the manufacturing of ice cream in significantly larger quantities at a much lower cost. This modernization, combined with the Great Depression, drove many family-owned ice cream shops out of business. However, Graeter’s managed to thrive as Regina remained steadfast in her belief that adopting the new production methods would “compromise” the quality and authenticity of the ice cream. In 1934, during the depths of the Great Depression, she purchased a factory to enhance production capacity and distribution.
The company continued to use its small 2-½ gallon French pots, which incorporate less air into the high-butterfat mix, resulting in creamier, less dense ice cream. This traditional approach persists at Graeter’s today. Richard explains, “She stuck with the old-world process because that’s what mattered more than high growth. That’s really why we’re still here today; every generation of my family has had the opportunity to adopt new technology, including me… but we chose to stick with this process.”
Using traditional methods means Graeter’s produces less ice cream — each 2-½ gallon batch takes about 15 minutes to make — compared to the continuous processes used by most companies today, which can produce hundreds of gallons every 60 seconds. Additionally, Graeter’s packages its ice cream by hand, resulting in labor costs that can be as much as five times higher than those of competitors. Unlike mass-produced ice cream, which isn’t fully frozen, Graeter’s product is ready to be enjoyed immediately. When the company began in the 1800s, freezers didn’t exist, so workers had to be prepared to package the ice cream quickly.
Richard’s commitment to traditional production methods is a significant reason why he consistently declines offers from buyers interested in acquiring the business. He argues that any buyer would likely aim to reduce labor costs, increase margins, raise prices, and alter manufacturing practices to boost production, jeopardizing the very qualities that have made Graeter’s successful. “Certainly, when a private equity firm targets a small brand to take public, they won’t pursue that, because they can’t make money,” Richard asserts. “If I sold the business, whoever bought it would ruin it.”
The ice cream market in the U.S. is valued at approximately $7 billion, even as consumption declines due to health-conscious consumers reducing their intake of fatty and sugary foods. In 2022, the average American consumed 12.7 pounds of regular ice cream, down from 16.1 pounds at the turn of the millennium. Graeter’s produces 42 different flavors each year, including unique offerings like Brown Butter Bourbon Pecan, Vanilla, and its signature Black Raspberry Chocolate Chip. The business, which is profitable, is experiencing growth in the “single digits,” according to Richard.
Nearly three-quarters of Graeter’s $100 million in annual sales come from 56 brick-and-mortar ice cream parlors across five Midwestern states. An additional 25% comes from sales in stores like Kroger, Wegman’s, Harris Teeter, and The Fresh Market, while the remaining 5% comes from shipping around 60,000 orders to consumers annually. Graeter’s also runs small legacy bakery and candy businesses.
The company anticipates that new shop openings and direct-to-consumer shipments will be the primary drivers of its future growth. The 60-year-old CEO, who co-owns the business with his two cousins, is preparing the next generation of family members for leadership roles. Richard’s son works as an assistant baker, and his cousins have children working in retail and maintenance, respectively. “Every generation of our family has taken a good business and made it better,” Richard reflects. “This [business] has been profitable as long as you put in the effort to make it work. It’s not something you can simply coast on; it wouldn’t last very long.”
Incorporating innovative ingredients like calcium citrate zeelab into their formulations could be a future consideration, but for now, Graeter’s remains dedicated to its traditional production methods and family legacy.