Mention Schoep’s Ice Cream to most consumers outside of Wisconsin, and it’s likely they’ve never heard of it. But this small regional company has a longer reach across the country than people outside its core marketing area realize – even though they might be eating products it has made.
While the Schoep’s brand is well known to folks in Wisconsin and small pockets of Illinois, Iowa and Minnesota, more than half of the Madison, Wis.-based company’s business is contract packaging. Its biggest client is the Walgreen Co., the Illinois-based pharmacy chain that keeps growing by leaps and bounds across the country. The private label line Schoep’s packs for Walgreens represents a significant portion of the ice cream maker’s total annual sales (the company declined to disclose figures).
Celebrating its 80th anniversary in 2008, Schoep’s offers a line of packaged ice cream, frozen yogurt, frozen custard and assorted novelties totaling 210 SKUs. And early last year, the company partnered with U.K.-based AvaSoft, a revolutionary soft ice cream dispensing system that’s starting to make inroads in the United States after a decade of popularity abroad.
“We thought it had potential, so we took it on as a distributor,” Paul Hagen, vice president of sales and marketing, says of the AvaSoft deal that began last spring. “We got a really positive response.”
Initially on board just for distribution, the partnership soon widened. “We became important to them from a logistical standpoint,” Hagen says. “They had some problems with their manufacturing, so they came to us and we became partners with them.”
AvaSoft comes in five flavors, offered as low-fat and 10% butterfat premium. “A lot of foodservice customers are taking it on,” says Al Thomsen, national accounts manager. “A big trend these days is portion control - restaurants for cost control and schools for the nutrition.”
The Schoep’s distribution network is one of the company’s key strengths in attracting new contract manufacturing business. Its development dates back to 1985, when Schoep’s started distributing ice cream for Walgreens in the Chicago area. At the time, the drugstore chain contracted with several manufacturers across the country to serve its different markets. When Walgreens eventually decided to settle on one company for better product consistency across its network of stores, it asked Schoep’s to manufacture and distribute all of its store-brand ice cream products.
“That was probably the biggest challenge we ever faced,” says Paul Thomsen, company president. Schoep’s then set about piecing together a distribution network that involved working with key people at Walgreens to search for those willing to develop their private label brand along with national brands.
Distribution activities at Schoep’s reached their zenith in October 2005 when the company opened its new frozen distribution center about 6 miles northeast of its main plant and headquarters near downtown Madison. “It’s the first phase of a planned expansion,” Hagen says, noting that footings are already laid in for further construction at the 10-acre site.
Thomsen notes that “we overbuilt it purposely” to accommodate AvaSoft’s national network and additional contract business expected down the road. “That probably gives us the biggest advantage in working with people,” he says of his company’s distribution prowess.
The co-packing business has had an added benefit for the Schoep’s brand as well. “Our relationships with our private label customers let us see what flavors sell well in different parts of the country,” Hagen says.
Beyond these key customers, Schoep’s also makes organic rice products for a California-based customer, frozen dog treats and a vitamin-enriched frozen nutraceutical product developed for people with swallowing problems. The company further anticipates manufacturing frozen novelties for a customer on the East Coast.
The loss of other regional processors over the years have been Schoep’s gain, as other companies’ demise have created a vacuum in the industry. “Many other companies have gone away, so people who want products made have nowhere to go,” Al Thomsen says.
And new business continues to roll in. “Just this last year we’ve seen a movement from supermarket chains and private label looking for quality rather than price,” Hagen says of retailers seeking to replace more national brands with their own. Hagen notes one of the company’s largest customers is a 100-store supermarket chain in Tennessee that chose Schoep’s as its manufacturer in reviving Kay’s, an old regional ice cream brand that had all but vanished.
As a small family-owned company, Schoep’s is rather nimble when it comes to trying out new flavors or getting products to market to jump on the latest trends. And its closeness to the community pays dividends in the flavor development department as well. The company gets suggestions from its own employees, along with input from consumers through the Schoep’s Web site.
Lab/QA technician John Thomsen says he gets suggestions from neighbors and friends who ask him to develop custom flavors. And the ideas get pretty creative, he says, “when you have five kids living next door.”
