He Launched a Tiny Ice Cream Factory, Now It’s a National Brand ft. Alec Jaffe

0:00What compelled you to learn how to make ice cream when you were in elementary school? I love ice cream. My freezer was always full of ice cream. And so I was like, well, I'm going to teach myself how to make ice cream. Did you have any idea that you thought this was going to work as well as it did in terms of the product selling? We launched it in stores April 7th. And that day, people DMing us being like, it's not in Whole Foods yet. I went to three different stores. Like, I can't find it. Where is it? Yeah, it's just lifted the brand. It's lifted our pint sales as well. So it hasn't really cannibalized.

0:28It's been a really pretty amazing thing to see.

0:37Hey, I'm Mike Elb, and this is Consumer VC, where we break down what it takes to invest in and build scalable consumer brands. If you're enjoying the show, hit subscribe on your favorite platform and sign up to our newsletter at theconsumervc.com. At theconsumervc.com, you'll get a weekly roundup of latest fundraisers, product launches around consumer, and new episodes of this podcast. Know that when you subscribe, you're helping us make more of this content. Our guest today is Alex Jha, who is the founder and CEO of Alex's Ice Cream. How Alex's Ice Cream is different from conventional ice cream is that it uses sustainable regenerative dairy and A2 protein dairy that's also gluten-free, which is better for digestion and low inflammation.

1:16Recently, they raised an$11 million Series A led by Imaginary Ventures. In this episode, we discuss why Alex started experimenting with ice cream in the first place and the problem that he was solving that he thinks hasn't been solved at Ice Cream, why they decided to become vertically integrated, also why they took on venture money, and how CultureCup, their product expansion, exploded the business, which is a really, really interesting and cool story. But before we get to Alex, before we get into it, I want to share more information about our sponsor, Glimpse. This episode is brought to you by Glimpse, Glimpse is an AI-powered, end-to-end deduction advantage of this service that's focused on recovery revenue from Keiki, UNFI, Amazon, and Target for consumer brands.

1:55They help by the centralized deductions with backups. They fully handle smoothing on your behalf, the brand's behalf. And they streamline the accounting process. They work with 100 plus brands that include Cure Hydration, Little Bucks, and Sauce. If you have a brand and would like to learn more about how they can help you fight deductions in retail, go to tryglimpse.com. That is T-R-Y-G-L-I-M-P-S-E dot com. Without further ado, here is Alex. Alec, thank you so much for joining me here today. Happy Friday. Yeah, thanks for having me. Happy Friday. First of all, I love your ice cream. It's absolutely delicious.

2:35Tell me what compelled you to learn how to make ice cream when you were in elementary school? So I love ice cream like any kid. And, you know, I it's just something that I can remember when, you know, coming back from basketball games as a kid, we'd stop at Baskin Robbins on the way home. My freezer was always full of ice cream at home. It just was kind of this thing that we would always have. And so I was like, well, I'm going to teach myself how to make ice cream and never had any idea it would lead to where I'm at today. Where did you well, when did you think about then ice cream in regarding to actually create an ice cream business?

3:19So I was working in tech at a startup and I was a sales and marketing employee at this small startup. And the company was shutting down. I was like, okay, well, what do I want to do? What do I want to do for my career, my life? And started playing around with some different ideas. I just kind of had this itch to create something and started experimenting with a bunch of different products. one of them being ice cream, of course. And, um, I recognize that there just wasn't this, there wasn't a prop, an ice cream in the market that tasted amazing. And it was made with really great high quality ingredients that I could feel good about and were better for me.

4:03And that kind of just like, I was like, Oh, this is a really interesting potential opportunity. Um, so just started experimenting, uh, with recipes at home, uh, making product for friends and family um and spent a long time doing that and then eventually people liked the product enough was like okay maybe this would be a uh interesting business idea and i started going from there can you walk me through in terms of how you thought about your definition in terms of like high quality ingredients how do you thought about how you thought about even like the supply chain side of things from the get-go and elaborate as well in terms of what other companies you felt like they were not doing.

4:46So I was looking for an ice cream that like I noticed that there was ice creams that either tasted great, but I didn't feel great after eating them or these low calorie ice creams that really were frozen dessert kind of food science experiments that didn't taste that great to me. And I was like, why can't we combine the ethos or mission of what these products are trying to do into one thing? And so I started with just like, how can we make a really clean, simple, delicious, organic ice cream pie? And using really high quality, we started with local pasture-raised family farms. And then, you know, use really simple ingredients and kind of build it from there.

