Graeter's and Games Workshop: The Case for Business Stewardship

The characteristics of capital stewards, from Cincinnati to Nottingham.

Todd Wenning is the founder of KNA Capital Management, LLC, an Ohio-registered investment advisor that manages a concentrated equity strategy and provides other investment-related services.

At the time of publication, Todd, his immediate family, and/or KNA Capital Management, LLC or its clients owned shares of Games Workshop.

Please see important disclaimers.

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Graeter’s Ice Cream has been a staple in Cincinnati for 155 years and the Graeter family’s fourth-generation is managing it today. Its ice cream can now be found coast-to-coast in many Kroger-owned grocery stores.

There was recent news that, rather than sell out to PE and make a killing (but probably ruin the brand), the family put 44% of the company’s stock into an ESOP trust so that the company could be both family and employee owned. If the family ever doesn’t want to run the business, the ESOP has the opportunity to acquire the remaining 56%.

CEO Rich Graeter commented, “I like to recruit and keep A+ employees, and we want them to stay with us until they retire...We want this business to persevere forever, whether we are running it or not.”

That’s proper stewardship. That’s how you build a company that lasts 155 years and beyond.

Back in 2018, Tadas Viskanta at Abnormal Returns polled some bloggers about which private company they’d want to own if it went public. My contribution was Graeter’s. Here’s what I said:

Graeter’s Ice Cream, which is based in my hometown of Cincinnati. This year, Graeter’s turns [148 years old] and is still owned and managed by the Graeter family. Having been a part of the city for generations, they’re ingrained in the local culture and, even in recessionary periods, are a place for families to enjoy a small treat. Graeter’s served “super-premium” ice cream way before that became a thing and for most of its history was a well-kept secret in Cincinnati and among ice cream aficionados. After Oprah put Graeter’s on her “favorite things” list a few years ago, they’ve seen a surge in demand and Graeter’s Ice Cream can now be found nationally in grocery stores. Given the company’s pricing power and dominance in the Cincinnati market, I would be happy to buy some shares for my children and hold them indefinitely.

I stand by those comments and still wish I owned some shares! Lucky employees.

It’s hard to find that type of stewardship mentality in the public markets, but it’s not impossible.

I recently gave a presentation to a group of local entrepreneurs and private equity/venture capital investors on the topic of finding companies with economic moats led by stewards of capital.

Here are some of the characteristics I shared for stewardship:

Source: KNA Capital presentation

Kevin Rountree of Games Workshop exemplifies these stewardship characteristics and I encourage you to read the company’s latest annual report. I reckon you’ll see what I mean fairly quickly.

Our ambitions remain clear: to make the best fantasy miniatures in the world, to engage and inspire our customers, and to sell our products globally at a profit. We intend to do this forever. Our decisions are focused on long-term success, not short-term gains. (my emphasis)

Intriguing. Both CEOs used the term “forever” when framing their ambitions. Most CEOs are worried about next quarter.

Stewardship is such an uncommon attribute that, when you see it, you need to at least learn more about the company.

For more thoughts on stewardship and Games Workshop, please see the following posts:

Too Many Professional Managers, Not Enough Stewards

Flyover Stock: Games Workshop

Have a great weekend.

Stay patient, stay focused.

Todd