November 1, 2007
by James Dudlicek
Dreyer’s leads the way for the ice cream industry, in sales and innovation.
Tiny bits of ice cream with a hard chocolate coating, sold in reclosable cups and tubs — so simple, yet so utterly brilliant they have the competition slapping their foreheads in a collective “why didn’t we think of that?” moment.
The frozen dessert equivalent of M&M’s, Dibs have revolutionized the way people eat ice cream, pulling them away from confining spoons and bowls and letting them take ice cream from the freezer to the couch and the street. It’s now almost as easy to take ice cream wherever you go as an apple, a bag of chips or a bottle of water.
It’s the creation of the biggest kid on the block, when it comes to ice cream. Maybe it’s not a Cinderella story, but it helps to explain how Dreyer’s Grand Ice Cream came to be so grand in just the most recent third of its nearly nine-decade history.
“I see other categories in dairy rising to the occasion and starting to take back some of that share of stomach from salty snacks, beverage and confection,” says Tim Kahn, executive vice president and chief operating officer. “But we’re going to need to double the pace.”
Come January, Kahn will play a larger role in setting that pace when he becomes chief executive officer upon the retirement of T. Gary Rogers, half of the duo that acquired Oakland, Calif.-based Dreyer’s in 1977, when it was but a regional player, and built it into a national leader in frozen desserts with annual sales exceeding $2 billion.
Last year, Swiss food giant Nestlé completed its acquisition of Dreyer’s, which has become both student and teacher in this global corporate relationship.
“Nestle’s technical people had basically invented Dibs, but they didn’t have the branding,” Kahn explains. “They had the technology, but no real clear idea how to take it to market in the States, so we were able to provide that from day one.”
Meanwhile, Dreyer’s had spent nine years developing its “Slow Churned” processing technology to make a reduced-fat product with the taste and texture of the real thing. A monster hit for Dreyer’s, the proprietary process has since been applied to other Nestlé-owned brands, including the first-ever light version of Häagen-Dazs. In addition, the parent company’s expertise in confectionary has been a great help in the development of chocolate and coatings, says Dennis Senovich, senior vice president of operations.
“Product development, almost from the first hour the deal was done, has been a great area for us,” Kahn says. “I think the flow of innovative ideas back and forth across the Nestlé ice cream markets is going to be very significant. We’re going to see a lot more with wellness as well, which is a major focus for Nestlé worldwide.”
Getting Into a Groove
But Dreyer’s likely would not be where it is without the revolutionary thinking inspired by its modern-day leaders.
“Gary Rogers and Rick Cronk had a very strong people vision, almost before they figured out their business strategy,” Kahn says. “It’s what we call the Grooves. It’s very front-line driven, and as it’s gone from 50 people to thousands, it continues to inspire the new people. It’s a good culture anyhow, but it’s a particularly good fit with a DSD organization, because it was very driven to individual relationships, respect, personal autonomy and the slogan in the middle of the Grooves: ‘I can make a difference.’ When you combine that with the innovation and the brands, I think it’s a very powerful tool.”
This philosophy has led to very ambitious missions for the Dreyer’s team. “One of them is to take this big, wonderful category and try to expand the horizons, and try to solve problems and create opportunities for consumers such that the category grows,” says Tyler Johnston, executive vice president of marketing. “Slow Churned is about being able to have ice cream when you want it. It involved nine years of developing proprietary technology at a time when we were a pretty small company. It was the kind of development that was unusual for a company our size, to take a chance on it and see if we could take something and make it as big as regular ice cream.”
Slow Churned ranked fourth among the top 10 individual ice cream brands with $345.5 million in sales for the year ending June 17, according to data from Chicago-based Information Resources Inc. Up nearly 18 percent over the previous year, it’s right behind the company’s flagship Grand line, which took in $439.1 million.
Häagen-Dazs took fifth place, giving Dreyer’s three of the top 10 brands — more than any other company — totaling nearly $1.8 billion in sales out of a total category of $4.1 billion. Dreyer’s also ranks tops among ice cream vendors, with a 28.2 percent dollar share, according to IRI data for the same period.
Meanwhile, Dibs ranked eighth among the top 10 frozen novelty brands with $86.6 million in sales, up nearly 15 percent.
“Historically, the category has been known as frozen novelties, which suggests it’s here today and gone tomorrow,” Johnston says. “With Dibs, we think about ice cream as a snack, and how might one expand it and get people to snack more often on ice cream. There are no limits if you allow yourself to dream big.”
With most of the company’s growth coming in the latter part of its history, how has Dreyer’s been able to keep up with such a rapid pace?