5:34And then we eventually started transitioning into like A2 dairy, getting involved with regenerative farming, and just continuing to further this mission of delicious ice cream that tastes better and is better for you and the planet. when you keep you walk us through in terms of what the difference is between in your mind or frozen dessert verse ice cream so it's literally it's a standard of identity um created by the fda and it has to do with how much you know butter fat is in the in the ice cream how many what they call solids um you know how much air can you whip into the product um there's all sorts of things that, uh, that go into it.

6:20Um, and so frozen dessert, um, is, um, frozen dessert is like, you know, less than the, you know, it's less fat, it's more air. Um, it's more, less solids typically. And so it's, it's just like literally a different product, although it can resemble ice screen. How, how did you go about, I guess, building these relationships with, um, with farmers and then, um, for local pasture raised, um, uh, family farms? Yeah. I mean, it's just, it's a lot of just kind of time and effort of reaching out, building relationships and, um, networking within the dairy world and, um, you know, going out to the different suppliers, different distributors.

7:12And, um, I would say we're very involved with our supply chain, much more so than typically you would be for a brand at our size. Um, and especially with dairy, dairy in itself is a very unique supply chain that involves you, requires you to be very involved with, um, the farm level side of things. Can you talk a little bit about, about as well, how you thought about experimenting with um in terms of when you felt like you actually nailed it and got it right when it came to taste and also as well you know feeling better um afterwards and a dumb question but but is it because of the higher quality ingredients that you feel better afterwards um because because of is there is there other is there other in terms of different quantities that you're that you're kind of thinking about as well when it comes to different ingredient choices.

8:09How do you think about nailing that part of it too? I think that the A2 dairy we use is a big component of that. It's been pretty incredible how so many customers reach out to us and say that they can finally enjoy ice cream again because of the A2 dairy that we use. And they don't have digestion issues and they don't have any discomfort after eating our ice cream. Um, so I would give, give a lot of credit to that. Um, and then I think just having, you know, a clean, simple ingredient list is, is also helpful. How, so what was, what was the approach first when it came to distribution? And when did you know that you had, when you had the right product that you were, that you felt like had a, had a shot of doing, had a shot of doing well?

9:02So we started locally. We started in the... We're based in the Bay Area around San Francisco. And we have actually our own manufacturing facility in a town called Petaluma, California. And so we started really just selling stores locally around the factory. I mean, I would drop off product and put it on the shelf myself. Our first retailer was Good Earth Natural Foods in Mill Valley. And I would stop by and drop off product there. And then I think it was really just looking at consumer feedback and hearing people saying how much they love the product, seeing the sales going, and then also feeling like we had something really unique and different.

9:47Was something that just made me feel like, okay, let's just keep expanding this. And also, we found a shutdown ice cream factory. And so we moved in there. And it's like, well, we have this factory as well. let's try to build capacity and um you know get get volume going through the factory um and then i think this year when we came out with our new culture cup line that has really been a huge spark and like okay now that we've we've grown a lot within the natural grocery channel working with retailers like whole foods um to build that initial base and that initial interest in the product and now that we have something that seems like it's really working how do we start expanding that into wider channels beyond the natural channel.

10:31How so love to love to get into a bit more to how you think about crossing that chasm, because I've talked to investors and they say, you know, the sweet spot is you found you find a brand that's kind of like doing really well and natural, but are able to to generate enough appeal price point and everything to actually be able to kind of cross that chasm and actually really excel into big box into mass. how did how do you think about just channel diversification and as you mentioned you started with natural but how how do you think about like doing that leap or just overall like different sales channels yeah i would say um it's about i think about a lot of like okay who is who is shopping in the store and what are the things that they actually care about um and you have to have a product that appeals to...

11:24Let's just use Whole Foods as a representative of the natural channel. How do you have something that appeals to the Whole Foods shopper, but then also appeals to Kroger, Target, Walmart, Costco, all those different types of shoppers as well. And so I think it's about finding something that delivers on some unique attributes to the category that have a widespread enough appeal that you can feel confident about jumping over to those channels. And then also ultimately just delivering on taste. Like we're making ice cream. It has to taste good. And if you have something that tastes good, and it also stands out as unique, then I think you really set yourself up for being able to jump over into those channels.