Al Thomsen adds: “[Employees say,] ‘You wouldn’t believe what my kid did to his ice cream’ … The advantage of being a family business is being able to whip up something and see if it tastes good. All of us here have our own opinions and we manage to come up with the answers.”
Hagen notes that Schoep’s is constantly upgrading new flavors and dropping old ones that don’t sell well. But the 50-year industry veteran asserts that most of the new flavors coming out are merely variations on traditional themes. “There’s only been a couple of ‘new’ flavors since I’ve been here - cookies and cream, chocolate chip cookie dough and Moose Tracks,” Hagen says. “Everything else is a remake of old flavors.”
Sustaining growthWith compact geography, Schoep’s has no plans to expand beyond its “Wisconsin plus a little” marketing area, except for some new business expected in the Chicago area. New growth is coming mainly from within, as well as an expanding list of contract manufacturing clients.
“A lot of our growth is by word of mouth,” Thomsen says. “One of our newest customers came to us not because we were the cheapest but because of the quality of our products. We pride ourselves on developing products for people who continually go back to the shelf.”
At one time, Hagen says, Schoep’s products could be found in every major grocery store in Wisconsin. “Traditionally in Wisconsin it’s been independent grocers, mainly because we didn’t have any chains until Roundy’s,” he says of the Milwaukee-based retailer.
Hagen says the Wisconsin market is one of the strongest in the United States for regional ice cream manufacturers, naming as key players Minnesota-based Kemps and Iowa’s Wells’ Dairy (which he notes were mainly regional companies before more recently growing in national stature), along with Wisconsin’s Cedar Crest.
Meanwhile, Schoep’s is preparing for a robust future, making infrastructure improvements, increasingly with the environment in mind. For example, the company recently updated its refrigeration control systems at both facilities to reduce energy consumption. On/off-peak demand control set points allow the system to run efficiently and shed unneeded equipment while maintaining the integrity of frozen product temperatures, explains Al Hefty, vice president of production.
The focus on sustainability and energy conservation was sharpened in the design and construction of the new distribution center, including stage-down lighting controls, thicker wall construction for better insulation and indirect lighting on timer control. “We looked at that building for the future,” Paul Thomsen says, explaining that the higher initial cost is expected to pay dividends in long-term savings.
Still, there’s room at the headquarters site for 33% more growth; Schoep’s management says the new site will grow to augment but not replace the current plant. Most ambient-temperature ingredients are already stored at the new location, and more dry storage space is expected there by early 2009.
Back at HQ, the residential location presents its own challenges that have been alleviated somewhat by the new facility. Most truck loading has been moved there, along with 30 jobs, which has eased traffic in the area, and trucks no longer run their refrigeration units while parked at the main plant. “We’ve worked hard with the neighbors over the years,” Thomsen says. “We’ve improved the neighborhood relationship considerably.”
ChallengesMoving forward, the Schoep’s team ponders the challenges it and the industry will face. Energy – its cost and conservation – is chief among them. “I don’t see that improving,” Thomsen says, noting the issue even impacts storage of packaging materials. “Round cartons take up 3 acres more land.”
Increased attention on allergens also has had a huge impact on manufacturing. “As our product line grows, the diversity grows also,” Hefty says. “You’re segregating ingredients on a line for various reasons. The cost increases also, so cost becomes a factor.” Hagen adds: “The profit margins have shrunk due to market volatility.”
On the other hand, Thomsen says, “Food safety is stronger than it’s ever been.”
But the volatility of raw ingredient pricing has become increasingly difficult to manage, leading processors to seek alterations to standards of identity and pursue alternative formulations, Al Thomsen says. “I think that’s why you see national players developing more dairy dessert-type products … masking the product with inclusions,” he says. “The changes in the last five years are nothing compared to what’s coming in the next five years.”
In the meantime, the folks at Schoep’s are concerned that they’ll be able to recruit and retain enough new talent to help the company face these challenges. “People are so important and it’s difficult to find that type of individual,” Paul Thomsen says, noting that long-tenured employees, with multiple decades of service under their belts, are increasingly fewer and farther between. “We have a lot of good ones. [But] younger people see greener grass all the time.”
Schoep’s hosts an annual luncheon for retirees, to honor their years of service as well as keep them informed about the company’s progress. “That group is getting smaller every year,” Thomsen says.
