01 Mar 2006

The Little Ice-Cream Company That Could

Nearly thirty years ago, Gary Rogers barely scraped together the $14K he needed to invest in a struggling Bay Area ice-cream company. Today, it’s a $2 billion global business. This is no “plain vanilla” success story.
Re: William Cronk (AMP 92)
by Roger Thompson


In a self-indulgent moment in his late 20s, Gary Rogers (MBA ’68) bought a Porsche, a flashy status symbol befitting his standing at the time as a well-paid McKinsey consultant. It turned out to be the single most important purchase of his life. Five years later, by then a failed restaurateur, broke, and with a wife and four young children at home, Rogers converted his aging Porsche into desperately needed cash to cinch the best deal he ever made — ownership of Dreyer’s Grand Ice Cream.

It’s one of the stories Rogers delights in telling a visitor who has come to his Oakland, California, headquarters to learn how he turned a struggling Bay Area ice-cream business into the nation’s leading producer. Today, as chairman and CEO of Dreyer’s Grand Ice Cream Holdings, Rogers, 63, presides over a $2 billion global enterprise with 7,000 employees. Seated in the comfortable leather armchair from which he has negotiated many a deal, Rogers readily admits that the company’s success “has been beyond my wildest dreams.”

Every business owner has stories to tell. Few relish the telling more than Rogers, and for good reason. His long, steady climb from unsuccessful restaurateur to ice-cream magnate is as filled with plot twists as a good adventure novel.

Engineer to Entrepreneur

Rogers took a winding road to entrepreneurship. A self-described “geeky” kid, he graduated with an engineering degree from the University of California, Berkeley, and had no real interest in graduate school. A friend persuaded him to apply to HBS, where he arrived in the fall of 1966, newly married and with a razor-thin bank account. “When the oilman came to the door with the bill after filling the tank, we’d hide in the closet,” he recalls.

Demonstrating the mental dexterity that earned him recognition as a Baker Scholar, in his spare time Rogers honed a system for trading over-the-counter stocks and left HBS with his bills paid and $50,000 in the bank. Eager to return to the Bay Area where he grew up, Rogers accepted a job offer from McKinsey in San Francisco.

His first entrepreneurial opportunity came knocking four years later when college fraternity brother William F. (“Rick”) Cronk (AMP 92, 1983), with whom he shared the daily commute, invited Rogers to join him as a partner in a restaurant venture. Rogers hesitated but eventually left McKinsey to help launch the Vintage House restaurant chain, which expanded to five locations before succumbing to financial difficulties after several years of struggle.

The experience “wiped me out financially,” says Rogers. Down to his last $4,000 and in need of a job, he dropped in one day at the Dreyer’s ice-cream plant on College Avenue in Oakland to inquire about franchise opportunities.

Founded during the Depression by William Dreyer and Joseph Edy, Dreyer’s had established a Bay Area reputation for premium quality and inventiveness, dating back to the debut of its Rocky Road flavor in 1929. The company prospered, and in 1948 it opened the College Avenue facility as a state-of-the-art ice-cream plant. Fifteen years later, the firm was on the verge of bankruptcy when Dreyer’s son, then in charge, sold it to key officers, including Ken Cook, who took over as president.

It was Cook who cordially invited Rogers into his office that fateful day in 1977. “We started to chat, and the phone rang,” recalls Rogers. When Cook hung up, he had tears in his eyes. “I offered to excuse myself, but he said, ‘No, no, let me tell you what just happened.’ ” Wells Fargo Bank had rejected Cook’s loan request. “And I blurted out: ‘Have you ever considered selling your company?’ He replied, ‘Well, no, not until just now.’ Within days, I had an option to buy it.”

Upon hearing this oft-told story, many people evidently have marveled aloud at how “lucky” Rogers was to be at the right place at the right time — to which he counters: “To me, it’s not luck. It’s the ability to recognize opportunity. Louis Pasteur said, ‘Chance favors the prepared mind.’ I was ready.” Indeed, he was.

Summoning his HBS skills and McKinsey experience, Rogers quickly went about rounding up the $1 million asking price: a $500,000 loan from the same bank that had rejected Cook, and the balance from a private-equity firm, Charterhouse Group. “As a matter of principle” Charterhouse demanded that Rogers ante up $100,000 of his own money. “I told them it might as well be $10 million because I only had $4,000 in the bank.” Charterhouse relented and cut the figure to $28,000, still well beyond Rogers’ reach.

Concurrent with the Charterhouse negotiations, Rogers invited his former restaurant business partner, Rick Cronk, to join him in the Dreyer’s deal. “I figured that building the company was going to be more fun and more likely to succeed if we did it together.” As equal partners, each had to come up with $14,000 to satisfy Charterhouse. This is where Rogers’ Porsche came into play. Incredibly, its Blue Book value was exactly $14,000, so Rogers sold it to the company, used the proceeds as his equity stake, and, as Dreyer’s new president, ended up driving the Porsche as his company car. “With God as my witness, that’s what happened,” says Rogers, who still seems amazed by the turn of events.

Taking Dreyer’s National

When Rogers and Cronk took over on May 20, 1977, Dreyer’s was a $6-million-a-year operation with thirty employees. Neophytes in the ice-cream business, they set their sights low. “Originally, we thought maybe we could become the leading ice-cream company in the San Francisco Bay Area,” recalls Rogers. “We had no sense of geographic expansion.”

