July 1, 2005
by James Dudlicek
Carvel’s new management aims to build on the rich heritage of its soft serve and ice cream cakes.
Just about everyone who grew up eating Carvel ice cream has a Carvel story. It’s those personal experiences that help lend a deeper meaning to the legendary brand.
“You see somebody in a grocery store, if you’re wearing your Carvel shirt, they want to tell you their Carvel story,” says Jim Schneeloch, vice president of sales and distribution for Celebration Foods, the Connecticut-based division of FOCUS Brands that manufactures and markets Carvel ice cream cakes in the supermarket channel. “They want to tell you they’ve had Carvel at every birthday party since they were 6 years old, and they’re 47 today and still having Carvel. Everyone has their own relationship with the brand. That, I think, is the one thing about this brand that is truly different from most other brands.”
It’s this personal attachment — combined with a history of high-quality, fun treats — that helped Carvel rack up some $225 million last year in sales of ice cream, cakes and novelties in more than 530 franchise locations in 26 states; and ice cream cakes in more than 8,100 supermarkets in 36 states. Whether it’s a Brown Bonnet cone, Fudgie the Whale cake or Flying Saucer sandwich, featuring ice cream made fresh daily at local franchise outlets, or a uniquely shaped and beautifully decorated ice cream cake from the grocer’s frozen dessert section, this company knows how to make ice cream lovers smile.
“It starts with the product,” says Steve Romaniello, president and chief executive officer of Atlanta-based Carvel parent FOCUS Brands. “We have our famous ‘secret formula.’ And it is true — there is a secret, proprietary formula that is unique to Carvel. It has been the same formula for many, many years and, in our opinion, it’s the best soft-serve ice cream in the world. From that, everything else emanates.”
What’s In Store
Carvel’s franchise locations offer four product lines: soft-serve ice cream, used for cones, shakes, sundaes and a blended creation called a Carvelanche; hand-dipped ice cream; take-home novelties; and ice cream cakes.
At one time, the cakes — created with layers of vanilla and chocolate soft serve separated by chocolate crunchies and covered with whipped frosting — were only available at franchise stores; some, like the ever-popular Fudgie the Whale, still are.
The company decided to enter the supermarket channel in the early 1990s. “Back in the early ’90s, the management team had a research report written about the future state of the ice cream industry, and among other conclusions that were generated was that the days of the ice cream parlor experience were limited, because people were looking for convenient solutions for virtually everything,” Romaniello says. “The key product in our stores was the ice cream cake, so when the previous management team decided they wanted to make their product line available in other channels that were more convenient, they chose that particular product, rather than trying to compete with the better-capitalized companies that were in the pints and quarts.”
FOCUS created Celebration Foods last year to run Carvel’s manufacturing and distribution operations for supermarkets, club stores and super centers. Its three plants make a wide variety of sizes and shapes of cakes, including an 8-inch round plus small and large sheet cakes, available in a range of decorations; plus eight holiday and seasonal cakes, including the Easter Bunny, a snowman and unique designs for Mother’s Day and Father’s Day. The three “everyday” lines encompass the Lil’ Love cakes, 12 designs including a rotation of sports-themed designs, a stars-and-stripes design, and ribbon and confetti designs; Love & Laughter cakes, with the upscale dessert options Sinful Chocolate, Cookies n’ Cream, Fudge Drizzle and Strawberries n’ Cream; and Slice-Mmm’s® ice cream rolls, ice cream rolled in crunchies including varieties like Strawberry Shortcake, Cool Mint and the new Orange Breeze. Slice-Mmm’s are credited for a recent 4 percent lift in overall sales.
Celebration Foods also sells Carvel’s Flying Saucer ice cream sandwiches in six packs, as well as the Taste of Carvel, a trial-size vehicle introduced in late 2004 containing 6-ounce servings of vanilla and chocolate ice creams topped with crunchies.
Just last month, Carvel announced a licensing agreement with Masterfoods to sell ice cream cakes co-branded with M&M’s® and Snickers® candies. The exclusive M&M’s Ice Cream Cake — vanilla ice cream in the shape of the yellow “M” character, with milk chocolate candies, fudge, chocolate crunchies and frosting — will be available in supermarkets this month and franchise locations in September. The Snickers Gameball® Ice Cream Cake will be available in October, followed by a Snickers Ice Cream Cake in early 2006.
Management says creating Celebration Foods as a more autonomous business unit reflects the differences in the franchise and consumer products operating models. They now report having a greater focus of resources in support of faster growth in both areas.