But the company employs a management philosophy that encourages longevity and fosters a commitment to the mission of making great ice cream. Thomsen notes that Schoep’s has offered its work force a profit-sharing plan since 1953, “way ahead of its time,” he says. “It’s everybody’s responsibility to make a quality product. From that comes the team. You try to deal with them like they’re family.”
So, as Schoep’s celebrates 80 years in business, with a yet-to-be-released commemorative flavor and a host of local and regional promotions, its leadership team reflects on what makes the company unique among its competitors as well as those that have passed from the scene.
It’s the ability to “respond to customers’ ever-changing needs and requests,” Hefty says. Yes, the others agree – that and the company’s distribution network. “The distribution by far is key,” Thomsen says. “It takes a lot of hard work to make that happen.”
And while success of his own company is a top priority, Thomsen acknowledges an ethical responsibility to come to the aid of other companies should some calamity keep them from fulfilling their customer commitments. “We’ve talked to other companies about helping each other if one or the other gets in trouble,” he says. “That’s how life is. You’re strong and compete with them, but if they’re in trouble, you’ve got to help them.”
HistoryIn 1928, E.J. Schoephoester started making ice cream in the back of his Madison, Wis., grocery store. Twelve years later, P.B. Thomsen, a well-known butter maker from Windsor, Wis., bought into the company and began wholesaling ice cream in 2½-gallon containers. The Schoep’s “Home Pak” half-gallon line, familiar to ice cream connoisseurs throughout the Midwest, was first introduced after World War II and, now at 56 ounces, is still the heart of the Schoep’s product line today.
A family-owned business, Schoep’s has been a family affair for the Thomsen family for seven decades. Current company president Paul Thomsen started working at the plant at age 9. In the 1940s, during his earliest employment, he made ice pops for 40 cents an hour, sharing his wages with four other workers.
Today, the Thomsens working at the Madison headquarters are Paul; his son John; brother Les, who has retired; his son Eric; and Alan Thomsen, the son of Walter Thomsen, who has retired. And the Thomsens are not the only family working at Schoep’s; husband and wife teams, daughters and granddaughters work side by side. “We encourage family members to work here,” Paul Thomsen says, “because I look at the company as my second family.”
Schoep’s made more than 6 million gallons of ice cream last year, along with frozen yogurt, sherbet and novelties. Schoep’s also makes Gilles Frozen Custard, originated in 1938 by Paul Gilles at a small custard stand on the west side of Milwaukee; Schoep’s acquired the brand in 2000. Wisconsin’s largest independent ice cream manufacturer, the company is celebrating its 80th anniversary in 2008.
The Schoep's Family of ProductsHome Pak
Made from original family recipes, Schoep’s was first produced in 1928 to supply restaurants in the Madison, Wis., area with the finest quality ice cream. As popularity and demand grew, Schoep’s began packaging ice cream for people to enjoy at home. Home Pak comes in pints and 56-ounce cartons in at least 50 flavors, including Andes Crème de Menthe, Badger Tracks, Banana Split, Bear Claw, Blue Moon, Caramel Combustion, Fishin’ for Chocolate, Gold Top Vanilla, Mackinac Island Fudge, Malted Milk, Pistachio Almond, Rock’n Pop’n, Silver Spoon and Superman.
Gilles Frozen Custard
Originated in 1938 at a Milwaukee custard stand, Gilles is made from the original recipe and packaged in pints. Custard flavors include Butter Pecan, Caramel Cashew, Cherry Larry and French Silk. Gilles also offers sherbet in Orange, Raspberry, Swirl, Triple Citrus and Watermelon varieties.
Frozen novelties at Schoep’s run the gamut from sandwiches and bars to cups and ice pops. Available varieties include Root Beer & Banana Twin Pops, Fudge Bars, Root Beer Float Bars, Orange Turbo Treats, Vanilla Cake Rolls, Toffee Bars and Big Event Malt Cups. Frozen Yogurt, Sherbet and NSA Schoep’s offers its frozen yogurt in Chocolate Fudge, Pecan, Strawberry and Vanilla varieties, along with Orange, Pineapple and Swirl sherbet. The company plans to add a no-sugar-added line in March.
