Going GaGa in 1,000 stores
01:00 AM EDT on Friday, September 19, 2008
By Paul Grimaldi
Journal Staff Writer
WARWICK — The turmoil rocking the nation’s financial markets this week and the general economic uncertainty that’s settled over the country this year is testing companies that depend on Americans’ taste for the finer things in life.
Jim King, who five years ago started selling a premium-priced frozen dessert, wonders whether people are willing to pay a high price for what he considers to be a high-quality product.
King likes to pitch his product, which cannot be classified as either sherbet or ice cream, as an “affordable luxury.”
Whether American consumers will continue to buy that pitch, “we’re going to find out in this economy,” King acknowledged.
A former news anchor at WPRI-TV Channel 12, King turned a family recipe into a business after he was laid off in 2001.
“I kind of went through that wandering period where I was waiting for the phone to ring,” said King, 46.
His grandmother, affectionately known as “GaGa” in the King family, used to make her own frozen lemon dessert.
The concoction is a cross between an ice cream and a sherbet.
King dubbed the recipe “SherBetter” and named the business he started in 2003 after his grandmother.
GaGa’s SherBetter products are sold in nearly 1,000 stores, mostly along the East Coast, including Dave’s Marketplace, Shaw’s Supermarkets and Whole Foods Marketplace.
At first, King priced GaGa well below the retail cost of Ben & Jerry’s and Haagen-Dazs, two premium-priced ice creams with international followings. Pints of both high-end competitors cost well over $4.
“If you’re over $4 a pint in this category, that’s a tough place to be,” King said while sitting in his office south of T.F. Green Airport.
The recommended retail price for a pint of GaGa started at $3.69, then went up to $3.99 as ingredient costs rose, he said.
“We took less of a [profit] to get at that price point,” he said.
Last year, steep increases in transportation costs prompted his distributor to raise the prices it charged grocery stores for GaGas again and again, King said. The stores have passed the price increases on to customers, who, King learned, are willing to spend the money on something they like.
After a series of price hikes, a pint now costs $4.69.
“We have not seen any significant erosion” in sales, said the Warwick man. “What that tells me is we have brand-loyal customers.”
Big supermarket chains understand the power of brand loyalty — particularly for a niche product that commands a premium price.
“The mass-market grocery stores are noticing that GaGa is doing well in the specialty stores,” he said. It took him some time to understand how supermarket chains such as Food Lion, which has 1,300 grocery stores, sold GaGas, he said.
King recalled a meeting with a Food Lion district manager in North Carolina in which he asked why the chain carried GaGa at widely scattered stores.
“We’re all over the place,” King recalled telling the manager. “There doesn’t seem to be any rhyme or reason.”
The manager’s response, King said: “You’re in all the ‘affluent’ stores.”
Like other chains, North Carolina-based Food Lion categorizes its store locations by the buying habits and income of the customers who shop in them. Based on its data, Food Lion splits stores into three groups: Affluent, Golden Country and Thrifty, and stocks them accordingly.
Food Lion stocks the frozen dessert at its stores in well-to-do neighborhoods — places where sales data show the chain’s managers that people search out all-natural food products and are willing to spend the money to buy them.
Understanding who is willing to buy a high-end dessert also means understanding that some stores aren’t the right place to sell GaGas.
Recently, King turned down an order request from a large convenience store chain in the mid-Atlantic states — the chain’s own data showed its customers don’t care about all-natural products.
“It took me five years, but I think I’ve turned the corner on understanding where we are in the marketplace,” King said.
The packaging, which features pictures of people making goofy faces, reflects King’s approach to his business endeavor.
“I wanted to have fun with it; it’s a dessert,” he said. “My grandmother was like that — she was a character.”
GaGas will be on sale this weekend at the Farm Aid show set for Saturday at the Comcast Center in Mansfield, Mass. On the same day, King will be pitching the product at a food show in Boston.
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