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McClatchy-Tribune  06/15/2014 9:48 PM ET
St. Paul-based Kemps -- with $800M in sales, 1,265 employees -- turns 100 [Star Tribune (Minneapolis) :: ]

June 15--Kemps' top-selling product, milk, is in a long-term decline. Another big dairy market, ice cream, has seen stagnant sales. And the venerable Kemps brand has been flipped between four corporate owners over the past 15 years, potentially a recipe for failure.

Yet St. Paul-based Kemps has slowly but steadily grown sales, anchored by its lock on the Twin Cities and Milwaukee dairy markets and its expanding national presence in frozen yogurt. The company was a pioneer in frozen yogurt and has a strong track record of innovation, a key to success.

"They are an innovative company in developing new products and really look for opportunities," said Jim Carper, editor of Dairy Foods, a trade publication.

Kemps is celebrating its centennial: It was 1914 when William Kemps co-founded the Lathrop-Kemps ice cream company with a plant in Minneapolis. Today, Kemps does about $800 million in annual sales and has 1,265 employees, including 850 in Minnesota. Its operations include a milk plant in north Minneapolis and an ice cream factory in Rochester.

Kemps CEO Greg Kurr said the company is an "autonomous business" within Dairy Farmers of America, a big Kansas City-based farmers co-op. Dairy Farmers bought Kemps in 2011 from Massachusetts-based HP Hood, which had owned it since 2004.

"Our greatest asset is our brand, and each owner has understood that -- and I'm on my fourth owner," said Kurr, who started at Kemps as a truck driver in 1986 and worked his way up to become CEO last year. His predecessor, Jim Green, had been CEO for 21 years, a steadying influence at Kemps as its ownership changed.

Kemps has thrived in businesses that are for the most part dominated by national and multinational players: Dean Foods in fluid milk, and Nestlé and Unilever in ice cream. Nestlé makes the Dreyer's and Edy's brands; Unilever has Breyers and Ben & Jerry's.

A regional leader

Despite such competition, Kemps has top market share in some major dairy categories in the Twin Cities, including milk, ice cream and frozen ice cream novelties, according to IRI data provided by Kemps. (Chicago-based IRI is a leading market researcher). In Milwaukee, Kemps is No. 1 in ice cream and milk.

"There are still all these kind of old, regional favorites, and I would put Kemps in that same category," Dairy Foods' Carper said.

Kemps' biggest product is milk, including flavored varieties, making up about half of its sales. Ice cream and frozen yogurt account for about 25 percent, while "cultured" products such as sour cream and cottage cheese make up the remaining 25 percent.

U.S. per-capital milk consumption has been falling for decades, dropping 25 percent from 1975 to 2012, according to data from the U.S. Department of Agriculture. The decline has been particularly "acute" over the past decade, Kurr said, as soy milk, coconut milk and other nondairy "milk" products have become more popular.

Meanwhile, the consumption of ice cream and sherbet is "on a slight decline," according to a July 2013 report by market researcher Mintel. As measured in dollars, ice cream and frozen novelty sales were flat from 2008 to 2013.

At Kemps, sales of ice cream novelties -- fudge bars, ice cream sandwiches, etc. -- has been "soft" due to aggressive competition in the category, Kurr said. But he added "we have experienced nice growth in our ice cream business over the past three years."

A key to keeping the ice cream -- and frozen yogurt -- business from going cold is innovation around flavors. Vanilla Bean Caramel Crunch is one of the latest at Kemps. The company's Moose Tracks and Caramel Cow Tracks, neither of which are traditional flavors, are among its top five selling varieties of ice cream, outselling chocolate, a standard.

"For a brand to remain relevant, it starts with innovation," Kurr said.

Greek yogurt, too

Lately, Kemps has tapped into the Greek yogurt craze. It appears to be the first to market with a Greek-style, low-fat cottage cheese. It has also come out with a line of Greek-style snack mousses.

But Kemps' best long-term growth opportunities appear to be in frozen yogurt.

Kemps is the nation's second-largest selling branded frozen yogurt, trailing only Ben & Jerry's, which had a 14.9 percent share for the year ending May 18, according to IRI. Kemps had a 10.53 percent share, followed closely by Iowa-based Wells Enterprises, owner of the Blue Bunny Brand.

IRI data shows that Kemps gained a full percentage point of market share over the past three years.

"Frozen yogurt is our big bet from a national expansion perspective," Kurr said.

According to Mintel, frozen yogurt benefits from a "perfect storm of factors," including yogurt's growing popularity generally and the health halo on yogurt products. Industry wide, frozen yogurt sales from 2008 to 2013 grew 91 percent, the Mintel report said.

Dairy Farmers of America, Kemps' latest owner, has put up money to help expand the company's frozen yogurt business, as well as to invest in Kemps' plants generally, Kurr said.

With Dairy Farmers, Kemps has also gotten more resources to invest in acquisitions like its 2012 buyout of the Cass-Clay creamery in Fargo.

"The industry is going to continue to contract," Kurr said. "There will be consolidation and we will be an acquirer."

Mike Hughlett -- 612-673-7003

 

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