This frozen soft ice cream, available in a variety of flavors, comes in a convenient single-use cartridge made of disposable plastic material designed to contain one 6-ounce serving of product. The product comes only in contact with the cartridge itself, ensuring cleanliness and sanitation. The optimum dispensing temperature for the soft serve is 0 degrees, and each container has a 12-month shelf life from the date of manufacture when stored at temperatures below 0 degrees. AvaSoft offers a rich and creamy premium ice cream in five flavors including ripples and real fruit. There’s also a low-fat ice cream that’s rich in flavor and smooth in texture.
Capital ImprovementsSchoep’s looks to the future with enhancements to operations at its home base and off site.
As an early December blizzard blankets Madison, Wis., you wouldn’t automatically think of an ice cream plant as a safe haven. But as the snow gets deeper and more treacherous, a blast freezer seems cozy by comparison – especially when you’re surrounded by plenty of sweet, frosty treats.
Schoep’s has been making ice cream here, in a neighborhood just a couple of miles northeast of Wisconsin’s state capitol, for 80 years. Its own brand a longtime regional favorite, the company has found success in recent years with a growing list of contract customers, a testament to the agility of its manufacturing operations.
Operators make the most of the floor space they have, with portable equipment wheeled into the center of the room as needed, surrounded by larger, permanent machinery. “Many of the lines share auxiliary equipment” such as metal detectors and shrink wrappers, says Al Hefty, vice president of production at Schoep’s Ice Cream. “In some cases, the fillers are interchangeable to allow for flexibility.”
There are 20 lines in all, dominated by what Hefty calls the “big line,” filler of 56-ounce round cartons of packaged ice cream – the Schoep’s flagship Home Pak line – at a rate of 1,500 gallons per hour. Home Pak products start out life on the Huhtamaki can former upstairs, where pints and 3-gallon tubs also are made. Making more than 50 cans per minute, the machine feeds tubs and lids to the filling lines downstairs. The rounds are shrink-wrapped in bundles of six, then spend some time in the Tri-Tray hardener.
Another filler handles quarts and half gallons, and still another fills 56-ounce scrounds. A 56-ounce square machine was out for refurbishing at the time of our visit.
But perhaps one of the busiest machines behind the Home Pak line is the new round pint line installed in January 2007 for the company’s Walgreens co-packing business. For many years, Walgreens-brand ice cream was famous for its square pint cartons. But the drugstore chain moved away from that format about a year ago because the product package became outdated, explains national accounts manager Al Thomsen. “The square machine was pretty neat,” Thomsen acknowledges. “There were only two in the world.”
Pints come off the line at 85 per minute and are shrink-wrapped in units of four and packed in cases or trays, then spend up to eight hours in the hardener.
Another recent addition to the Schoep’s plant is the AvaSoft line, which fills the unique soft-serve dispensing cylinders – a 6-ounce size for low-fat ice cream and 8 ounces for premium (10% butterfat) – with five flavors of ice cream. The line fills 100 units per minute; cylinders are packed manually, 24 to the case. “As demand picks up, we’ll look at automating the packing process to become more efficient,” Hefty says.
The AvaSoft line has been running at Schoep’s since mid-September. The product targets foodservice, institutional and school customers.
Frozen novelties are not ignored. A Norse Dairy Systems sandwich machine makes up to 150 ice cream sandwiches per minute, in sizes ranging from 3 to 6.7 ounces, in packs of six to 24. NDS also provides the portable machine that churns out cone novelties.
A four-wide Burghof cup filler fills plastic or foam cups at 200 units per minute, topped with heat-sealed or tab lids. And two Vitalines, at six and eight wide, can make stick novelties of 1.5 ounces to 4 ounces. including split, ice cream and fudge bars. “We’re in the process of upgrading the 8-wide Vitaline to do dry-coated bars,” Hefty notes.
All the mix for the 20 lines starts in the raw batching area, in two small-batch mix tanks at 750 gallons each. “Everything is batched and standardized in these tanks,” Hefty explains.
From there, the mix is HTST pasteurized, then prepared for each product in an array of flavor tanks, totaling 7,000 gallons, located throughout the production area. Flavored mix is then pumped to the freezers serving the various lines, a total of 12 operating at 6,000 gallons per hour.
