NOSH writer Carol Ortenberg captured a written article with Neal Gottlieb about how he had to shut Three Twins Ice Cream down after 15 years of being in business and I found the article (which now behind a paywall) very reflective.
So I got Neal on the show to talk about the really crunchy details about the direction of Three Twins Ice Cream. From its beginning in an ice cream shop to raising money, to battling the brutal retail space. We talk about some really tactical stuff, but the ending is something that gives me a lot of hope. Not just for Neal, but for everyone.
This episode is a bonus episode because it doesn’t follow our regular format. There’s no script on this one, just going through the journey and talking to some key points. For those in the food business, I think it’s extremely useful information. Information that might help you in your food business such as financing debt versus equity, manufacturing decisions, and figuring out the retail space. I just wanted to capture Neal’s lessons while it’s still fresh in his head, and he did an amazing job being transparent and honest about his experience with his food business.
Show Notes
NOSH article by Carol Ortenberg
How did you start Three Twins
I was once part of Finance for GAP Clothes
Peace Corps
Grew from a small ice cream shop to international brands
Ice Cream is hugely competitive. Most organic brands come and go Even line extension organic ice cream disappeared
Halo Top Effect – Big competitor took off and took a ton of shelf-space
When we started, we had a small ice cream shop and did everything in house
We built two factories: one in California and one in Wisconsin
The decision between co-packing and manufacturing yourself: Copackers are unreliable. For example, a soy yogurt copacker shut down completely. We only found two organic ice cream companies. Oregon Ice Cream (had a contract to not sell ice cream) and one that already shut down.
So it made more sense to manufacturing yourself
How did you raise money?:
Until the factory, friends and family round
When you have a good product, high growth, and a charismatic founder, it can work out
Should you get investment?: You probably have to.
Our big mistake is that we focused too much on growth
On raising, you can either raise equity or debt, the issue with debt is that it has to pay back first
Convertible Note – most food companies do this so the investors mitigate risk
Before the pandemic, people-focused all on growth
Krave Jerky multiple 6x sale hyped up grocery
Krave sold back to John Sebastiani
The selling dynamic reflected a lot on the natural food sector. It’s easy for a big legacy company to buy out the competition even if the company isn’t doing well internally
Use the money to either decrease overhead or increase margins
What were the margin killers for Three Twins Ice Cream?: Organic cream is very expensive. At the top, vanilla was over $500 dollars/gallon
Also, grocery discount structures and slotting fees really killed us
Broker Fees
What is your opinion on the retail cold chain?: It’s a necessary evil. UNFI probably makes a razor-thin margin
How can you optimize the retail situation?: Offer something unique (your product) and optimize your margins
On line extensions – How can you tell about cannibalization?: We launched two line connections such as bigger tubs and higher protein. Initially, these SKUs took our shelf-space which lead to less brand facing opportunities
Advice for Food Entrepreneurs: Back up and figure out why your brand is special and that people will spend money on
Find people who have recent food experience in your board of advisors
It’s one thing to have smart people in your team, but you need relevant people
How did you reflect on this event?: It’s actually refreshing to look forward again. I’ve been extremely lucky to have opportunities.
The journey is the reward
You can find Neal here
Also: did you know Neal was in survivor?