Halo Top Ice Cream: Justin Woolverton

26:27Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2011 and Justin has just founded a company called Eden Creamery. And he then does what any of us would do. He Googles ice cream factories near me to find places that could make his new product. I literally would call and be like, hi, I have an ice cream idea. I was wondering if I could pay you to use your equipment. If it needs to be on nights or weekends, I'm willing to do that. And I called all 10 of them. I called all 10 of these companies and nine said no. And some of them said no angrily. Like, what are you even doing? And this is actually, this is not an exaggeration.

27:07Literally, I had nine scratched off my list, and the 10th one was a guy in Van Nuys. In the San Fernando Valley. Yep. Yep. And he was oddly interested in it. He was like, yeah, sure, you can come in. We've got a lot of extra capacity. Did you tell him what kind of ice cream it was? No, no. And this is what I'm getting at. He said, what are you making? And I was, of course, paranoid about, like every entrepreneur is, a little too paranoid about someone's going to steal my idea. And I was a lawyer, so I had a bunch of NDAs at my disposal. So I had him sign an NDA, and he was really curious, you know, what the hell am I making?

27:42And this guy was, he was really cool. He was old school L.A. and more like big aviators at all times. He must have been 70. Just a cool guy. So I show up like a couple days later with my little recipe and my ingredients that I bought from Smart and Final. And he's like, so what are you making? and I'm like proudly like I'm making the first all natural healthy ice cream and he just looks at me and is like oh so it's not weed it he was just he was just so sad about that he was really hoping I was making weed ice cream I broke his heart which of course it's California that's Southern California of course you would make weed ice cream probably exists today and that's why he thought oh I I'm pretty sure it does and I'm that he thought that was why I was being all cagey and And it was like, man, you're making a healthy ice cream.

28:31Give me a break. Doesn't sound very appetizing to me. Okay, so you have these ingredients, and he agrees to, what, make a batch for you. And the ingredients are what in that first run? Egg whites? I'm so naive. It's my own recipe that I made on my home ice cream maker, and it's got all of, like, five ingredients. And I'm actually sitting there doing the blending and putting it in the machine and learning how to use the equipment with another guy. And it's milk or cream? Milk and cream, yeah. Yeah, milk and cream. Stevia. Stevia, yep. I can't give away the recipe too much. There is a little Coca-Cola to this stuff.

29:11Okay, I got you. Obviously, these are the basics, yes. There's egg whites in there. That's right. By the way, egg whites is weird because that usually use egg yolks in ice cream to give it that creamy richness. That's right. So the whites, they add a little protein. And if you want to nerd out about ice cream, they have emulsification properties. Right. So it actually is a good thing to put into ice cream in terms of performance. Okay. So I run my little batch on the machines and it could not have gone more horribly. The machine basically spit out something that looked like a liquid burnt marshmallow.

29:47I mean, it was just like a white river. It was so demoralizing. It was foreseeable, of course, that my little home recipe wasn't going to work on professional equipment. But it just absolutely didn't work. I mean, I'm demoralized almost to the point of tears because I was so gung-ho on this thing. But why didn't it work? I mean, it's the same principle. It's spinning and freezing the ingredients. So when ice cream is ready, it comes out of soft serve, and then you freeze it. So I don't understand why it didn't work. Well, ice cream needs a lot of salt. I couldn't actually pinpoint exactly why it didn't work, even though it was just me sticking a bunch of ingredients in an ice cream machine and expecting it to spit out ice cream.

30:27But to be more precise, ice cream needs a certain level of solids, like sugar and fat and that, to give it body. And I didn't have enough of that. It worked on my little Cuisinart ice cream maker at home, but on this professional equipment, it didn't work at all. So it was like back to the drawing board. Either give up the dream or it's back to the drawing board. So you're not a food scientist, of course. Nope. Right? This is not your background, but you're kind of dabbling. And there's clearly a reason why up until that point there was nothing like that on the market because probably if anyone had attempted it, the same thing happened.

31:05that it just didn't come out good. Yeah, I talked to some ice cream experts and there were some movie moments where they'd be like, you know, give it up, kid. And a food scientist, he was like, this just can't be done and things like that. So one of the virtues that I had at the time was just utter, sheer, overwhelming naivety to where I didn't realize how hard it would be to eventually make this stuff. How did you start to figure out what to do next? Did you go to the, I mean, And presumably you went to the Internet. Yeah. So, you know, on the Internet, you can figure out how to make everything now.

31:41And I basically took my little recipe and just that night started researching, became like a little miniature food scientist and started researching what did I need to have in there. And then I started to realize proportions of solids and all these things I won't bore you with, but greatly revised the recipe overnight. Well, this is a thing, right? Like then you've got to find out things that will replicate that mouth feel. That's right. That's right. But the biggest issue is when you take out a lot of the sugar or almost all of the sugar out of ice cream, it loses all of the solids. And what I mean by solids is everything that's in ice cream that isn't water.

