Gelato: sweet, profitable and unknown

May 4, 2006

Fish has its chips, burgers their fries and fried chicken its cole slaw.

Will pizza and gelato acquire that same inseparable identity in America?

A number of pizza operators who offer it believe so, and they say their sales of the creamy-cold concoction prove it.

"About 50 percent of our customers get gelato," said Lee Shadle, chief executive of Pesto's Creative Italian Bistro in Columbus, Ohio, which also serves pizza, pasta, salads and sandwiches.

Stirring customers to purchase it doesn't come automatically, especially when most don't know jack about gelato. Shadle said most of his customers assume it's another flavor of ice cream. He's not alone. Clive Barwin, CEO of Melt Café and Gelato Bar said 98 percent of his customers don't now the word is Italian for ice cream, so staffers at the currently mall-centered concept offer free tastes to entice passersby to try it.

"A high 90 percent of our customers don't know what gelato is," said Allie Mallad, president and CEO of Gelato di Roma, an 11-unit pizza-and-gelato chain based in Dearborn, Mich. "Sure, we have to work to help them understand what it is, but I see that as the glass half full. It shows we have a hell of a lot of room to grow yet."

Mallad, a

The gelato display found at Gelato di Roma's Ann Arbor, Mich. store.                             *Photo courtesy of Gelato di Roma.

former Little Caesars franchisee of 159 units, expects to have 25 Gelato di Roma stores open by the end of 2006. The company recently signed a 150-unit development agreement. Though he's proud of Gelato di Roma's pizza, he's confident gelato will differentiate the company within the pizza segment.

"We make our gelato fresh in the stores daily," Mallad said. "We have 51 flavors inside of cases with 18 feet of curved Italian glass for presentation. That's what truly wows the customers when they walk in."

And makes them want to buy pizza and dessert in the same spot, he hopes. Every customer buying a large pizza at Gelato di Roma gets a free pint of gelato, a bonus worth $4.99.

"It is a value meal, and being a guy who's experienced in the pizza industry, I know it positions us to have the greatest value out there," he said.

Pizza and gelato have been the perfect pair for decades in Italy, said Jim Minidis, CEO of RedBrick Pizza, a 55-unit company serving gelato. It's safe to assume, he said, the tasty pair will work elsewhere if it's marketed correctly.

"Our whole concept is the Italian neighborhood pizza café, a derivative of what's been done for years in Italy; there's nothing unique to that," said Minidis, whose company is in Palmdale, Calif. In the Italian tradition, high-quality pizza is like gelato, Minidis added, in that it's visually attractive and vividly flavored. "We don't compromise on any of our ingredients, and we use no artificial flavors. The product has a really full-flavored gourmet taste. When they taste it, people know it isn't ice cream."

Sweet schooling

Much is made about gelato's lower fat content, something operators say is increasingly important to customers and especially to the United States government. To call a frozen dessert here

What's Important

Gelato is a virtual unknown in America, but many operators believe it has a big future in frozen desserts.

Part of selling gelato is educating one's customer base.

The investment in a modest gelato program is fairly significant, but operators say it'll pay for itself quickly.

"ice cream," it must contain at least 10 percent butter fat; premium ice cream can contain double that amount. Gelato contains from 4 percent to 8 percent fat and sometimes it's fat-free.

More often than not, gelato makers use no artificial colors, flavors or preservatives to produce a wide variety of unique and unusual flavors.
Despite the lower fat content, gelato's "mouthfeel" is described by some as creamier than premium ice cream. True gelato batch freezers get the credit for that texture because of the speed of the dasher (the paddle used to agitate the mixture) moves slower than dashers in ice cream freezers and reduces the amount of air folded into the product, yielding a denser texture.

Do customers really care? Barwin said more than 5,000 surveys done by Melt prove increasingly health-conscious customers like its healthful attributes, as well as the fact that it's all natural. Teaching them all about gelato, he added, takes effort that some independent operators fail to do.

"People think they can put up a gelato sign, people know what it's about and they'll sell a lot of it," he said. "You have to work hard at merchandising it, too. They've got to know it's different or they'll just think it's ice cream."

Tasting is believing, Mallad said, and counter workers at Gelato di Roma give out an average 3.5 tastes to each customer. Even if they know which of its 51 offerings they want to order, staffers still offer others to expose them to the variety. Shadle suggests customers sample his gelato while they wait in line for their main-course orders.

"We hit them with free samples while they're waiting," he said. "They taste it and buy some; it works like a charm."

When customers call for pizza, Gelato di Roma phone staff always offer gelato. The company delivers as well in bags "that keep our product frozen for up to three hours," Mallad said.

Store-level execution

Operators make their gelato fresh onsite, while others buy it frozen from gelato makers. Gelato di Roma employs what Mallad called "a gelato master" who teaches staffers at its corporate training center how to make from scratch in stores. Minidis said RedBrick also makes its gelato in stores, but said the process is fairly simple. Melt's gelato is made at a commissary and shipped to stores, while Pesto's comes frozen from a distributor.

According to Chris Humiston, sales manager for Aromi d'Italia, a Baltimore-based distributor of gelato mixes, batch freezers and display cases, all the equipment and mixes needed to make gelato is imported from Italy. As demand for gelato grows, he said manufacturers in the U.S. will see the potential start building equipment here.

Humiston said

Gelato sellers say the product's bright color is an attention-getter for customers.      Photo courtesy of Gelato di Roma

the equipment required to make and display a modest gelato selection will run an operator about $35,000. But he insists that sales of the product will more than cover the cost.

"If you borrow $35,000 and you buy a machine and display case, and your payback is $750 to $800 a month for five years, that works out to $25 a day, which is 10 cups of gelato," Humiston said during an interview at the February North America Pizza & Ice Cream Show. "This will pay for itself much quicker than that."

Depending on the market, operators sell gelato for $2.50 to $3.50 a scoop. And while most didn't want to reveal their food cost for gelato, all said it's very affordable. Shadle said his food cost was 24 percent, "and we're giving what I think is a decent portion."

Operators insisted that making money off gelato also includes having a facility with good foot traffic or dine-in traffic, and knowing how much variety to offer. Having too many flavors can become an inventory and food cost problem, as well as overwhelm customers.

RedBrick rotates 12 to 15 flavors at each store, while Gelato di Roma offers a staggering 51. Pesto's limits its variety to 12 on display and eight in the walk-in to move in when one up front runs out.

"We have 32 flavors on hand at all times," said Barwin of Melt's inventory. "We have a very standard formula: no less no more. It works well for us."

Topics: Marketing , Operations Management

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