12:07But it is super difficult. It's not like you just put the product in and then all of a sudden it starts working in those other channels. You need to make sure you have the right pricing, the right promo plans you know the right marketing support uh there's a lot there well i just if you can dig into about pricing as well because i um that would be that that'd be just how you think about it um from a you know um where you maybe have natural channel which you might have a bit more a customer base that has a bit more disposable income versus mass which or or conventional that um where they might not how do you think about balancing and i know that it's there's oh you can get a lot more granular obviously but just as that as a as a kind of a 40 000 foot um uh foot um a step from it how do you think about from it from from that perspective i would say that you're it's all like within the context of your category that you're in and so all right we're going to the ice cream set and let's say we're going into a conventional retailer it's our first time going into conventional retailer i'm often looking at what is what is the the ceiling how much are how much are people trained to or experienced with paying for ice cream at the high end?

13:36And then who are we really competing against? And if we're going to be at a premium, how much of a premium are we going to be? And is that an approachable premium? You don't want to be double the price of your closest competition. But if you are offering something that is a more premium product than what's out there, then you should be able to get that premium. But it just has to be within reason or to get people to be willing to trade up for what you're selling. And then I think it's about having attributes within the product, things that are making your product unique and different. Do people understand the value of that?

14:22You can have a super unique, different thing about your product that makes it really cool in your eyes but if the people shopping at a kroger don't even know what that is then they're like well why am i paying two dollars more for this thing i don't even know what this whatever differentiating factor about your product is so it that's also part of the challenge is being different but familiar at the same time do you do you think about it as well as in front of your category is there from conventional uh ice cream per se like like how many like how many how much willing how much premium um percentages would would people be willing to actually pay for regarding your product yeah i mean i think like it's it's very dependent on on the retailer and the environment but um i feel like you know up to like 25 is probably the high end um maybe 30 depends it it all depends on like well what do you have and what do you this episode is brought to you by glimpse glimpse is an ai powered end-to-end deductions management service that's focused on recovering revenue from KEHI, UNFI, Amazon, and Target for consumer brands.

15:45They centralize deductions with backups. They fully handle disputing on your behalf, the brand's behalf, and streamline the accounting process. For more information, check out tryglimpse.com and let them know that Mike sent you. How engaged is that shopper who's looking for that thing? And if you have something that, you know, maybe they will pay 50 % more if they like desperately need this, want this thing. And you're the only one who who's offering it or you've put it together in a really compelling way. But yeah, I mean, I think there, there's a lot of category dynamics at play that make it hard to just say like, here's a sink.

16:20Here's like the percentage that you can go premium. No, that's, that's really helpful. Thank you. I know you just raised, um, a big round, a series a, which congratulations. That's so exciting and incredible, especially in today's market. Just really impressive and just awesome. Talk a little bit about those early stages of raising capital when you were much smaller. How were you able to do it? When was it the right time in order to raise that capital as well? And what do you think about your journey? we had a unique start in that we found we we were having some trouble finding a co-packer to work with us because we had some unique requirements around our dairy supply and we're a small volume because we're a brand new brand and we ended up finding this shutdown factory uh they're going out of business it's a 4 000 square foot factory so it's it's tiny And we were just leasing the space, but we bought all the equipment that was installed.

17:26So it wasn't a huge investment, but we needed to make that investment. So that required us raising money from the beginning. And we really took the approach of just scrapping together angel rounds as we tried to prove out the concept. and then when we really started to see some real traction on a national basis that's when we started to go out to more like the venture funds and and raise money there and then honestly it was a slog it was so hard really really difficult for a variety of reasons one investors are scared of ice cream they're scared of frozen they don't like the margins compared to supplements or beverage or whatever.

18:15And I think when we launched Culture Cup, that really put us in a new place in investors' eyes of seeing this really interesting product that was very differentiated. And that really helped things. But I think it's about... And I'm glad... I'm saying it now. In a way, I'm glad that it went that way because I think if we would have signed up to go with a VC too early, there's all the growth expectations that come with that. And that's fine. That's the game that you're signing up to play if you go that route. And the business wasn't ready for that. And the product and the proposition wasn't ready for that at that time.

