Minnetonka, Minn. — Having your cake and eating ice cream too just isn’t possible for the more than 40 million Americans who are lactose-intolerant.

The answer to their ice-cream cravings? It’s “OatsCreme,” says Steve Frances, CEO of American Oats, Inc. The company makes a patented, smoothly whipped frozen treat with only a tiny hint of oat — yet oats is the only ingredient besides water and all-natural flavorings and stabilizers. Long a soft-serve item, the hard-pack version of OatsCreme is now available across the country.

“We don’t add any sugars; we convert the starch in oats to glucose and we’re able to maximize the sweetness,” says Frances, adding that OatsCreme flavors — vanilla, strawberry and chocolate — “have a nice creamy texture.”

The sugar-free label is a big asset, Frances says. Diabetics like it, but “they should check with their doctor because it is a glucose, although it shouldn’t spike insulin levels like refined sugars.”

Still, OatsCreme’s main selling point “has always been dairy-free; that category is huge.”

Coming up oats

Although OatsCreme entered the market in 1996, an improved, sweeter product was introduced in 2001. “We figured out a way to reduce the oat taste but still maintain high fiber,” Frances says.

OatsCreme has one gram of soluble fiber per half-cup serving. (An FDA-approved claim says three grams of soluble fiber a day can lower cholesterol and reduce the risk of heart disease.) And OatsCreme is priced competitively with premium ice creams: $2.49 to $2.89 per pint.

For the growing ethnic market, especially Asian- and African-Americans who want lactose-free products, American Oats will expand into oat beverages this spring. “Oatrageous,” an oat shake with fruit juice, is being marketed to youth. The nutritional content is “like having a glass of milk, bowl of cereal and glass of orange juice in one serving.” The smoothie-style beverage is packaged in 16-ounce containers made to “grab and go,” Frances says.

American Oats is also introducing an oat milk with calcium and vitamins A and D. Low in fat, it still has two grams of fiber and tastes mild and pleasant “like the milk left over in a bowl of Cheerios.” Packaged in quart containers, the oat beverage can substitute for milk in all recipes, including baked goods.

The oat milk’s retail price hasn’t been set yet, but “it will be very competitive,” Frances says. “Our position is to be in the mid-range, affordable. We work hard to lower the cost of manufacturing so eating and drinking calcium doesn’t have to cost a lot of money.”

A bite of oat history

American Oats, Inc. was founded in 1989 by Buck MacDonald, who left a career in business, law and banking to open specialty shops and a restaurant.

In 1994, MacDonald teamed up with Don Maxwell, a former General Mills food technologist who had worked on products like Cheerios. The two realized the versatility and composition of oats were ideal for frozen soft-serve. They patented OatsCreme and began producing a liquid mix for soft-serve machines at a Minnetonka facility in 1996.

AURI stepped in with product development, manufacturing and distributing samples of OatsCreme at the State Fair. “AURI is probably the reason (American Oats) got as far as it did, because of the support they gave this company when it was just getting started,” Frances says. “They got it to the point where people became interested in investing: there was a product, market, track record. People became interested in seeing us grow.”

Frances, a former International Dairy Queen executive, joined American Oats two years ago. Maxwell and MacDonald retired.

Hard-pack sells

Although experienced in soft-serve, Frances changed the company’s focus to hard-pack sales. “I understand the business and there are a lot of problems dealing with soft-serve — one, of course, is the machine.” Grocers can’t give the same attention to soft-serve that ice-cream stores do, where “the maintenance and cleanliness of the machine is their livelihood.”

In August 2001, the company test-marketed hard-pack OatsCreme in 48 Twin Cities groceries such as Lunds, Byerly’s, Jerry’s and natural food stores. By May 2002, when the test was done, “we realized we had a very good product” with a loyal customer following, Frances says. The company will continue to make soft-serve mix, “but it will be a secondary focus.”

Frances also moved the company away from production to just marketing and distribution. “We didn’t have any business being in the actual manufacturing — it’s too expensive. We use the facilities of manufacturers who are not quite up to capacity. We get the benefit of their expertise at a lower cost. We don’t have to buy equipment and maintain a facility.”

Last May, the company started marketing through Blooming Prairie, a natural food distributor that covers 11 Midwestern states. In July, OatsCreme was picked up by Tree of Life Southeast, a major natural foods distributor in Georgia, the Carolinas, Tennessee and Florida. American Oats products are now in 220 stores.

“We’ll add more states — we’re moving west this summer. But we’re a small company and we want to first make sure we can service all our stores and that the consumer gets the highest quality products.”

A loyal following

American Oats’ next step is to move to a 100-percent organic product, but organic grain is difficult to find. “If you know any farmers out there growing organic oats, we would love to get them.”

OatsCreme has a loyal following and most sales are by word of mouth, Frances says: “We do little marketing.”

“It is amazing to me … I spent so many years at DQ — very rarely did we get a call from someone saying, ‘Boy I love your ice cream.’ But we get calls every day from people who say, ‘I really love OatsCreme.’ It makes you feel good.”