Ice cream firm frozen Lee's Ice Cream: The Baltimore company is finding it easier to break into the Saudi Arabian market than to get its product on local supermarket shelves


With a growing international sweet tooth for super premium ice cream made in America, Lee's Ice Cream is finding its foreign market expanding from the deserts of Saudi Arabia to the rice paddies of South Korea.

But try as it might, the Baltimore-based ice cream maker can't break into a much tougher market -- the shelves of large grocery chains in Baltimore.

Even as the company finds a growing foreign interest in its super-rich ice cream -- with 17 percent butterfat -- it has been stymied in expanding its local market, blocked by chains that are reluctant to put any new ice cream products on their shelves or which want large "slotting fees" to include the product.

"It's frustrating because we are a local player and we ought to get a shot," said Scott I. Garfield, Lee's executive vice president. "People want these products."

Officially known as the M&L; Gourmet Ice Cream Co. Inc., the 16-year-old family operation is run by Mr. Garfield, 31, who handles the sales and planning, and his mother Mary, 64, who is president and oversees operations and administration.

In their one-story headquarters in a gritty industrial park in Southwest Baltimore, the Garfield family and 10 workers churn out 200 flavors of ice cream , including "Tequila Sunrise," "Oreeeo" and "Sir Fig Newton," for 15 ice cream parlors from North Carolina through Maryland.

The ice cream is also sold in pint-sized cartons sporting a Dick Van Dyke-type soda jerk. The product is packed under contract with a company in Laurel.

Founded as the personal dream of the late Leon "Lee" Garfield, who died in July 1994, the company grew by setting up "dipping parlors" where the creamy concoction is sold by the cone and dish to people frequenting such places as Harborplace, the Galleria at Harborplace and the Chevy Chase Pavilion in Washington. This business accounts for 97 percent of the company's $1.2 million annual sales.

But a few years ago, the company decided to venture into the grocery market, going head to head with such super premium brands as Haagen-Dazs and Ben & Jerry's.

What it found was that it had a peculiar advantage in the international market, because its competitors either put restrictions on possible sellers -- like paying territorial fees -- or had the reputation for being hard to deal with.

A year ago, Lee's shipped two dipping parlors and $60,000 in ice cream to Riyadh, the Saudi capital. The Saudi outlet has since placed a $20,000 order for more ice cream.

And at the beginning of this month, Lee's shipped about 34,500 pints, worth $50,000, to South Korea. There are also indications of interest in England and the Caribbean.

Eventually, Mr. Garfield expects the foreign business to eclipse its domestic business.

But the battle to get onto shelves in Baltimore has been less successful.

Despite various presentations to chains such as Giant, Safeway, Super Fresh, Farm Fresh and Basics and Metro, Mr. Garfield has only been able to get his pints into Royal Farm stores, a local chain of convenience stores; Valu Food Supermarkets, a Baltimore-based chain, and a few other stores.

In all, the ice cream is carried in only about 80 to 100 individual stores.

Trying to make the ice cream more enticing to the chains, Mr. Garfield early last year floated the idea of making flavors connected to well-known Maryland food products.

This program, called Maryland Classics, included flavors like "Goetze's Caramel Cream Ice Cream," "Berger Cookie Ice Cream," "Haussner's Black Forest Cake Ice Cream" and "McCormick's Sinful Cinnamon."

Giant Food Inc., the state's largest grocery chain, was interest-ed, but wanted to see the product in its final form, carton and all.

But Mr. Garfield was faced with the dilemma that his paper supplier would only make groups of cartons in 50,000 to 80,000-batches -- too much of an investment on just the possibility of getting into the stores.

While the Maryland Classics program was dropped for pints, the company is considering starting it up in its ice cream parlor business.

Part of the problem of getting into the supermarkets is that there is a proliferation of new brands each year.

"In fairness to the retailers, everybody makes ice cream," Mr. Garfield said.

Yet small companies, like Lee's, are also excluded by "slotting fees" -- charges assessed by the grocery chains for just putting the product on their shelves.

Mr. Garfield declined to talk about such fees, but Jeff Reiter, senior editor for Dairy Foods, a monthly dairy industry trade magazine, said the fees are an obstacle to many small companies.

These one-time charges, which can range from $1,000 to $5,000 per flavor, are often waived for small, local companies, Mr. Reiter said.

"But not all the chains are willing to do that," he said. "Some of them insist on them and that really hurts the smaller companies that cannot pay the fees."

And while there are some administrative costs associated with taking on new products, Mr. Reiter said the fees are there primarily to discourage weaker brands.

"They are flooded with so many new products, these fees tell the manufacturer you better be serious about supporting this product, or you've wasted your money," he said.

For its part, Giant Food says it does not demand slotting fees, but it won't turn them down if they are offered.

"We don't ask for them, nor do we demand them," said Barry F. Scher, a spokesman for Giant. "But if a potential supplier, vendor, is making them available, yes we will talk to that person. But it is not a requirement for product," he said.

The main reason for rejecting new products is they are not new, Mr. Scher said.

"There are literally thousands of new products brought to a food retailer every year and a very, very small number make it, because there simply are not many totally new products ever introduced."

"We have to look at things like shelf space, is the product really new, what's the marketing program behind the product, does it have potential to outsell what's already on the shelf," Mr. Scher said.

Yet Valu Food, a Baltimore chain with 18 stores, was able to make an exception about a year ago for Lee's Ice Cream, even though its buyers recommended against it, according to Louis Denrich, president of Valu Food.

"We're very supportive of local business," he said. "It's part of our ethic." And he said it has paid off with Lee's.

"Lee's, in my opinion is an excellent ice cream," Mr. Denrich said. "We are doing well with it."

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