
Grand Design
by James Dudlicek
Editor
Editor
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.”
Growing Pains
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.”
Wider Perspective
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.”
Looking Ahead
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
• Ownership
• Hoopla
• Learn, learn, learn
• Face-to-face communication
• Upside-down organization
• Ready, fire, aim
• Hire smart
• Respect for the individual
• People involvement
• Ownership
• Hoopla
• Learn, learn, learn
• Face-to-face communication
• Upside-down organization
• Ready, fire, aim