For one, low turnover has helped. “On average, somewhere between 16 and 22 years is the tenure of leaders,” says Rhonda Ramlo, executive vice president of sales and distribution. “These are the same people that helped us enter markets, store by store, chain by chain, market by market. They feel great pride in what they’ve accomplished, but they’re also very enthusiastic about what’s ahead of them. We have this mantra here called persistent optimism.”
Also helping is a broad entrepreneurial spirit, Johnston adds. “The best place to learn about the culture of Dreyer’s is not on College Avenue in Oakland. It’s to be in any center across the country, and you’ll see it alive and well,” he says. “It’s a very decentralized model. Hire smart people, get out of their way, let them experience the joy of being a builder. With that, size and scale become a less daunting task because it’s been done a team at a time around the country.”
And when new ideas emerge, operations can’t be far behind. “Speed to market is always a challenge, but we have a culture that embraces change, that gets a charge out of the innovation,” Senovich says. “Our teams routinely respond to new innovation and rise to the challenge, because they know they’re making a difference.” Dreyer’s maintains six manufacturing facilities — two in California and one each in Indiana, Maryland, Texas and Utah.
Innovation is a key motivator, Ramlo stresses. “I’m sure that’s motivating for any marketer, product developer or engineer. But it’s also energizing to anyone in sales because by definition, you’re bringing value to that customer,” she says. “Through superior consumer and shopper insights, you’re bringing them a solution. You’re competing on something that’s sustainable, and something that’s going to help them increase traffic down the aisle and through the store.”
Plus, ice cream is just plain fun, Kahn says. “But also, it’s 20 or 30 years at least further back on the curve from more mature categories that long since went to one or two leaders, and the book’s already written and you can run it very well,” he says. “We’ve always been a company full of people who want to build stuff. It’s a very attractive type of category to a certain kind of person, whether they’re in front-line sales or engineering or manufacturing, because these problems are still brand new to us.”
Taking It To the Street
Dreyer’s has always offered direct-sales distribution, and by doing do not only provides customers with a complete service package, but it allows the company to maintain complete control over its products — and thus ensure quality — right down to the temperature of the in-store freezer cases.
“We offer an element of service that is unique and not replicated by our competition,” says Tony Sarsam, executive vice president of operations and supply chain. “Because we are a DSD company, we bring a level of insight and service to the store that they’re not going to get with the warehouse model or less-dedicated distributor model. That’s a pretty important, pretty powerful selling point with customers.”
That means consumer value, Kahn says. “It gives us higher in-stock and better management of the space, and in a business that’s highly driven by impulse and flavor selection, those are the things that really count,” he says.
And, Johnston says, it allows Dreyer’s to demonstrate to customers its commitment to expanding this traffic-driving category. “DSD capability sets a close-to-the-street energy level that is critically important,” he says. “We have exceptional speed to market, so in the event that we have an idea we want to get out to market quickly, the DSD capability gives us the ability to act very fast and be first to market.”
Kahn cites the example of Dreamery, a superpremium brand that Dreyer’s eventually sold as part of its deal with Nestlé. “We took 18 flavors and within eight weeks had 70 percent grocery distribution, and that entire process from when we were notified to when we were in the market was no more than a few months,” he says. “That to me is a wonderful story about the combined strength of being really flexible on innovation and having a DSD system. If you have either one, it’s great, but if you have them both together, it’s a very powerful thing.”
Meanwhile, Dreyer’s is leveraging new technology and pop culture trends to engage consumers more actively, including a nationwide contest for a new Häagen-Dazs flavor, culminating in a Food Network special; a line of flavors inspired by TV’s “American Idol”; and a new flavor launch coordinated with Gourmet magazine.
Traditional marketing tactics like FSI’s are “very passive, and they’re not very targeted,” Ramlo says. “You contrast that to the Food Network or ‘American Idol’ — that’s a way of engaging the consumer, getting them involved in the category and your brand.”
Johnston says “engagement” is the key word. “This is a category that has rich emotional connection with consumers, and the reality is consumers own the brands and consumers build the brands by what they think of them and what they believe about them,” he says. “We’re not going to broadcast what you should think about this brand — you’re going to become part of it. You’re seeing that across all of our own behaviors on how we engage information and media, and how we tailor information for ourselves today.”
With the resources of a global parent at hand, Dreyer’s continues to draw from the well to nourish its growth.
“They have a lot of expertise in manufacturing ice cream and some really effective ways of disseminating that knowledge,” Sarsam says. “For the last couple years, we have tapped into their technical organization to get the best of the best practices, especially in areas where Dreyer’s did not have a lot of expertise. We had limited expertise in snacks, for example.”
