Welcome to In the Trenches. It’s great to have thousands of you here. My goal with this newsletter is to be all signal and no noise. To that end, make sure you let me know each week how you liked the content. I’ll keep incorporating the feedback into future posts.

Periodically - I'll breakdown transformational business stories that I think every Founder, Executive and Operator should learn from. A few weeks ago I did Domino's and a bunch of you responded it was interesting / you wanted more. Keep sending me your feedback on what types of posts you like.

This week I want to talk about the turnaround of an ice cream brand we're all familiar with: Dippin' Dots.

The company was founded in 1988, went bankrupt in 2011 and was bought by an oil tycoon for $12M in 2012. Fast forward a decade later and Dippin' Dots passed $300M in retail revenue and was acquired by J&J Snack Foods for $200M+. The 20x growth story is filled with a bunch of lessons for Founders today. Let's dig in.

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. 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 "the ice cream of the future." The business was saddled with debt and fell into default when Regions Bank called the loan.

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."

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.

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.” 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.” Fischer did 3 things to turn the business around:

• Customer Adaptation: He adapted to the customer and met them where they were
  • 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.
• Portfolio Expansion: He expanded the product portfolio beyond ice cream via acquisition
  • Fischer bought Doc Popcorn to pair sweet and salty and capture more wallet share. Franchisees loved it - they had 2 revenue streams. Customers loved it - they had more selection. DD loved it - they could leverage a well run, complementary product
• Licensed Technology: Fischer unbundled the cryogenic technology from in house product production and licensed it outside of the ice-cream market.
  • This was really brilliant. 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. 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.
  • 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%!

So what are the lessons here?

• Debt is tough - proceed with caution
• Everything has a price
• Go to your customers
• Capture the whole customer relationship
• Sometimes you're sitting on a 💎right under your nose.
• Brand matters.

Fischer created significant value over the course of a decade by following a simple philosophy: he narrowed the focus, upped the intensity and increased the speed. A simple, but not easy strategy in business.

And for his effort, thankfully the 2011 WSJ headline about DD's meltdown didn't come true. As Fischer likes to say: "DD is still connecting the dots."

Until Friday,

Romeen

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