Velvet Ice Cream 4.0: How this 100-year-old company stays relevant
Talk about manufacturing in Ohio and the conversation might turn to tires, auto parts and machine tools. But the Buckeye State sports good credentials in agriculture in general, and dairy processing in particular. It ranks first in the production of Swiss cheese, fifth in cottage cheese and eighth in ice cream, according to the state’s Department of Agriculture.
Ohio is blanketed with ice cream makers. The National Agricultural Statistics Service counted 33 plants making regular hard ice cream in the state in 2013. That’s more than Wisconsin (28), Pennsylvania (27) and California (21), three big guns of dairy processing. Native Ohioans have their favorites, including newcomers like Jeni’s Splendid (Columbus) and long-time makers like Pierre’s (based in Cleveland), Graeter’s and Homemade Brand (Cincinnati) and Velvet Ice Cream (Utica).
Family-owned Velvet Ice Cream has been at it for 100 years. The headquarters and ice cream plant (see related article) are in Licking County. (Could there be a better place name for an ice cream company?) Joseph Dager, an immigrant from Lebanon, founded the company in the basement of his brother-in-law’s confectionary store in 1914.
To get where it is today, the company has had to overcome various obstacles. Until the 1930s, Ohio’s ice cream makers could only sell their products in counties where they owned plants. Charles Dager, the second-generation owner of Velvet Ice Cream, worked to change those restrictive, anti-competitive laws. Velvet has thrived since then, although it has seen its share of challenges, including a fire that destroyed its plant in 1986. Fluctuating commodity prices that make planning difficult, along with government regulations and competition are not unique to Velvet. Nevertheless, the company must deal with them.
Close ties to the community
Over the last 100 years, the Dager family and their business have become closely entwined with the community and the state. A Memorial Day weekend fundraiser for a Catholic charity in partnership with the Utica Sertoma organization draws 40,000 visitors and generates $60,000 a year in charitable donations. This summer, company executives rode their bicycles to raise funds for The James Cancer Hospital, a Columbus hospital. Velvet develops special, exclusive flavors for the annual state fair. The restaurant and gift shop at the headquarters have given hundreds of teenagers their first jobs.
Joe Dager is the patriarch of the family. Joe and his brother Mike, grandsons of the founder, took over the business in 1965. In 2009, Joe became chairman of the board and turned the day-to-day operations over to three of his daughters (a fourth daughter is not involved in the company). Luconda, the oldest daughter, is president, and Joanne and André are vice presidents.
In a proclamation to Congress, U.S. Rep. Pat Tiberi called Velvet Ice Cream “a quintessential American story.” He noted that “15-year-old Joseph Dager came to America from Lebanon in 1903 without knowing a word of English. Eleven years later he started his ice cream business in the basement of a local confectionary. His hand-cranked ice cream batches set his family and Central Ohio on a path that would make Velvet Ice Cream and Central Ohio famous.”
How does a family-owned business survive one generation let alone four? Joe Dager reels off some of the lessons he has learned from his forebears and that he has passed on to his children. He said:
- You pay attention to the details. “Focus on the little things. They lead to the big things.”
- Focus on the big and the little things. “Small customers pay for small bills; big customers pay for big bills.”
- Employees are as important as the recipes and ingredients that go into ice cream.
“We’ll prevail if we do what we’ve been doing,” Dager said.
Still, the ice cream industry faces challenges, like stagnating sales. In the 52 weeks ended Aug. 10, 2014, retail sales of packaged ice cream in the United States increased just 2.1% to $5.4 billion, with unit sales increasing 1.4%, according to Chicago-based market researcher IRI.
Luconda pointed out that consumers have dessert choices besides ice cream. Frozen yogurt, and now frozen Greek yogurt, is crowding freezer sections. Snacks, pies, cakes and candy bars are competing for that limited share of stomach.
Retailers have hurt ice cream sales by over-promoting it with low prices and two-for-one offers. While those kinds of deals are not as readily offered as they once were, they essentially trained shoppers to look for discounts. That sort of merchandising kills brand loyalty.
Ice cream pricing makes it all the more challenging for Velvet Ice Cream to compete because it produces a high-fat, low-overrun premium product that is 100% real ice cream (as defined by the Standard of Identity), not dairy dessert. So when customers (or consumers) balk at the price, the marketing team explains how the company makes ice cream and the ingredients that go into it. A taste test usually convinces the skeptics that the ice cream is worth the price.
In addition to the premium line, Velvet makes a low-fat churned product and a no-sugar-added product. It produces a lower-cost controlled brand of ice cream for grocery customers in rural areas. Sherbet products make up less than 2% of the company’s business.
Conceding to price pressure, Velvet decreased the package size of its premium line to 56 ounces from 64. But that’s it, Joe said. “We won’t go any smaller.”
Joe said the company will succeed by keeping loyal customers and growing the brand outside of Ohio. It sells into Indiana, West Virginia and Louisville, Ky., a new market this year. In 2011, Velvet purchased the ice cream business of Dairymens’ Milk Co. (Cleveland) and in 2012 it bought the ice cream division of Schenkel’s All Star Dairy (Huntington, Ind.).
Velvet’s customers include grocery chains, independent grocers, convenience stores and foodservice accounts. The ice cream maker has partnerships with Ohio-based restaurant chains Bob Evans (in the Columbus suburb of New Albany), Max and Erma’s (Columbus) and Frisch’s Restaurants (Cincinnati). Velvet ice cream is on the menu of every Bob Evans restaurant in the United States. Max and Erma’s sells the ice cream at its sundae bar and Frisch’s Big Boy restaurants include the ice cream in their hand-dipped milk shakes. Even the Ohio State Fair is a customer. This year a flavor contest was conducted to create the flavor, Blueberry Sweet Corn, which Velvet developed.