Nestlé also has more experience at selling ice cream outside of traditional channels in other parts of the world, Ramlo says. “They brought a lot of new perspectives and proven practices selling in what we call the ‘up and down the street business’ or the individual proprietors, the mom-and-pop type shops, delis, liquor stores,” she says. “If you go to cities like Santiago [Chile] or Rio de Janeiro [Brazil], those areas are very well developed in terms of ice cream. You can see Drumstick almost anywhere you turn. So they’ve helped us think about it in a new way.”
Dreyer’s and Nestlé together possess a bounty of consumer research to better understand buying habits and develop solutions, particularly as more attention is focused on health and wellness.
“One responsibility we have as marketers within this category is to not try and force-fit everything into one definition of wellness,” Johnston says. “Wellness can certainly be defined as a state of mind and how you feel through the pleasure and reward of a frozen dessert. For some people, it may be strictly about dieting. We listen very carefully to our consumers.”
Beyond Slow Churned, portion-controlled Dibs and the company’s successful Skinny Cow line of frozen novelties, Johnston sees frozen yogurt as a strong growth segment in this area. “We have reintroduced frozen yogurt with the Slow Churned technology, and it is our fastest growing line right now. Clearly that’s an area that’s growing in refrigerated yogurt, and there are some very interesting developments there in formulations,” he says. “We were the first ones to really expand the nationwide packaged frozen yogurt business, and for all these years we’ve been the leader. But the segment itself has gotten very small. But with that reintroduction, we’re at the front end of more growth.”
Moving forward, it will be crucial for the ice cream industry to expand beyond its traditional eating occasions, a direction in which Dibs has already begun to steer the company. “A challenge we face is prompting the consumer to look at the category as something that’s consumed in many more dayparts, maybe at work while they’re sitting at their computer, maybe in their car while they’re chauffeuring their kids from soccer to dance,” Ramlo says. “And in doing so, we’re helping the customer see the category as more relevant, to see it as an even bigger category than they see it today.”
That’s a challenge for the dairy industry as a whole, Kahn adds. “Ice cream is a vitally important category to our customers,” he says. “It’s a responsibility for us as a leader to come to our customers with the kind of innovations that are going to keep the category front and center as a major traffic driver.”
As such, ice cream will need to mirror the diversity of other food segments. “Look at what’s happened to the salty snack business. Look at what’s happened to the beverage business,” Kahn says. “In 2002, there was no Slow Churned. Yogurt was a dying segment. Snack sizes were unheard of. Low-fat snacks, to the extent they existed, were not particularly palatable. Now look what we’ve got. I think it’s the tip of the iceberg. It’s a very exciting time in the category.”
So then, what’s next for Dreyer’s?
“We can’t really divulge what’s around the corner, but I’m confident we will be under the heading of ‘brands matter,’” Johnston says. “I think most companies are staring at the same macro trends — wellness, indulgence, ethnic diversity, convenience, aging. It’s all how you can harvest an insight from that and turn it into a very common sense-based new idea. I think as is always the case in Dreyer’s history, the past is the best predictor of what’s ahead. We are committed to leading the category. We want to be there as a thought leader, as a solution provider to our customers. The other trend that probably isn’t on every other food company’s list but is very important to us is to have fun and provide enjoyment in what we do. I think you will continue to see things that have a sense of humor to them because in the end, this is a category that is a very special space for people and we want to keep it that way.”
Important to that will be attracting the kind of mavericks that have made Dreyer’s what it is today. “If we want to double in size, we need to continue to provide an environment and culture where smart people can come and see themselves in their work, look back on it and say they can personally identify with the result,” Johnston says. “I’m sure everybody in America wants to find smart people, but we want to continue to bring in the kind of people that have been here historically — pioneers and builders.”
Meanwhile, the innovations of recent years still have plenty of legs left in them, Kahn says. “A lot of what’s coming will be about Slow Churned and Dibs and Skinny Cow, and even brands that have been around a long time, like Drumstick. We’re adding Drumstick capacity in the next year. Drumstick has huge growth for us and more to come,” he says. “There’s a lot of close-in innovation that can be done.”
Based on its success, Dreyer’s has a handle on how to stay relevant in changing times.
“The categories that have been most vibrant in this country are the ones that have really understood they have lots of different types of consumers and occasions, and crafted both their innovations and acquisitions around that,” Kahn says. “I think for our category in particular, where it stands right now, that is a crucial challenge. It will be a very different category when you come into the store five to seven years from now.”
GROOVES: THE ‘I CAN MAKE A DIFFERENCE’ PHILOSOPHY
• Management is people
• Hire smart
• Respect for the individual
• People involvement
• Learn, learn, learn
• Face-to-face communication
• Upside-down organization
• Ready, fire, aim
• Hire smart
• Respect for the individual
• People involvement
• Learn, learn, learn
• Face-to-face communication
• Upside-down organization
• Ready, fire, aim