Ice cream maker secures sweet deal
Pittsburgh Business Times - by Tim Schooley
Michael Mandell has spent more than a year sweet-talking a major new client in the New York City area to test his theory that "there's always room for the little guy when the big guy screws up."
Against industry giants such as Nestle that can alienate smaller distributors, Mandell's Reinholds Ice Cream Co., the city's last remaining ice cream maker, now has a major new business to prove there is room.
Reinholds has reached an agreement with Paterson, N.J.-based Festival Ice Cream Inc. to produce 1 million gallons of ice cream, starting in the next week or so, each year for five years on behalf of the ice cream distributor.
Based on volume, the new contract is the largest ever for Reinholds in more than 100 years in business and will nearly double the company's annual production volume of 1.2 million gallons.
"The beauty of it is our plant is running at 40 percent capacity right now," said Mandell, 38, the third-generation owner of Reinholds. "The new business will really do wonders for our operation because it allows me to run at a higher capacity with the same work force."
At the same time, Mandell expects to soon receive a new piece of equipment from a former Ben & Jerry's facility that will enable Reinholds to manufacture a variety of premium ice cream bars. Festival is acquiring the $400,000 equipment for Reinholds to use, he said.
"I have the machine already half filled (with orders), and it's not even installed," Mandell said.
Reinholds' contract with Festival represents a new private label strategy after a few years of struggling with the company's established direct store delivery business.
While that business grew to nearly 6,000 accounts in three states, Reinholds found it difficult serving such a far-flung network of accounts, said Mandell. So the company retrenched a year and a half ago, reducing its territory to a 120-mile radius of Pittsburgh, shrinking its accounts to 3,000 and returned to profitability last March.
Until then, Reinholds, which continues to serve such major long-time clients as Eat'n Park and 7-Eleven convenience stores, had struggled to run its facility and maintain its 55 employees without higher production volume.
The company still has federal liens totaling more than $400,000 against it stemming from delayed tax payments.
"We almost went out of business," said Mandell of the company's earlier struggles. "(The new business) comes at a very crucial time because you need to run so many gallons through your facility to be able to pay your bills."
Mandell declined to disclose the company's revenue. But he projects sales at Reinholds could double during the next five years as it builds other new private-label business.
Private-label business, in which manufacturers turn out product lines under other companies' brands, comes with challenges, said Bob Yonkers, chief economist with the International Dairy Foods Association, a Washington, D.C.-based trade group.
"In that business, you've got to have a lot of cost efficiencies built into your system because customers can go almost anywhere to have private label done," Yonkers said.
Yonkers noted growth in ice cream sales is in the premium and super-premium categories, typically occupied by such high-end brands as Edy's and Dreyer's Grand, both brands of Nestle.
Those categories represent 51.5 percent and 3.5 percent respectively of the ice cream sales in supermarkets, according to the International Dairy Foods Association.
Overall, the national market for ice cream and frozen desserts is estimated to be more than $21 billion, with $8.1 billion bought for at-home consumption.
Mandell pursues its new private-label contract not only as the last remaining regional-sized ice cream manufacturer in the city, but also as one of the only food manufacturers.
Yet Cliff Shannon, president of SMC Business Councils, a trade organization for small manufacturers based in Churchill, sees signs of health in the region's food manufacturers. He noted such growing Western Pennsylvania brands as Uncle Charley's Co. and Pennsylvania Brewing Co., as well as H. J. Heinz Co. and Del Monte Foods.
"I think the moral of the story is if you can make good product and do so efficiently, you can be successful," Shannon said. "We're certainly not going to import ice cream from China."
Festival declined to comment.
Along with product quality, Mandell said he believes distributors such as Festival turn to Reinholds to avoid losing their identity
"We're one of the most flexible ice cream makers," said Mandell, whose company makes 17 kinds of mixes as well as other products. "I take everything as a business opportunity to grow the business for us and our partners."
tschooley@bizjournals.com | (412) 208-3826
