Ice cream has many characteristics not shared by other dairy foods and beverages. It has a longer shelf life than milk and can be shipped to stores far from the factory. Thus, ice cream processors based in small towns can sell into cities with much greater populations.
Ice cream is churned into many more flavors than cheese, for example. Consumers can choose from a wide variety of flavors that are made with fruits, nuts and baked pieces.
And because ice cream is a treat, it doesn’t have to pretend to be good-for-you like Greek yogurt or cottage cheese. True, there are no-sugar-added and low-fat varieties of ice cream, but consumers also can purchase (guilt-free) high-butterfat and low-overrun premium products.
Perhaps no ice cream processor knows this better than Brenham, Texas-based Blue Bell Creameries. It rotates 50 to 60 flavors of ice cream and novelties in and out of stores and foodservice outlets. (Blue Bell has an inventory of more than 250 flavors.) With four production facilities in Texas, Oklahoma and Alabama, the ice cream processor sells in parts of 23 states. The company’s reach extends from the southeast United States (Virginia to Florida), west to Nevada and as far north as Indiana. Las Vegas is the newest market, added in 2014.
Ask non-Texans about the company and they might think Blue Bell is based in their state. That’s because the ice cream processor creates region-specific flavors when it enters a new market. To announce its arrival in Denver in 2011, the company developed Rocky Mountain Road, made with dark chocolate ice cream, dark chocolate-coated peanuts, milk chocolate-coated pecans, white chocolate-coated almonds, roasted walnuts and a marshmallow sauce swirl. That flavor was so popular that Blue Bell later added it to its full lineup.
Despite a presence in almost half of the continental United States, Blue Bell refers to itself as a regional brand. Even so, its sales outpace those of national brands like Ben & Jerry’s and Breyers (from international giant Unilever) and Häagen-Dazs and Dreyer’s/Edy’s (from Nestlé’s, another international conglomerate).
According to ACNielsen Scantrack data, Blue Bell in 2013 had 60% of the ice cream dollar share in the Dallas, Houston and West Texas markets. Control brands (private label) were second with an 18% share.
Looking at national retail sales, Chicago-based market researcher IRI reported sales of Blue Bell ice cream were $489 million for the 52-week period ended Aug. 10, 2014, outpacing all but private label products. As for branded frozen novelties, Blue Bell ranked sixth in dollar sales ($157 million) but third in unit sales. The privately held company does not report annual revenues. It ranks 57th on the Dairy 100, this magazine’s list of North America’s largest dairy processors. We estimated 2013 revenues of $360 million.
History of company
The Brenham Creamery Co. was founded in 1907 as a butter maker. In 1911, it started churning ice cream. The total production was two gallons a day. In 1919, the company was struggling. It ran at a loss for three years in a row. President H.F. Hohlt asked E.F. Kruse (pronounced “cruise-ee”) to manage the business. He soon had the company turning a profit. Kruse changed the company name to Blue Bell (after the Texas wildflower that blooms in the summer) in 1930. The butter operation was discontinued in 1958.
For years, Blue Bell made ice cream in an Art Deco-facade plant in downtown Brenham. In 1960, it pushed beyond Brenham and surrounding towns and started serving Houston, about 82 miles to the southeast. Then came Austin (1965), followed by Beaumont (1973) and Dallas (1978).
In 1972, Blue Bell built a production facility a few miles away on the edge of town to keep up with demand while using the original creamery to make novelties. (See related article)
Blue Bell continued to add other Texas cities throughout the 1980s while it also entered Oklahoma City and Baton Rouge, La. In the 1990s, the ice cream maker started selling in Kansas, Alabama, Arkansas, Mississippi, Georgia and Tennessee. In 1993, the company opened another plant in Broken Arrow, Okla., and in 1996 it bought a facility in Sylacauga, Ala., which was remodeled and expanded the following year.
From 2000 to 2014, Blue Bell opened distribution centers in Florida, North Carolina, Arizona, South Carolina, Kentucky, Colorado, Missouri, Indiana, New Mexico, Virginia and Nevada. The company also sells in parts of Wyoming, Illinois and Ohio.
CEO Paul Kruse is the third-generation of the family to run the company. His father Ed and uncle Howard began working part-time in the plant in 1941. Ed was 13, Howard 11. The brothers both attended Texas A&M University, majoring in dairy science. Ed served as president from 1968 to 1986 (when he was named CEO and chairman of the board), turning over the president’s title to Howard, who served as president and CEO until 2004 when Paul took over those duties.
Other family members in the organization include Paul’s cousin Greg Bridges, the vice president of plant operations, and Jim Kruse (Howard’s son), the VP of information technology. The executive team also consists of long-time Blue Bell employees Ricky Dickson (VP of sales and marketing), Wayne Hugo (general sales manager) and Carl Breed (director of marketing).
One market after another
“I think our growth has been really steady going back” to the late 1970s, said CEO Kruse. “We have added about one to two [new markets] every year, with a few years that we’ve skipped.”
Blue Bell does its due diligence and follows a time-tested format when it enters a new market. But the ease of entering Las Vegas caught everyone off guard. After just 13 weeks, the company said it had a 25% market share. The situation in Denver was similar in 2011, but not quite as dramatic. Kruse asked his management team how many trucks Blue Bell needed in the Mile High City. They answered six. In fact, after nine months, Denver required 22 trucks to service customers.
Blue Bell does a lot of things in-house that other ice cream makers outsource. For example, it builds its own wooden pallets and bakes its own cookies to grind them into inclusions. It also is likely to tap a trusted employee to manage a market expansion, rather than recruit from the outside. An advantage is that a home-grown employee knows Blue Bell’s products and story inside and out. Another advantage of promoting from within is that the company can offer ambitious employees a career path. Today’s managers have worked their way up from drivers, territory managers or production employees.
