0/ The Dippin’ Dots ice cream turnaround was wild:
1988: Founded
2011: Bankrupt
2012: An oil tycoon buys it for $12M
2019: $330M+ in revenue
The kicker? The next decade will be driven by its plant-based meat and cryogenics storage businesses. Not ice cream.
Let's dig in.
1988: Founded
2011: Bankrupt
2012: An oil tycoon buys it for $12M
2019: $330M+ in revenue
The kicker? The next decade will be driven by its plant-based meat and cryogenics storage businesses. Not ice cream.
Let's dig in.
1/ Dippin' Dots was started by Curt Jones, a microbiologist with a background in cryogenics.
Curt started with feed for farm animals, but quickly moved to ice cream. He started the business in 1988 and grew it to 170 retail locations and 10,000+ small customers.
Curt started with feed for farm animals, but quickly moved to ice cream. He started the business in 1988 and grew it to 170 retail locations and 10,000+ small customers.
2/ Dippin' Dots grew successfully to a $40M business by 2007 but got wrecked by the financial crisis.
Customers were no longer willing to pay a premium for "ice cream of the future."
The business was saddled with debt and fell into default when Regions Bank called the loan.
Customers were no longer willing to pay a premium for "ice cream of the future."
The business was saddled with debt and fell into default when Regions Bank called the loan.
3/ The coverage of DD's fall was met with a lot of extreme reactions.
Vanity Fair wrote a long obituary which included this zinger:
"Dots will melt and melt until they eventually rejoin the universe, melting back into stardust that will become a part of each of us, forever."
Vanity Fair wrote a long obituary which included this zinger:
"Dots will melt and melt until they eventually rejoin the universe, melting back into stardust that will become a part of each of us, forever."
4/ The reaction may have felt dramatic, but if you read between the lines it spoke to something foundational:
Operational excellence and customer affinity are not synonymous.
While the business wasn't run well, customers did really like the product.
Enter Scott Fischer.
Operational excellence and customer affinity are not synonymous.
While the business wasn't run well, customers did really like the product.
Enter Scott Fischer.
5/ Fischer was a successful oil tycoon from Oklahoma that had a core philosophy in evaluating businesses:
“I would rather buy a business at a good price that has a lot of room for improvement than buy a business at a prime price that is operating the best it can.”
“I would rather buy a business at a good price that has a lot of room for improvement than buy a business at a prime price that is operating the best it can.”
6/ And that he did.
DD went through a 363 auction. This was critical. 363s facilitate a Chapter 11 bankruptcy.
Chapter 11s allow you to pick up select pieces of the business.
Fischer: "I was able to pick the diamonds from the rough free and clear of any liabilities.”
DD went through a 363 auction. This was critical. 363s facilitate a Chapter 11 bankruptcy.
Chapter 11s allow you to pick up select pieces of the business.
Fischer: "I was able to pick the diamonds from the rough free and clear of any liabilities.”
7/ Fischer did 3 things to turn the business around:
1. Adapted to the customer and met them where they were
2. Expanded the product portfolio beyond ice cream via acquisition
3. Unbundled the cryogenic technology from in house product production and licensed it
1. Adapted to the customer and met them where they were
2. Expanded the product portfolio beyond ice cream via acquisition
3. Unbundled the cryogenic technology from in house product production and licensed it
8/ Customer Adaptation
DD's core business was theme parks. When Fischer looked close he saw a big gap.
If he shifted to grocery stores, he could create leverage for the top and bottom line.
He'd reach 10x customers while reducing capex.
The core business exploded.
DD's core business was theme parks. When Fischer looked close he saw a big gap.
If he shifted to grocery stores, he could create leverage for the top and bottom line.
He'd reach 10x customers while reducing capex.
The core business exploded.
9/ Portfolio Expansion
Fischer bought Doc Popcorn to pair sweet & salty and capture⬆️wallet share.
1. Franchisees loved it - they had 2 revenue streams
2. Customers loved it - they had more selection
3. DD loved it - they could leverage a well run, complementary product
Fischer bought Doc Popcorn to pair sweet & salty and capture⬆️wallet share.
1. Franchisees loved it - they had 2 revenue streams
2. Customers loved it - they had more selection
3. DD loved it - they could leverage a well run, complementary product
10/ Licensed Technology
Fischer formed DD Cryogenics to license DD's cryogenic technology outside of the ice-cream market.
He learned through the acquisition how much IP DD had.
He's said before, he didn't know what to do with it, but knew he had to do something with it.
Fischer formed DD Cryogenics to license DD's cryogenic technology outside of the ice-cream market.
He learned through the acquisition how much IP DD had.
He's said before, he didn't know what to do with it, but knew he had to do something with it.
11/ Pharma companies used DD's tech to cryogenically freeze drug ingredients.
With that use case in hand, Fischer marketed it.
Plant-based meat (Beyond Foods, Impossible Burger) came on board to cryogenically freeze oils / create synthetic fats for plant-based meat.
With that use case in hand, Fischer marketed it.
Plant-based meat (Beyond Foods, Impossible Burger) came on board to cryogenically freeze oils / create synthetic fats for plant-based meat.
12/ Fischer got the operation running just at the right time.
COVID was devastating for DD ice cream. Ice cream revenue dropped 85% YoY BUT on the cryogenic side it grew 1200% (!!)
COVID was devastating for DD ice cream. Ice cream revenue dropped 85% YoY BUT on the cryogenic side it grew 1200% (!!)
13/ Diversification will be core to DD going forward.
Fischer foresees plant-based meat revenue passing ice cream by 2021E.
That said, ice cream will always be strategic:
"Ice cream gives us brand equity. The value of our brand gives us recognition with the market."
Fischer foresees plant-based meat revenue passing ice cream by 2021E.
That said, ice cream will always be strategic:
"Ice cream gives us brand equity. The value of our brand gives us recognition with the market."
14/ So what are the lessons here?
1. Debt is tough - proceed with caution
2. Everything has a price
3. Go to your customers
4. Capture the whole customer relationship
5. Sometimes you're sitting on a 💎right under your nose.
6. Brand matters.
1. Debt is tough - proceed with caution
2. Everything has a price
3. Go to your customers
4. Capture the whole customer relationship
5. Sometimes you're sitting on a 💎right under your nose.
6. Brand matters.
15/ In 10 years, DD may be one of the most important companies in the frozen food space. But not for the reasons we would have previously thought.
Thankfully the 2011 WSJ headline about DD's meltdown didn't come true.
As Fischer likes to say: "DD is still connecting the dots"
Thankfully the 2011 WSJ headline about DD's meltdown didn't come true.
As Fischer likes to say: "DD is still connecting the dots"
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