How Graeter’s ice cream outlasted over 150 years of wars, depressions and deep-pocketed competitors

Ice cream company Graeter’s has thrived for more than 150 years by just saying “No.”

Rather than installing modern ice cream-making equipment like its competitors, Graeter’s uses the same technology the company had when it was founded in 1870 — causing it to lose out on higher margins and increased production but maintain what it claims is a better-tasting, more authentic product.

Graeter’s has given up winning in highly populated cities such as New York or Los Angeles. Instead, the company focuses on dominating Midwestern markets such as Louisville and Indianapolis, as well as its headquarters in Cincinnati where it outsells the most popular ice cream brand Ben & Jerry’s in some stores.

However, its biggest “no” comes from fourth-generation owners who say that despite frequent calls from buyers interested in purchasing the operation, Graeter’s remains a family-owned business.

“It’s not about selling the business. It’s not about cashing out,” said CEO Richard Graeter, who gets calls almost every day from private equity firms interested in buying his company. “It’s about passing on, paying forward the legacy that was paid forward to us.”

Graeter’s began in 1870 when Louis Charles Graeter started selling ice cream from two carts in Cincinnati after handcrafting it in French Pots. Graeter and his wife, Regina, later opened their first permanent location in 1900. After Louis died in 1919, Regina, left with two young sons, took over running the business — a rarity for a woman at the time — and started expanding.

Regina faced one of her biggest challenges in 1926, when a new mass-production method allowed for significantly larger volumes of ice cream to be manufactured at a much cheaper cost. The modernization of the frozen treat, coupled with the Great Depression a few years later, forced many family-owned ice cream shops to go out of business. 

Graeter’s, however, managed to thrive even as Regina remained adamant that using the new production method would “compromise” the quality and authenticity of the ice cream. She eventually purchased a factory in 1934 during the height of the Great Depression to increase the company’s production capacity and ability to distribute its frozen offerings.

The company continued using the small 2-½ gallon French Pots, which incorporates less air into the high-butterfat mix to create a creamier, less dense ice cream. The practice remains in place at Graeter’s today.

“She stuck with the old-world process because that’s what mattered more than high growth,” Richard said. “That’s really why we’re still here today is because every generation of my family had a chance to adopt new technology, including me … but we stuck with this process.”

Old-school methods mean Graeter's produces less ice cream — each 2-1/2 gallon batch takes about 15 minutes to make — compared to a continuous process used by most companies today that cranks out hundreds of gallons every 60 seconds.

Graeter’s also packages its ice cream by hand, resulting in labor costs that are up to five times higher than competitors. Unlike the mass-production process that creates a mix not fully frozen, Graeter’s ice cream is ready to be consumed immediately. When the company first started in the 1800s, freezers didn’t exist —so workers had to be ready to package the ice cream quickly. 

The company’s production process is a big reason why Richard routinely says “no” to buyers who inquire about purchasing the business. He said any buyer would look to cut labor expenses, boost margins, raise prices and change manufacturing practices to increase production, undermining what made Graeter’s so successful.   

“Certainly, when a PE firm goes to a little brand to take the public, they aren’t going to go for that, because they can’t make money,” Richard said. “If I sold the business, whoever bought it, they would ruin it.”

Ice cream is a roughly $7 billion business in the U.S. even with consumption on the decline as health-conscious consumers cut back on fatty and sugary foods. In 2022, the average American enjoyed 12.7 pounds of regular ice cream, according to Statista, down from 16.1 pounds at the turn of the millennium. 

Graeter’s makes 42 different flavors each year, including Brown Butter Bourbon Pecan, Vanilla and its signature offering Black Raspberry Chocolate Chip. The business, which is profitable, is growing in the “single digits,” Richard said.

Nearly three-quarters of its $100 million in annual sales come from 56 brick-and-mortar ice cream parlors scattered across five Midwestern states. Another 25% comes from sales at stores such as Kroger, Wegman’s, Harris Teeter and The Fresh Market. The remaining 5% is collected by shipping about 60,000 orders a year to consumers. Graeter’s also operates small legacy bakery and candy businesses.

The company expects new shop openings and direct-to-consumer shipments to contribute the lion’s share of its future growth.

The 60-year-old CEO, who owns the business with his two cousins, is preparing the next generation of family members to take over. Richard’s son works as an assistant baker, while his two cousins have children toiling in retail and maintenance, respectively.

“Every generation of our family has taken a good business and made it better,” Richard said. “This [business] made money as long as you busted your ass making it work. It wasn’t something you could sit back on and milk it. It wouldn’t last very long.”