Wednesday, September 20, 2000

Ice cream producer gets lean

Jeremy's trying to halt meltdown

By Jennifer Brown
The Associated Press

        PHILADELPHIA — Jeremy's MicroBatch Ice Creams Inc. has taken some licks.

        Generating the kind of buzz usually reserved for Internet startups, the ice cream manufacturer has been rewarded with blurbs in glossy fashion magazines, a free commercial during the 1999 Super Bowl, and an initial public offering on the Nasdaq Stock Market. But, like many Internet startups, the maker of such flavors as Vanilla Cream Stout and Fuzzy Navel has yet to turn a profit.

[photo] Jeremy Kraus, with his dog Atlas, holds a pint of Jeremy's MicroBatch ice cream.
(Associated Press photo)
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        In recent months, Jeremy's has made some dramatic changes in hopes of turning itself around.

        After reporting $4.1 million in losses over the first half of the year, the company slashed its marketing staff from about 100 to fewer than 10, closed some stores in the West and shuffled its front office, replacing its 24-year-old founder and namesake at the chief executive officer position.

        Jeremy Kraus, now chairman of the company, remains confident that the 3-year-old premium ice cream company, which markets to 18 to 24-year-olds, will turn a profit next year.

        Mr. Kraus founded the company in 1997 as a class assignment while attending the University of Pennsylvania's Wharton School. When he graduated a year later, his ice cream was selling in about 50 stores.

        Then, Mr. Kraus hit an extraordinary string of good luck.

        He was named one of the state's top young entrepreneurs by the Pennsylvania governor's office, and he won an essay contest by Mail Boxes Etc., which landed the company a commercial during the 1999 Super Bowl worth $1.6 million — more than its annual revenues.

        In February, Jeremy's earned $7 million in its initial public offering, and, in March, fashion designer Nicole Miller created a silk tie and scarf using a collage of Jeremy's flavor logos including Vanilla Cream Stout, Triple Espresso, Chocolate Overload, Eve's Sinful Cider and Tiramisu.

        This summer, the ice cream was mentioned in InStyle magazine and The New York Times, after a series of free ice-cream giveaways during the 90-degree days of Philadelphia's Republican National Convention.

        Still, media attention is secondary to profits.

        Shares of Jeremy's fell from a high of $6.75 in February to about $1 a share in August. In recent weeks, shares have crept back up to about $2.

        “... Their income statement looks like an Internet company,” said Mitchell Pinheiro, an analyst at Philadelphia-based Janney Montgomery Scott LLC, citing the company's high marketing budget and net losses.

        The company reported a net loss of $4.1 million on sales of $489,000 in the first six months of this year. That's compared with a loss of $856,900 on sales of $572,400 during the same period last year.

        The company blamed marketing expenses and declining revenue after discontinuing sales out West, which had accounted for 16 percent of 1999 sales. Down from a peak of 3,200 outlets in 21 states, Jeremy's now is available in about 2,000 stores mostly in the Northeast.

        In July, board of trustees member Joe Phillips — a former executive for Champion athletic wear — was appointed president and CEO. Other additions included former Pepsi-Cola executives Joseph Casey as chief operating officer and David A. Broll as a member of the board of directors.

        In addition to sprinkling its management team with experience, The company pared its expensive marketing department from more than 100 full- and part-time workers to fewer than 10.

        Even if Jeremy's survives this bump in the road, Mr. Pinheiro said, a small ice cream company has limited potential.

        “Small companies in the early stages can pick up sales from the dollars that fall between the cracks. But once you get on the radar screen and become a threat, the challenges increase,” Mr. Pinheiro said.

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