Celebration Foods continues to expand the reach of Carvel cakes. “We cover most of the major grocery chains in the United States, from Safeway and Albertson’s to Kroger, Ahold and Publix,” Schneeloch says. “We’re in some Super Wal-Marts; we cover club channels in the east, Super Targets.”
The company launched in Texas late last year via Albertson’s, with Kroger soon to follow there and in the Pacific Northwest, Schneeloch says. “We’re still filling in some of our existing geographies,” he says. “This year we just added the Dominick’s chain in Chicago; we’ve got the Safeway division in Phoenix, Spartan Foods in Michigan, the Weis stores in Pennsylvania.”
Feeding this channel are Carvel’s three cake-decorating plants, in Jessup, Md.; Marlborough, Mass.; and Commerce, Calif.
FOCUS calls consumers its best marketers, and reports a 90-plus percent repeat purchase intent for ice cream cakes — not bad for something originally thought up about 50 years ago as an alternate way to use ice cream.
“Tom Carvel, as a great innovator, was always looking for opportunities,” says Craig Hall, Celebration’s chief operating officer. “He thought, you can pour ice cream in a mold and make cakes. It came out as an offshoot of soft-serve and quickly became a major part of the business.”
Sprinkles Past and Present
Despite the early ’90s study that predicted doom for ice cream parlors, Carvel’s franchise operations are in rapid expansion mode. The chain is looking to grow by 100 units this year (nearly 50 of which have already opened as of press time) and pursue co-branding opportunities with FOCUS property Cinnabon.
Meanwhile, new behind the counter are 13 hand-dipped ice cream flavors, including the top-selling Cake Mix; along with Sundae Dashers, six new sundaes in clear, portable cups, with flavors including White Raspberry Truffle and Bananas Foster.
In late 2004, Carvel opened its 500th franchise store (near Cleveland) and marked the second consecutive year of positive comparative store growth, with a franchise system size increase of 43 percent since Carvel’s acquisition by Roark Capital Group three years earlier. In that period, Carvel built a dedicated franchise team, introduced more than 20 new menu items and launched an aggressive marketing campaign.
The result, management reports, was an invigorated brand and customer experience, and a quick rise in franchise sales. Record results that year also included 178 individual franchise agreements and 85 new locations opened in markets such as California, Las Vegas and Texas.
As part of this growth strategy, Carvel unveiled a dynamic new prototype store last year, dubbed “Carvel of the Future.” Designed to capture the whimsical spirit of Carvel’s founder, this new model takes the best of the company’s history and blends it with innovations of the modern era. Features include old-fashioned marquees for custom birthday and special-occasion messages, a 9-foot-tall sprinkle tower and interactive toys for children.
The company plans to create a strong market presence in prime suburban, family-oriented locations, including strip centers close to schools, parks, shopping districts and other recreation areas. Carvel also owns and operates 22 locations in sports venues such as Yankee Stadium.
Carvel offers strong support for its franchise operators, says Chris Prasifka, chief operating officer of FOCUS Brands. “We help them through the site-selection process, real estate, construction, equipment ordering, food ordering. Then we put them through extensive training in the field,” Prasifka says. “We also have the Carvel College of Ice Cream Knowledge in Atlanta. They come for two weeks of training. We do our very best to hold their hand through that process of understanding the ice cream business.”
Since 2001, Carvel has developed an extranet site for franchisees and an online franchise administration tracking system, additions credited for greatly enhancing communication efforts and management of the steadily growing franchise base.
Other opportunities exist in leveraging the equity of the company’s other brands as well. “We’re looking at how they can work together in an even more viable concept,” Romaniello says. “That’s something that would resonate well in places like Chicago, which has a really good Cinnabon presence but there hasn’t been a good Carvel presence [with one franchise outlet in Geneva, a Chicago suburb] other than retail.”
Ultimately, the company aims to promote the family-friendly appeal of Carvel stores. “We have the sprinkle tower with sprinkles for the kids. A family feels very comfortable when they come in to enjoy a Carvel experience,” Prasifka says. “We feel like what we offer, in addition to quality, is value for a family. It is a lot to take the family out for a treat, and we feel like when they come into Carvel, they get value for their money.”
Celebrating a Brand
As part of its 70th anniversary last year, Carvel redesigned its cake packaging with a photo of founder Tom Carvel and a brief company history, to reinforce brand equity by retelling the story of tradition and freshness.