When the company opens a new market, the whole company pitches it. “We really never run out of volunteers,” Hugo said. “They spend the week and help set up or reset stores.”
“When you have support like that it’s easy to say [to a customer], ‘Just sit back, don’t worry about a thing. We will do everything,’” he said.
When it breaks into a new market, Blue Bell uses sampling and price promotions. Word-of-mouth helps, too. There is a mystique about Blue Bell, and fans become brand ambassadors. Many retail customers already know the company, and that makes it easier to sell, said Breed. For those unfamiliar with Blue Bell, a common practice is to leave the prospect a half-gallon of ice cream and a spoon and say, “See you in about a week,” Dickson joked.
Blue Bell could probably expand faster except infrastructure holds it back. Like many ice cream processors, Blue Bell has more production capacity than storage space. In order to expand, it needs a warehouse (which it typically builds for itself) and then the employees to service new customers.
“It would be easy to run out and try to take on the world. That really has never been our goal. We want to make sure we are doing it right. It’s just very predictable,” Kruse said.
“Doing it right” also means having the flavors and quality consumers want. That’s why Blue Bell is so focused on new products. Though chocolate and vanilla are perennial favorites, consumers await the seasonal flavors and will try limited time offers.
“It’s the fun flavors where the excitement comes from,” Dickson said. “It’s kind of like trying out a new restaurant. Even though you have your favorite ones, it’s fun to try something new and different. In some cases all of a sudden you have a new favorite. We see this with our new flavors all the time.”
Developing new flavors
A visitor’s center and ice cream parlor on the grounds of the corporate headquarters and creamery attract 200,000 consumers a year. That’s a big base for test marketing. But Blue Bell approaches flavor development much more rigorously than asking consumers what they like. The company asks driver salesmen, territory managers and branch managers from its eight regions, 60 distribution centers and home office to submit ideas. Those in the field offices visit stores every day and know what the competition is selling, Dickson explained.
The process to develop 2016 flavors began in October 2014. The company started by entering 300 flavor suggestions into a database. At a series of meetings, the ideas are discussed for their potential. A team narrows down the list to 20 or 30 flavors and regional managers are invited to support their favorites.
When the list is whittled down to 15, the research and development department makes recipes and the plant produces samples, which are sent out to each branch office for evaluation. Then five or six are selected for introduction.
It takes a lot of departments to make ice cream, Hugo said. Visitors who have toured the plant say “I had no idea that it took so much just to make ice cream,” he said.
Introducing new flavors, however, means some SKUs are dropped. Groceries have limited display space and category managers tend to cut from the bottom when placing their orders, leaving only the best sellers. Still, consumers will take up the banner for a discontinued flavor and retailers will re-order it sometimes.
Dickson said the reward of selling ice cream comes from the arrival of fan letters or phone calls. One letter from a 12-year-old girl was written like a ransom note, with letters cut out from newspapers and magazines. It read, “We’ve got your cows. Bring back Cantaloupes and Cream, or else.” The letter showed a picture of a hamburger.
Another consumer wrote after her grandfather passed away. She noted that he had a separate freezer stocked just with Blue Bell’s current flavors. When he came down with Alzheimer’s he couldn’t remember his family but he brightened up when they served him Homemade Vanilla, his favorite. “We got our Pa back,” the granddaughter wrote.
Blue Bell executives are involved in state and national industry associations. Paul Kruse is a past chairman and current Advisory Board member of the International Ice Cream Association of the International Dairy Foods Association. He received IDFA’s Soaring Eagle Award for outstanding service in 2006.
IDFA is “real good about international trade, research and lobbying. I’ve enjoyed being a part of it and it puts us in contact with all the other companies,” he said.
“Collectively you can do a lot more than you can individually. When you can put all your resources together, it’s a lot more economical, but it also puts us all as speaking as one voice. I think [the dairy industry is] well-respected. Connie Tipton and the group have a good reputation on Capitol Hill and with the regulatory bodies we have to deal with.”
He said the company has employees serving on committees of the Dairy Products Institute of Texas, which he called “a very active group” that works with Texas regulatory agencies.
One of the company’s folksy sayings is “We eat all we can and sell the rest.” It makes plenty under the Blue Bell label and has no interest in co-packing ice cream for another company.
Co-packing “changes your focus,” Kruse said, but he acknowledged that “for a factory that has a lot of spare time, that makes sense to make something for somebody.”
Where is Blue Bell headed next? If Kruse knows, he’s not saying. He takes the long view. He’ll grow — at his pace — as long as he has the talent and the infrastructure in place. Getting off on the wrong foot with a retail customer is, in essence, re-work. The sales team just has to go back and rebuild relationships that might have taken a year or two to develop.
Kruse said being No. 1 is “not an important thing for us.” Nodding in the direction of his managers, he added, “I mean, they’re boys you know. They like competing.”
He said the key is staying relevant to the consumer and delivering what they’re looking for in terms of flavors and quality. One aspect of quality is keeping packaging at 64 ounces, rather than downsizing to 48 or 56 ounces as many creameries have done.
Kruse said, “I just don’t see where the benefit is [to downsizing to 56 ounces]. We feel like the best play is a half-gallon and it always has been.”
Hugo said when the company opened in Denver, a shopper came up to him with a package and asked, “Are you responsible for this?” When he said he worked for Blue Bell, she replied, “I don’t know anything about you. I’m buying you just because of the 64 ounces.”
Chicago retailer Marshall Field reportedly said, “Give the lady what she wants.” The advice helped the department store he ran in the 19th century thrive, and it’s timely today. Just ask Blue Bell.