In honor of its 100th anniversary, Velvet created a 100% natural line with four SKUs: Original Vanilla, Bourbon Pecan, Salted Chocolate Fudge and Vanilla Chocolate Duo.
Typically, Velvet rolls out new flavors in March and April as stores do their resets. Flavor ideas are inspired by other sweets, including candies (like the popular Buckeye, made of chocolate and peanut butter) and cookies. The company also works hand-in-hand with flavor houses to come up with new concepts.
At Velvet, there is no such thing as plain vanilla. The company makes three versions, each packaged separately or combined into one carton (called Vanilla Lovers Trio) like a Neapolitan or spumoni ice cream would be packaged. The company also is known for its extensive use of nuts, inclusions and fruits, including buckeyes, raspberry, fudge ripples, caramel, pecans and cashews (the last two combined into one ice cream).
But after making ice cream for 100 years, Velvet has a pretty good idea of what will sell in Ohio: simply any peanut butter and chocolate combination, Luconda said. On the other hand, Ohioans are not big on coffee ice cream, despite the national popularity of Starbucks and Dunkin’ Donuts.
Small companies have to be strategic in their marketing. Certainly being on the menus of Bob Evans and other restaurants goes a long way in promoting the brand. Velvet also uses free-standing inserts, social media and plant tours to spread the word. The latter works like a charm.
“We’re a destination,” André said. “People come to see how Velvet ice cream is made.” Partnering with local convention and visitors bureaus, businesses and tour groups, Velvet Ice Cream has seen growth in the number of visitors to their destination.
Velvet Ice Cream’s headquarters and plant are located at Ye Olde Mill, named by the travel guide Frommer’s as one of America’s 10 Best Ice Cream Factory Tours. Every year, more than 150,000 visitors come for tours, tastings and events. The mill dates to 1817. Ohio’s abolitionists made the mill a stop on the Underground Railroad during the Civil War, said Joe, who is as enthusiastic about American history as he is about ice cream.
I asked Joe what he learned from his dad. “Do the right thing,” he answered. “These are basic business ethics,” said Joe, who earned the rank of Eagle Scout. His watchwords are those of the Boy Scouts: be trustworthy, loyal and helpful.
Joe recounts a mistake his uncle Edward made. Edward bought a piece of equipment that turned out not to be right for the plant. But rather than blame the vendor and demand a refund, he stood by his decision because he was responsible for it.
The sisters said they have watched their parents “do the right thing.” Luconda said she leads by example and puts people first. Joanne said the company has an open-door policy. It’s even better than that: the executive offices are walled with transparent glass.
Velvet Ice Cream employs 120 full-time employees (about 15 work in the plant). Another 40 to 50 work seasonally in the restaurant and gift shop. One other indication that employees are valued and respected is the long tenure of the senior management team; team members have 15 or more years of experience. The Dagers invite all employees and their spouses to an annual awards banquet where they recognize individuals with gifts for their service.
Family members and other employees are involved with local and national trade associations.
Luconda serves on the board of the International Dairy Foods Associations and she is an officer of the Ohio Grocers Association. Joanne is on the advisory board of the Conway Center for Family Business at Ohio Dominican University, which guides owners in maintaining a family business. In 2013, Joe Dager received the Center’s Lifetime Achievement Award. The center called him “a family business leader who has made a significant contribution to his or her industry or the Central Ohio business community.” The company also was honored in 2010 and 2002.
In the community, Velvet is best-known for its annual Memorial Day weekend ice cream festival. The event attracts 40,000 visitors and raises funds for Sertoma Club, which buys hearing aids for those in need. The festival is held on county land across the street from Ye Olde Mill. Velvet donates ice cream and the labor to scoop it. This year, the event netted $50,000 in profits for Sertoma.
Social media marketing
For a 100-year-old company, Velvet is pretty adept with new marketing techniques and technologies. The company has 20,000 Facebook fans, 2,800 followers on Twitter and is an active poster to Instagram and Pinterest. For a promotional video on YouTube, the company took a GoPro camera for a spin through its tunnel freezer to give fans an inside look.
Marketing Manager Nathan Arnold said social media works faster than any other marketing the company does. “It’s good for us,” he said, noting that while ice cream is a product that is bought by an older demographic, social media marketing helps to attract younger consumers.
A Facebook contest this summer offered free ice cream for a year. Other prizes included coupons for Bob Evans restaurants and passes to the state fair. Because of the company’s 100th anniversary, Velvet advertised on radio this year more than usual. The focus, however, is more on online advertising with coupons. The company wants to reach the 25- to 49-year-old demographic, Arnold said.
The company uses its food truck in and around Columbus in grassroots efforts to educate shoppers about premium ice cream. The mini truck is parked outside of stores (like Kroger or Giant Eagle) and Velvet employees engage consumers, telling them about the 100-year-old family-owned business that uses only the finest locally sourced ingredients.
To promote its entry into the Louisville market, Velvet and Denali Moose Tracks donated $10,000 (in the form of 10,000 scoops of Moose Tracks ice cream) at an event this summer held at the city’s Fourth Street Live venue. The event benefited the Salvation Army.
Looking to the future
Most of the fifth generation of Dagers is still in middle school, although one of Joe’s college-aged grandchildren has expressed interest in working at the company.
Regardless of any rules or dietary guidelines to come out of Washington in the future, the ice cream industry will prevail, Joe said. “Premium is not a fad. People want something good,” he said. “We have a reputation for higher prices. That’s not bad. When customers know what’s in our ice cream, they understand the price. Consumers won’t give up ice cream.”
He’s probably right. And in this case, past performance is an indicative of future results.
All photos by Vito Palmisano