Founded in New York, Carvel has a strong heritage in the Northeast. “Our brand awareness in New York is as high if not higher that Coke or Pepsi — we have research that demonstrates that,” Romaniello says. “It gives us visibility and awareness in other markets.”
Romaniello notes that Carvel’s concentration in key markets makes the company “media efficient” for marketing. “A chain of 530 units and 8,100 supermarkets is still relatively small, but our media spend versus the big guys, like Dairy Queen with 5,000 stores, in those various markets where we compete, is as good or better, and gives us another way to improve awareness but also improve sales because we can afford to do that,” he says. “That’s also a big advantage over some of our upstart competitors who may even have more stores spread out over a greater amount of geography and not be able to advertise as efficiently as we can.”
In addition to DQ, Carvel names Baskin-Robbins and Cold Stone Creamery as its main franchise rivals, while supermarket competition comes mainly from regional brands and private labels.
“We regularly receive calls from people outside of our current distribution area asking when we will be coming to their market,” Schneeloch says. “Our strategy is to continue driving traffic and incremental purchases for our customers. One of the ways is to look for ways to be more than just a ‘celebration occasion’ purchase. We think our products are great for everyday use, so we look for ways to move our products more into the mainstream, like our new line of Slice-Mmm’s [ice cream rolls]. These products are priced at a $7.99 price point that is easy for shoppers to pick up as a dessert alternative for the family dinner.”
In addition to franchisee-specific promotions and advertisements, Carvel has a tiered level of marketing support developed in conjunction with Celebration Foods. Core markets receive television and FSI support, while pioneer markets have a combination of print advertising and direct mail. Supermarket support includes some radio while relying heavily on in-store point-of-sale displays.
Carvel recently introduced a co-branded product with retailer Giant Food in the Baltimore area. The product, featuring two layers of ice cream with a layer of cake in between instead of crunchies, is assembled at Carvel’s Jessup plant using a supplied cake layer and is labeled as “Made with Carvel Ice Cream.” In-store bakeries handle custom decorating.
Building for the Future
Lots of folks want Carvel products, but a key challenge is making sure they get them. “Our problem has been, how do we manufacture that many units of quality product and how do we distribute them to these various geographies?” Romaniello says. “We think over the last couple of years, with the enhancements made to this plant, to our packaging and certain other infrastructure changes we’ve made internally, we now finally have a format that’s scalable on a national level.”
There’s actually more capacity now in three plants than when there were six, Shanley says. “Expanding this site [Jessup], getting science and structure around our core processes … we’re putting emphasis on efficiencies,” he says. “Our trailing capacity is in storage. For the foreseeable future, the challenge will be storing the product and getting it to market, not making it.”
Future plans call for continued rationalizing and streamlining of production processes. The company is implementing a new consumption-driven production-scheduling software solution that allows production to keep up with increased and more complex demand requirements. Carvel refers to the idea as “taking a perishables mentality to the frozen-food environment.”
Carvel managed to weather the commodities storm without increasing product prices. “The gains we are making in manufacturing, with efficiencies in the plant, reducing our scrap levels, have helped us to offset those cost increases,” says Thom Gilday, chief financial officer for Celebration Foods. “Now that butterfat has come down from 2004 levels, we see fuel costs averaging 26 to 30 percent higher than the same period last year. Jim’s team is looking at our routes to market and seeing what is the most effective way we can deal with increasing fuel costs. We can now backhaul our own ingredients, which has helped us reduce costs.”
High fuel costs don’t seem to be keeping motorists away from Carvel stores. “In the last two years, we’ve seen positive same-store sales growth,” Prasifka says. “We attribute that to new product development, refreshing the image of our stores and franchisee excitement about their business. As it relates to fuel, that really has not had an impact because most of our stores are neighborhood stores versus vacation destination spots. If it keeps people close to home, it keeps them close to our stores.”
Building on 2004’s performance, highlights of FOCUS Brands’ plans for 2005 include continuing to build on Carvel’s momentum to accelerate growth by signing 200 new franchise agreements, and opening more than 100 new locations; and continuing to grow the ice cream cake category in food stores through product innovation and expanding the Carvel brand into new markets.
“There’s still a phenomenal opportunity as we fill out our geography with the cakes and developing household penetration there,” Hall says.
Maintaining a healthy future shouldn’t be difficult, because in the ice cream cake segment, according to Shanley, “We’re the gorillas.”
Making People Happy
With seven decades under its belt, Carvel looks to the next five years with optimism. FOCUS expects to increase its portfolio by two or three more brands, while Celebration Foods anticipates distribution in up to 14,000 outlets with 75 percent market share.