The pair turned out to be savvy managers. Within four years, sales had grown to $30 million, and earnings went from breakeven to $1.5 million after taxes. “The company was on really solid footing and growing rapidly,” says Rogers, paving the way for a $45 million IPO in 1981. Rogers and Cronk now had the cash and the confidence to think on a larger scale. Within a few years, Dreyer’s ventured into Kansas City and Chicago. But that meant marketing under a different name — another of Rogers’ many war stories.

A year after Rogers and Cronk bought Dreyer’s, a lawyer from Kraft Foods, owner at the time of nationally best-selling Breyers ice cream, phoned Rogers with a startling announcement. He claimed that the Dreyer’s name and logo encroached on Breyers’ trademark and demanded that the company change its name. Although his own attorney advised that Kraft had a strong legal case, Rogers opted to play hardball anyway. Returning the Kraft attorney’s call, Rogers calmly staked out his position. He threatened to print on the side panel of every container of Dreyer’s ice cream the following message: “Kraft, manufacturer of such quality products as Velveeta, Cheez Whiz, and the like, has come to us after we’ve used our founder’s name for fifty years and forced us to change it.” At that point, Rogers recounts with a smile, the Kraft lawyer “got very reasonable.”

On the spot, he offered to let Dreyer’s use its name in thirteen western states, a compromise that Rogers readily accepted. At the time, he had no plans to venture east of the Rockies. When that opportunity arose several years later, there was only one logical choice for a new name: Edy’s, after cofounder Joseph Edy. By the early 1990s, the Edy’s brand was well established throughout the Midwest and East, and it has long since eclipsed Dreyer’s in total sales.

In the Groove

While war stories make for great company lore, even in their telling Rogers never loses sight of the two things he credits for making the company truly great: its unique direct-to-store delivery system and a culture that values employees above all and empowers them to excel.

Unlike its competitors, Dreyer’s has always insisted on delivering ice cream to grocery stores with its own trucks and drivers to ensure product quality. Early on that meant customers could choose between fresh cartons of Dreyer’s and ice-encrusted competitors’ brands. Today, it means Dreyer’s is still in charge of its in-store inventory. To help cover the high cost of its company-owned trucks, Dreyer’s over the years has formed partnerships to distribute products for other ice-cream makers, including, at different times, Häagen-Dazs and Ben & Jerry’s. It also manufactures and distributes ice cream in partnership with other companies, including Starbucks. Historically, these partnerships have paid off, producing about a third of Dreyer’s revenue.

As the pace of expansion picked up in the mid-1980s, Rogers sensed a loss of cohesiveness and shared purpose. “We were one big family to start with,” he recalls, “but when we opened a plant in Los Angeles we began to talk about how to sustain the sense of pride and the culture that we had begun to develop.” After many discussions and much research, Rogers sat at his desk on two consecutive weekends and wrote what became known as the company’s “I Can Make a Difference” philosophy defined by ten tenets or “Grooves” that aim to empower individuals to realize their potential.

Over the years, the Grooves have taken on a cult-like status. Everyone receives training and retraining, and employee satisfaction surveys periodically measure how well the company is meeting its stated goals. “Today, as I travel around the country, it’s what binds us together,” says Rogers. “We really practice what we preach.”

Together, the direct-to-store delivery system and an empowering culture gave Dreyer’s a competitive edge that propelled it far beyond its regional origins. “Looking back, these are the two best things we did,” Rogers opines.

Suitors Come Calling

A strong commitment to innovation has also played an important part in the company’s success. It introduced new flavors like Cookies ’N Cream, invented a proprietary process that in 1987 produced the first “light” ice cream, and launched the first line of frozen yogurt sold in half-gallon containers. (Slow Churned ice cream, with half the fat and one-third the calories of premium, and Dibs bite-sized ice-cream snacks are the company’s most recent innovations.) By mid-1994, Dreyer’s fulfilled its dream of becoming the leading premium ice-cream brand in the United States — a mixed blessing. “As we approached a billion dollars in sales, it was clear that we were a plump target for big, acquisitive food companies,” says Rogers.

The Anglo-Dutch packaged-goods conglomerate Unilever had already bought Breyers. (It would buy Ben & Jerry’s in 2000.) Simultaneously, the Swiss food conglomerate Nestlé began to make friendly overtures to Dreyer’s. Viewing Nestlé as a compatible partner, Dreyer’s sold an 18 percent stake to the company in 1994 with the agreement that it would not attempt to acquire more than a 25 percent stake for a decade. As that agreement neared its end, Nestlé surprised Rogers by making an offer to buy the Dreyer’s shares it didn’t already own for $2.5 billion or $83 per share, an offer too good to pass up. Under terms of the deal, Dreyer’s will remain unusually independent for a wholly owned subsidiary, and Rogers will continue as chairman and CEO until 2007, when he turns 65. (Cronk retired in 2003 when the deal closed.)

After 28 years at the helm, it’s clear that Rogers still loves his work and his products. He eats ice cream every day — Dibs are his current passion. Which raises the inevitable question: What is his favorite flavor? “Vanilla,” he declares without hesitation. “All ice-cream people will tell you that,” which explains why he hates the term “plain vanilla.” Indeed, Rogers’ long career at Dreyer’s has been anything but.

Featured Alumni

Featured Alumni

Gary Rogers
Class of MBA 1968, Section F

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