Chicago-based Lobster Gram makes waves

I remember when this guy was small potatoes, advertising on Johnny B’s radio showgram (I’m assuming it’s the unnamed radio show mentioned in the article). It’s neat to see how popular this has become because I thought it was a great idea and have ordered a few myself when I lived in the area. ~Susan

http://news.medill.northwestern.edu/chicago/news.aspx?id=70597

Chicago-based Lobster Gram makes waves

by Mallika Rao
Nov 20, 2007

It’s been a good year for Chicago-based Lobster Gram Inc., a company nourished in an Arlington Heights garage and which now bills itself as the country’s leading live lobster mail-order service. Its inclusion in this month’s issue of Every Day with Rachel Ray magazine comes after gaining a spot earlier this year on Oprah Winfrey’s influential “O-list” of the talk diva’s “favorite things.”

“She received one as a gift for Christmas and by March she decided to put it in her magazine,” explained Lobster Gram founder Dan “the Lobster Man” Zawacki. Winfrey’s famed golden touch didn’t fail, he says. “We sold like 500 packages that week.”

Zawacki, who counts Macy Gray, Sharon Stone and Gene Hackman among Lobster Gram’s other famous clientele, says the company took its time getting to this “unbelievable” level of success.

Lobster Gram’s revenue in the past year rose more than 50 percent, nearly double what he expected, to $12 million in the past year from $7.8 million. Zawacki attributes the jump to increased radio and TV advertising.

“The first three years were very difficult,” he said. Indeed the story of his transformation – from an unemployed entrepreneur living in his parents’ Arlington Heights house to the owner of a boutique company able to inspire big-name customers and hopeful competitors alike – shifts from despair to success with the ease of a Horatio Alger novel.

“I had to move back home because I didn’t have any money,” said Zawacki. Formerly a successful computer salesman at Honeywell in Peoria, he was fired after the “big boss” heard him plugging his part-time lobster business on a popular Chicago morning radio show.

The idea to use mid-continent Chicago as a base from which to sell an ocean product was in fact inspired by Zawacki’s work as a salesman. “My clients were tired of getting liquor and they were tired of getting fruit baskets,” he said. “So I got a bunch of lobsters and put them in baskets in the trunk of my car, added a stick of butter and lemon and, you know, happy holidays!”

When a client called asking if he could turn the idea into a business himself, Zawacki knew he had to act quickly. “I went home and started writing a business plan.”

Though he never intended the quirky side business to act as his sole source of revenue, when he lost his day job, he was left with little choice.

“It wasn’t really that easy, but like with any business you just have to do it and not quit. So many people I know who start a company, they quit too early.”

But Zawacki didn’t. With little money to promote his nascent company, he bought radio advertising by “trading gift certificates for air time.”

Extensive airplay was necessary, he says, because the concept of ordering live lobsters through the mail was so novel. “I had to spend most of my time convincing people that you could even do this.”

Those early years of soliciting advertisers paid off, says Zawacki’s brother-in-law and Lobster Gram board member Jim Lillig. “He was one of Glen Beck’s first advertisers,” recalls Lillig. “When Beck got his CNN show, that was huge. But Dan still got to keep the same advertising rates.”

The company has increased its profits each year, due largely to Zawacki’s knack for advertising. “Dan has always been gifted at getting his company out there,” declared Lillig, an Internet marketing guru brought on last year to manage Lobster Gram’s online advertising.

“There was a time there when the Internet made it easier for competition,” said Zawacki. “Then in the last couple years there are so many competitors for anything – pens, steak, fruit – that now consumers are going, okay, who do I trust?” That means endorsements from household names like Rachel Ray and Oprah Winfrey now trump online ubiquity, he says.

The word spreads naturally, Lillig says, largely because Lobster Gram is a gift-based operation. “It’s viral. One person sends it to another and that person goes, ‘What a great gift! I’ll send it to somebody.’” Eighty percent of the company’s sales come from gifting, Lillig said, a system of “buyers turned evangelists.”

At North Shore Community Bank in Wilmette, every customer who opened a home equity loan last December received a free Lobster Gram certificate. “It was one of the more successful promotions we had,” said President Cathy Pratt, who was already versed in sending the unusual gifts to her family members before she initiated the loan promotion. “We were doing it around the holidays and people thought it was a unique gift.”

The bank is considering using similar Lobster Gram promotions in the coming year, she said.

But despite its increasing popularity, Lillig says a company like Lobster Gram faces more obstacles toward high profitability than other luxury gift services like Omaha Steaks International Inc. and The HoneyBaked Ham Co., who get to “kill the pig before they send it.” At 99 percent, Lobster Gram’s success rate for live lobster delivery is no small accomplishment, Lillig said, one he attributes to the company's attention to detail. “You try sending a live lobster and have it arrive live. It’s not easy.”

And lobster is a far riskier inventory than cows or pigs.

“Lobster isn’t a crop,” Lillig explained. “You can’t forecast your prices. HoneyBaked Hams can look out back and see how many pigs they’ve got so they know their prices. Unfortunately for Lobster Gram, they publish a catalog in which the price has to stay constant.”

Harvested from unseen depths, lobster crops are “as predictable as nature will allow,” said Dane Somers, executive director at the Maine Lobster Promotion Council in Augusta, Maine. “Fishing is in a lot of cases quite seasonal. You can generally say that October and November will be high harvest months and January through February low.” But, he says, the potential for sudden shifts in the crop is enough that any “prudent” lobster-reliant business should protect itself with padded prices. “What to some people is just a normal fluctuation,” he said, could be “a disaster” for a company like Lobster Gram.