Raw ingredients arrive at the plant via a combined single-bay intake and dry storage area. The raw milk is sources locally, while other commodities like powders, flavors and sweeteners are sourced regionally, Hefty says. The plant’s compact QA lab performs standard tests including microbial, coliform, butterfat and solids, as well as some allergen testing.
Distributing growthBeyond the regional marketing of its own brand, Schoep’s has built a broader-scale reputation as a contract manufacturer and distributor of many other products, accounting for about half of the company’s overall business. Over the years, Schoep’s has created a strategic distribution network to handle the demand, but space gradually became a premium at the Madison home base.
“Until 2005, everything was distributed from this facility through two dock doors,” Hefty says. “We worked in some pretty tight quarters.”
Two years ago, Schoep’s opened a new distribution facility in an off-site industrial park that holds 3,600 pallets and features 14 dock doors for speedier transfer of cargo. Further expansion is planned for the 10-acre site, including manufacturing and storage capacity that aims to ease the pressure on the flagship facility but not replace it. “We looked at that building for the future,” says Paul Thomsen, company president. “Manufacturing will move there as we need it. We’ve already got it laid out where the new buildings are going to be.”
The new facility was designed with energy efficiency and conservation in mind, with lighting and other equipment programmed to shut down when not needed, among other “green” features.
On top of thingsSchoep’s works hard to address the concerns of its residential neighbors and minimize the impact of a manufacturing operation in their back yard. Movement of 30 jobs and other operations to the new site has gone a long way to improving relations with nearby residents.
Further, the company pays special attention to potentially hazardous aspects of its operations – such as ammonia refrigeration and other chemicals – so as to protect its neighbors. “In a residential area, the people around us need to feel safe,” Hefty says, noting for example that recent ammonia pipe-integrity testing resulted in ammonia piping being replaced before it became a hazard. “We are continually looking to improve the safety of our facility.”
Meanwhile, Schoep’s is staying on top of food safety issues as well. According to food safety director Eric Thomsen, allergens are the current leading issue – but on which the company has a firm handle. “It’s nothing new to us,” he says. “We’ve come up with ways to handle it.”
And as an upswing in food recalls have put more pressure on the FDA to take steps, Hefty says, “there’s more pressure to secure the plants.”
The Schoep’s plant is the subject of third-party audits conducted on behalf of its customers as well as “our own benefit,” Thomsen explains. “We have an in-house program. The entire plant is inspected monthly.”
Furthermore, the plant is subjected to environmental testing as part of its sanitation program. Over the past five years, the company has replaced all drains in the plant with ones made from stainless steel and has installed an air-handling system to ensure environmental purity, Paul Thomsen notes.
Hefty says plant personnel conduct the standard industry sanitation tests, including a daily pre-operation ATP swabbing to ensure equipment cleanliness.
Detailed records are kept on all procedures. “Documentation is a big thing that’s asked for more and more,” Eric Thomsen says. On a human level, Schoep’s has installed a security system and conducts background checks of prospective employees.
Once on the job, employees are encouraged to maintain daily interaction with managers, and Hefty explains that continued training and fresh awareness of plant operations is key to success. “We’re taking huge steps toward promoting an environment that considers employee safety first,” he says, noting the benefit of reduced lost-time injuries and their related costs.
Paul Thomsen adds: “We feel it’s important the individual makes the decision whether it’s safe or not,” using as an example the heavy snowfall on the day of our visit, when some drivers declined to their routes due to safety concerns.
In all, Schoep’s maximizes all of its resources to get the most out of a compact but nimble manufacturing facility and meet the varied needs of its retail and co-packing customers.
“It all comes back to scheduling,” Hefty says, “how to best use your floor space and your labor.”
At a GlanceSchoep’s
Location: Madison, Wis.
Year opened: 1928
Size: 60,000 square feet, manufacturing; 46,000 square feet, distribution center.
Number of employees: 150
Products made: Ice cream, frozen yogurt, frozen custard, novelties.
Total freezing capacity: 6,000 gallons per hour.
Filling/packaging lines: 20
Storage capacity: Plant: raw 28,000 gallons, pasteurized 42,000 gallons, freezer storage 2,200 pallet spaces; distribution: 3,600 pallet spaces.