What sets Carvel apart from the pack? Managers each have their own take, but all seem to come back to brand heritage and quality, above all else.
“Brand equity, building it into every cake that we make, and keeping the emphasis on it,” Shanley says. “We build every process around freshness. When it’s got to be fresh, to keep our promise to consumers, it changes your mentality about how you run your site. That’s a very unique thing about which we’re almost religious.”
Gilday emphasizes commitment to quality. “Regardless of pressures from external factors such as butterfat costs,” he says, “we’re not going to jeopardize the quality of the brand for short-term financial gains.”
Customer satisfaction is the ultimate goal, Hall says. “When we go out and ask people questions about ice cream cakes, Carvel tends to be top of mind,” he says. “At the end of the day, everything is about making the consumer happy. That’s one of the reasons we came up with the slogan for FOCUS Brands: ‘Focus on Making People Happy.’” m
From Roadside Mishap to American Icon
It was hot on that Memorial Day weekend in 1934 when Tom Carvel got a flat tire on his ice cream truck while driving through Hartsdale, N.Y.
Things would have been bleak had holiday motorists not started pulling off the road at the sight of his truck. Within two days, he had sold his entire supply of melting ice cream, and a soft-serve empire was born.
Carvel realized he could make a lot more money working from a fixed location. He tapped into the electricity of a nearby pottery store, planted a few shrubs around his disabled truck and opened for business.
Two years later, he bought the pottery store, converted it into a roadside stand and permanently established himself as the first retailer to develop and market soft ice cream.
Considered by many as the “father of franchising,” Carvel was passionate about creating and selling one of the country’s favorite ice cream brands.
In 1936, he created and patented a “no-air pump” ice cream machine and, over the next five decades, introduced more than 500 other patents, trademarks and copyright registrations, from mechanical and product designs to methods and technical developments of food equipment. Carvel introduced the “buy one, get one free” deal in 1936, started offering gift certificates in 1954 and started doing his own radio and television commercials in 1955.
In 1947, Carvel began to franchise his brand. With fervor for perfection, Carvel was committed to his franchisees and worked with them daily to help each one effectively and efficiently run their operations. In support of this commitment, Carvel opened its first training school in 1949 for storeowners, known as the Carvel College of Ice Cream Knowledge but affectionately referred to as “Sundae School.”
After 71 years, Carvel enjoys brand awareness surpassing 90 percent in its core markets and continues to build upon its rich heritage. In addition, Carvel holds the Guinness world records for the largest ice cream scoop pyramid and the largest ice cream cake.
In November 2001, Roark Capital Group purchased Carvel, with plans to expand the brand nationwide. In 2004, Roark created FOCUS Brands, and acquired Cinnabon and the rights to Seattle’s Best Coffee in certain international markets to join Carvel to form a new foodservice company.
Based in Atlanta, FOCUS Brands is the franchisor and operator of more than 1,200 ice cream stores, bakeries and cafes in the United States, Puerto Rico and 30 foreign countries.
At the same time, Carvel created Celebration Foods, the consumer food products division of FOCUS Brands. Based in Rocky Hill, Conn., Celebration Foods manufactures Carvel branded ice cream cakes and novelties, and delivers these frozen desserts, along with Eli’s Cheesecakes, Mama Mia’s Italian Ices and HP Hood’s Lactaid Scoopfuls®.
Focus on Making People Happy
FOCUS is an acronym for the words representing the company’s mission. Each letter represents those whom FOCUS Brands serves:
Front-Line Partners: We will make our franchisees happy through communication, innovation and support. We will make our retail customers happy through success by providing high-quality products and exceptional customer service, which contribute to increased growth, profitability and consumer satisfaction. We will make our distributors and suppliers happy by building long-term, ethical partnerships, sharing ideas and opportunities, and challenging each other to contribute to our mutual success.
Owners: We will make our owners happy by strategically growing our brand(s) to build brands and achieving our goals while maintaining integrity and high ethical standards.
Consumers and Communities: We will make our consumers and communities happy by offering consistent, high-quality products, being responsive to consumer requests, respecting the environment and providing opportunities for associates, franchisees and others to contribute to our corporate cause in the communities in which we live and work.
US: We will make us (associates) happy by fostering personal and professional development; offering a fun work environment, celebrating successes and recognizing superior performance; understanding and supporting each other’s roles and responsibilities in an environment of teamwork, mutual respect and integrity; and encouraging effective communication and following through on our commitments.$OMN_arttitle="Maintaining Focus";?>