19:01um so yeah i think it was like for us we needed to find our footing more um until we were ready for for that jump up so so so in in retrospect it was better that you aren't that you weren't able to maybe have vc on on before because um because because well because you didn't have culture cup yet right yeah i mean i think it was like not like it was more about what culture cup represented i guess of like finding this really breakout product that was going viral on social kind of from day one selling out at whole foods from day one and just having this product that then warranted the vc kind of like okay you're signing up for for this like it's it's cool to get all that money but also like here's what you're signing up for um and so being you know and like that's just what it is like no judging on it good or bad it's just what the dynamics of that that route are how um yeah sorry i was gonna say it's just like it was harder it was harder not having that money like there i definitely would have loved to have all that money back then but the business wasn't ready for it so i think it's it's all like when you when you get to a certain point and then you go do that that thing but uh versus like trying to skip steps how how did you come up the how did you come up with the idea of culture cup um

20:39we came up with the idea so we were asked to create a novelty product which ice cream novelties or anything that's not a ice cream, like a pint or tub and culture cup, like kind of technically isn't a novelty. It's a cup. Um, but we packaged it like a novelty. Um, and so it's in sold in a four pack, but like, okay, we have our own factory. Our factory is tiny. We don't have the footprint to install a novelty line to make like a, uh, ice cream bar or a sandwich. So what can we do when we can make these little cups? And then how do we make these little cups? Interesting. Um, and that led to, uh, the brainstorming of just thinking through, well, okay, well, let's add the probiotics in because that, then we already have the A2 dairy or all that, or we already have this like gut friendly dairy.

21:27Let's add the probiotics that really hit on that gut health, uh, aspect of what we're doing. Um, and then we added the chocolate shell to, you know, which added a really fun sensory texture experience. and it's all about just how do we how do we stay aligned to what our brand represents and create something that's super different and unique that we can also make in our own factory and so it's really I think a story of constraints leading to interesting innovation that's awesome that's awesome and did you have any idea that you thought this is going to work as well as it did in terms of the product selling uh it's gone i i had high hopes for the product i would say it's gone better than i expected so it's it's been something that like i was like okay i think this will be really interesting really unique it hits on some some things that are very wide you know wide appealing attributes and trends like with probiotics, lower calories, lower sugar, tastes surprisingly great for a quote unquote healthy ice cream.

22:45And I was like, okay, let's, you know, let's put it out there. Let's see how it goes. And I feel like as a brand, we had kind of quietly been building this, this very loyal following, but it wasn't like we had blown up on social media or gone viral or anything like that and so i was you know cautiously optimistic and we our social media manager put out a post on her so on her personal handle on tiktok like a couple weeks before the launch just as like kind of a thing that she did just you know having fun on tiktok and this is like a basic carousel still images like the lowest production it's just like lo-fi like still images carousel text on the image and it was really nicely done but you know not anything like crazy and it just started it got more traction than anything we have ever posted ever by far um like hundreds of thousands of views over a thousand comments like very such a positive uh sentiment around like what people were saying in the comment section, which you never get that on the internet.

23:56And yeah, it just was from... We launched it in stores April 7th. And that day, people DMing us being like, it's not in Whole Foods yet. I went to 3 different stores. I can't find it. Where is it? And I'm like, well, it's day one of the reset. Just give us a couple of weeks. And it just has been going crazy ever since then. Yeah. It's just lifted the brand. It's lifted our pint sales as well. So it hasn't really cannibalized. It's been, it's been a really, um, pretty amazing thing to see. How do you, how do you think about quantities overall? Because you, you are vertically integrated in that you have your own, have your own factory.

24:35How do you, um, which obviously when you have kind of two different product sets, I'd imagine it's challenging. Um, how do you, or you can tell me that it's not challenging, but, um, but how, How do you think about that in terms of expansion with, with, with culture cup selling and performing really well? Not that the pints aren't, um, the pints obviously are this, are the original, the staple product from the, from the beginning. But how do you think about that, that, that kind of balancing act? Yeah, it's really hard. Um, I mean, we've got two different product lines. we have a one tiny little factory um we only have one production line so we're changing things over trying to make things work and then it's just you know it's also a lot of just inventory management you got a lot of skews um and then you're you're marketing both products so it's created some just some challenges of like okay how do we evolve as more of this like platform ice cream brand versus like just selling our pints and like the the pints aren't low calorie We're not marketed.

25:44They're not like they're really delicious, indulgent pints made with gut friendly A2 dairy and like cleaner ingredients. And that's a little bit of a different message than Culture Cup. And so how do we how do we thread that needle of showing up consistently as a brand? um but i think ultimately it's it's all kind of worked and flowed together because there are these core links between the two products with clean ingredients a2 dairy gut healthy and just taste and delicious product experiences how how also i know that you kind of talked a little bit about the story in terms of why you vertically integrated at least on the manufacturing side that there was this, there was this factory, old factory.

