Toronto Globe and Mail; 6th Feb 1997

AFTER 40 years of serving up soft ice cream to Canadians, Dairy Queen now wants to be known for its burgers and fries, too.

Dairy Queen Canada Inc. figures it can make more money selling hamburgers and other fast-food fare, which today consume only 40 per cent of its sales. The economics are overwhelming in parts of the country where some of the company's 479 outlets still shut down in the winter because of limited menus.

"We're trying to move ahead," says Gerard Holmes, marketing director for Dairy Queen in Burlington, Ont. "Like any company, you can't live off those baby boomers' memories. You need to ensure that a new generation is enjoying the products and services we offer."

To tempt new customers, Mr. Holmes has fashioned a strategy that tries to shake off the nostalgia for the past and cater to a younger consumer.

The chain is also trying to cook up a more consistent image, with franchised stores being slowly renovated to ensure they boast the same look, products and prices.

For the first time, Dairy Queen is running Canadian-made television commercials using teens in fast-paced, lifestyle-type spots made by BBDO Canada Inc. The chain upped its ad budget by almost 10 per cent to more than $12-million this year, and it is moving away from the old price-and-product ads that showed mountains of soft ice cream.

Those old "land of Dairy Queen" ads were produced south of the border for the chain's Minneapolis-based parent, International Dairy Queen Inc. They weren't broadcast until March, just before warmer weather whetted the appetite for a cold treat.

Dairy Queen Canada also recently stepped up direct mailing to pitch some special deals. And in April, the chain will unveil a new store design that is brighter, more compact and more contemporary.

"I was given a mandate of change," says Mr. Holmes, who came to Dairy Queen 18 months ago from a small marketing consulting firm. "People think some of our stores offer different things when, in fact, they don't. Consumers want to see consistency because they've been weaned on that throughout the years in the fast-food business.

"We've got a long way to go to get to the consistency level that the consumer is demanding."

Industry watchers agree that Dairy Queen is a sleepy operation that needs as much of a jolt as it gives its milk shakes. Yet the brand has a solid reputation to build on.

"It's a very sleepy, old, tired, non-aggressive operation," says food-service consultant Douglas Fisher of FHG International Inc. in Toronto.

"If Dairy Queen can get someone behind them that has the energy to push it forward, it's something that can be pushed. They have a nice product."

He commended the chain for trying to chase the teen market in its latest round of advertising. Other rivals, such as McDonald's, target baby boomers and their children, which is a market with more revenue potential.

But Dairy Queen has an opportunity to fill an opening by attempting to convert more teen-agers to its brand, Mr. Fisher says.

It's not easy to lure teens. They're fickle and swayed easily by trends. Still, Dairy Queen's fare of burgers, hot dogs, grilled chicken sandwiches and frozen treats may work, he says.

Dairy Queen's image problem varies across the country. The biggest challenge is in the key markets of Ontario and Quebec, where the chain is synonymous with ice cream. Some outlets still close in winter because of weak demand for their limited offerings.

Dairy Queen does better in other parts of the country, where it is more rooted in fast food, Mr. Holmes says.

"It's a message we still need to get out there - that we're in both businesses. We're highly competitive in fast food and the soft-serve business."

Both businesses are brutally competitive. But Mr. Fisher, the consultant, says the frozen dessert market - dominated by Dairy Queen - is particularly tough in Canada because of the short season. "No one has done brilliantly."

On the burger side, Dairy Queen trails in fourth spot behind McDonald's, Burger King and A&W, Mr. Holmes says.

Dairy Queen is an international operation with more than 5,500 stores worldwide. It opened its first Canadian outlet in Estevan, Sask., in 1953, and now rings up about $250-million in annual sales from its domestic network. (Dairy Queen also operates 104 Orange Julius outlets.)

The company calls its frozen treats "soft serve" because they're technically not ice cream - they contain only 5 per cent butter fat, compared with at least 10 per cent in real ice cream, Mr. Holmes says.

As for the coming year, the chain is gearing up to open 32 Dairy Queens in Canada and to introduce more offerings - perhaps fish in the basket.

"My mandate was to move the company to a more diversified marketing scheme and bring it up-to-date - to try some different things," Mr. Holmes says.

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