Increased advertising pays off for Lobster Gram

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 Rachael Ray magazine comes after gaining a spot earlier this year on Oprah Winfrey's influential "O-list" of the talk diva's "favorite things."

Oprah received one as a gift for Christmas and by March she decided to put it in her magazine, Lobster Gram founder Dan Zawacki said. 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 to $12 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 -- 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," Zawacki said. Formerly a successful computer salesman at Honeywell in Peoria, he says he was fired after the company 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 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."

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 word also 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.

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."

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.

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 catches 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.