26:32And it's like, well, we, we have, it seems like a really good deal here in place at the same time, managing a factory and managing your brand to, you know, very different to, you know, two different businesses. Right. And in, in, in a lot of ways, what, what has been your approach when it comes to when it comes to managing the factory and and also even how you think about with product expansion now you're you know you're you're national in so many different retailers about um like about capacity constraints or or what have you yeah uh that's something that we really came up against this summer of uh we got too much demand and we can't which is a great problem which is a great problem to have.

27:23Yeah. Yes. Yeah. It's, it's, uh, I've been, I've heard that line a lot this year. It's a great problem to have. Um, and it is, it really is. And so it's still a problem, but it's still a problem. And so how do we solve it? And so we've done some work on expanding, uh, production capacity and, uh, making sure that we're able to fill our orders. Um, and, and then on the business, like man, it really is like managing two different businesses. You're sort of your own co-packer. So you're dealing with production. You're dealing with... But when the machine breaks down, it's on you. Your maintenance person needs to go and be able to fix it.

28:04I've learned so much on the operational side of things because it forces you to... When you're running that factory, your ops needs to be dialed in. You can't be loose there. And so I think it's really helped us build a strong culture of being really on top of the details with how we operate, how we look at everything from production planning to food safety. And then, yeah, I think in the early days, especially when you're resource constrained, it puts a challenge on marketing. Like we're spending a lot of dollars at the factory that other brands just get to throw directly into marketing. Um, and so I'm really excited with the funding that we just raised that now we're going to be able to start to do a little more on the marketing front, put some more budget there.

28:54Um, and yeah, it's, but it is a challenge that anyone who does self manufacturing will tell you, you have to really get good at balancing those two things. managing working capital and that and that side of the business do you think it becomes easier or harder when you self-manufacture

29:23in a way it depends it depends i think almost harder though in some ways in some ways it's easier because you you can do smaller production runs you can kind of you know have a lot more control over when you run production like you don't have a command saying well you need to hit your moq and so we're gonna have to schedule you for five more days or whatever it might be um at the same time you're kind of always running production and sometimes that agility can can hurt you where you keep too many raw materials on hand because you're like well we want to be able to always be making something and we want to have throughput in the factory.

30:08Whereas with a co-man, you kind of know, all right, we've got our however many production days coming up next month, order all the materials to land right before production starts. You've got many of your finished good inventory that you're then selling through. And so it creates a lot more simplicity, I would say, when you're co-packing in that your working capital is really just like materials going in, you're running production. This episode is brought to you by Glimpse. Glimpse is an AI-powered, end-to-end deductions management service that's focused on recovering revenue from KEHI, UNFI, Amazon, and Target for consumer brands.

30:45They centralize deductions with backups. They fully handle disputing on your behalf, the brand's behalf, and streamline the accounting process. For more information, check out tryglimpse.com and let them know that Mike sent you. Got the finished goods. It's like very straightforward. You don't have to do with any accounting around the manufacturing costs and all of that. So in some ways, that simplicity really helps. But then in other ways, you lose control. So with anything, there's the trade-offs of it. No, yeah, that makes sense. I'd imagine it's also when you obviously have your own plant, then you also have as well.

31:25Then, of course, it's salaries as well that you're managing too, right? And it's a lot more kind of intensive there from that standpoint, instead of paying one set sum out to a co-man. So that also can be probably a lot more challenging because you're obviously dealing and working with those people day to day. Yeah, and especially as you're scaling the brand. And so it can force you as a brand to make certain choices that maybe you wouldn't make if you're co-packing because you need to just fill volume in your factory. and then yeah you have those ongoing costs you have your labor force that you're paying on a daily basis uh you have or you know when they're come and then you have uh repairs maintenance all these things that like something's always breaking at a factory and you need to have people coming in and fixing it you're ordering spare parts all these things that you don't think about or have to deal with when you're just putting a po into a command now as you mentioned you you're working with local pasture-raised family farms as you scale and you're and you're scaling and you're scaling the business how i i'd imagine it's partnering with more farms that um is the answer in terms of in terms of that but how much runway do you have when it comes to on on the actual i would say like wrong ingredient side of things.

32:52Yeah. I mean, dairy is going through a really unique