Graeter’s began as a tiny Cincinnati business and now enjoys a national reputation for the quality of its premium ice cream. Once a small local business, today Graeter’s has a state-of-theart factory, ships ice cream and other products across the United States that are sold in major supermarkets, and has an e-commerce site where customers can order merchandise online.

All of these production and marketing activities helps Graeter’s to generate more than $125 million in sales each year. Even though the company is expanding, it still clings fiercely to its original small-batch production method for making creamy ice cream from fresh ingredients.

CEO Richard Graeter emphasizes that profits are important, but “staying true to who you are and investing in your business is what makes sure that your business is going to be here tomorrow.” That’s why Graeter’s still makes all of its ice cream by hand, ensuring that the texture and taste meet its high standards batch after batch, year after year.

More Than a Family Affair

Graeter’s top-management team includes the CEO and two additional fourth-generation Graeter family members.
Bob Graeter is in charge of operations and quality assurance.
Bob is responsible for manufacturing, as well as for developing new products and finding suppliers to provide ingredients such as fresh fruits, cream, eggs, and chocolates.
Chip Graeter oversees all of the company’s retail operations.
Rounding out the management team are a chief operating officer, a vice president of sales and marketing, a vice president of operations, a plant manager, a controller, and consultants that help the company plan for expansion.
“Every major decision, we make on a consensus basis,”
Richard says, describing the equal partnership among the three family members. “That doesn’t mean we don’t have a different point of view from time to time, but . . . we learn to see each other’s view and discuss, debate, and get down to a decision that all of us support. The other thing that we have learned to do, something that is a little different than our parents’ generation [did], is bring in outside people into the . . . executive level of the management team. . . We now work with consultants to help us plan our strategy to look for a new vision, to develop training programs . . . all those systems that big companies have.” Even with growth and expansion, executive-level managers still stay in close contact with employees at all levels and don’t hesitate to ask for their input when solving problems and making decisions.

Inside the Org Chart

Graeter’s formalized its organization structure over the years as it opened more stores and expanded beyond Cincinnati. Today, the store managers report to a group manager, who in turn reports to the vice president of retail operations. Graeter’s sets weekly and monthly sales goals for its stores, based on each unit’s location and other factors that affect demand. If a store doesn’t meet its goals, the group manager acts quickly to find out why and to help the store get back on track. To make sure employees and store managers are providing great customer service, managers “shop” each store every month, checking on quality and service. These management visits are supplemented by two monthly visits from “mystery shoppers” who buy ice cream and other products on different days, observing what employees are doing and taking note of what else is happening in the store. Their written reports give Graeter’s top managers another view of the business, this time from the customer’s perspective.
At the company’s main production facility, employees in each of three shifts are supervised by a shift manager, who reports to the vice president of operations. The first and third shifts are responsible for ice cream production, while the second shift is in charge of cleaning and sanitizing the facility.

What’s the Plan?

For a small business like Graeter’s, changes often come quickly, and even with robust planning for the future, there are surprises. A while back, the company was constructing its second factory to support the drive for nationwide distribution when an unexpected opportunity arose: to buy out the last franchise company operating Graeter’s retail stores and take over its factory as well. The management team jumped at the chance. “A few months ago, our strategy was just operate one plant,” says Richard. “Now our strategy is, adapt to the opportunity that came along. Now, the goal is to make the best use of our assets.” The newest Graeter’s facility, on Regina Graeter Way in Cincinnati, was built with the capacity to produce as much as 1 million gallons of ice cream per year. Many steps, such as putting lids on packages and moving them into refrigerated storage, are handled by automated equipment. Yet all of the ice cream is still made in small batches and by hand. Experienced technicians wield a paddle to gradually mix in ingredients such as molten chocolate, which have been pasteurized on the premises to comply with government regulations. Once the ice cream reaches the right temperature and texture, another employee hand-packs it into individual packages, which are then automatically capped, stamped with a date code, sealed, and whisked away to be kept cold until being loaded onto trucks for delivery to supermarket customers. Ice cream samples from every shift’s output are tested to ensure purity and quality.
As the company explores the possibility of opening Graeter’s stores as far away as Los Angeles and New York and selling more ice cream and other products in new markets, the management team is planning carefully and assessing the potential challenges and advantages of coastto-
coast operations.
Questions
1. Based on this case and the two previous Graeter’s cases, what are the company’s most important strengths? Can you identify any weaknesses that might affect its ability to grow?
2. How would you describe the departmentalization and the organizational structure at Graeter’s? Do you think Graeter’s is centralized or decentralized, and what are the implications for its plans for growth?
3. The newest Graeter’s plant can produce far more ice cream than is needed today. The company also makes ice cream cakes, pies, toppings, and other products at its other plants. What are the implications for Graeter’s strategy and for its operational planning?