32:22I mean that's even fat particles. But sugar is the easiest one to understand. And if you remove that, it will freeze hard as a rock unless it has enough solids. Right, right, because sugar keeps it creamy. Right, right. Right? Yeah, and it keeps it soft and scoopable because it depresses the freezing point. Alcohol does the same thing too, I think, right? A little bourbon or something. I actually at one point experimented putting a little bit of vodka into Halo Top. I'm not kidding. I'm not kidding. Yeah, because vodka is a low-calorie beverage. I'm not surprised. Yep, and I spent like five days researching if I could do that without, you know, can I put alcohol in ice cream without declaring it?

33:00all that stuff. How long did it take you in experimenting with different ingredients before you were satisfied that you had something ready to sell? Yeah, it took about two months, I would say, before I was like, okay, there's a little bit of tweaking to do, but I'm almost, once packaging is done and everything like that, I'm ready to start selling in stores. So about two months in, and you were financing this, right? I mean, so you had to pay this guy. And presumably this Copacker and Van Nuys could handle everything. They could make the ice cream and package it up for you, and you would just come and pick up the pallets of frozen ice cream?

33:42Yep. And I wasn't in stores until early 2012. So during 2011, I didn't even need to deliver ice cream. I was just going up there with my ingredients, taste testing the batch, making notes, going the next day with ingredients, making the new updated recipe. The issue was with this equipment, I had to make like 80 to 100 pints at a time, and I really only needed one pint to test. So it was a total waste, but the machine was too big. All right. So you now at a certain point, did you start to add a little bit of sugar, of canned sugar, or was it only Stevia? I did. I did. Just during this whole process of going back and forth and seeing how well it froze and all of that.

34:19But I realized that stevia alone kind of has this weird black licorice taste. And so I would add, I always added a little bit of sugar, both for taste and for performance, but also to cut that stevia taste. Yeah. All right. So you've got these pints ready to go. And you're financing this all from your paycheck as a lawyer. Yeah. And deep, deep credit card debt. Yep. And at this point, you know, you're thinking, I'm thinking, okay, take it to a farmer's market, put in a cooler, open up a farmer's market stall and start to sell it there. Yep. I thought that that would be too slow. So I just called stores directly.

35:02Not really, very, very nervously. I remember my first sales call. It was right at the start of 2012. And I called it to store. And who was it too? Erewhon. It's like an L.A. Erewhon, sure. Famous store in L.A. Yes. L.A., natural food store. Natural food store, bougie,$25 salads, all that. And I called, and I'm so nervous for this call because, number one, I don't know what the hell to say on the phone. Just like, how do you even broach this subject? And number two, in the back of my mind, I'm like, I just devoted six months to making this stuff. What if nobody wants it? What if nobody will carry it?

35:38Because, you know, I couldn't go to a store ahead of time and say, hey, I've got this concept. Would you carry it if I made it? it doesn't work like that and i didn't know any store buyers you gotta bring it and say here try it yeah well that's not the way that it went so i'm making this um this uh nervous phone call and i remember her name was vicky at ero one and she was just fantastic she's like oh honey just come in every two any tuesday from two to four p.m and we'll try it and uh and that was how it worked and what the what were the flavors you had i i started with vanilla bean chocolate strawberry strawberry and lemon cake because it was kind of received wisdom back then that of course you do vanilla and chocolate then you do a fruit and then you for your fourth you do an experimental flavor mine was lemon cake and it was actually the most popular flavor for a long time so you bring it into ero one yep but in vicky's there and i that was my first sales meeting i realized how uh how long they can be i was probably sitting there for like an hour and a half two hours while everybody in the store kind of came around and tried it, but they were absolutely awesome.

36:44She, and it was a small chain. It's not like a big chain where it's like, we're going to take you and you hit shelves in four months. So get prepared. She was like, yeah, we'll take it. We'll give you all four flavors. You can put it on the shelf next week. And so literally in like the span of a week, I was now selling ice cream on the shelf. Wow. And like two days later, I had a little folding table and an apron on and I'm scooping ice cream for people saying, hey, try healthy ice cream that doesn't taste healthy or some cornball thing like that. You called it healthy ice cream. You didn't call it low calorie.

37:19I varied between the two, you know, because low calorie is more accurate. But, you know, healthy. The words were always awkward to say, like, you know, how do you actually term this stuff? And by the way, how many calories was like a pint of vanilla ice cream? It was right around 300, I think. Okay. For the whole pint. Yeah. Yeah. Whereas a traditional like Ben and Jerry's or Hagen-Dazs vanilla would be like twice or three times that amount? Four times. So it was a quarter of the calories. That's exactly right. Yeah. And you personally would go there with your cooler and you would stock the shelves.

37:57That's right. until I got a distributor which came a few months later which was crucial obviously I was literally hand delivering ice cream all the way up in some cases to a store called Lassen's in Ventura so I would seriously just have, I had so many coolers in my house at this point, I never thought I'd own so many coolers but I would have a big cooler of ice cream loaded into the back of my trunk, put a bunch of dry ice in the cooler because it had to stay perfectly frozen and go make deliveries around LA Yeah. And so I'm just basically cold calling everybody. And I reached a point. I think I got into about just like 20, 25 stores on my own.

38:36And then I got into a certain chain that was big enough that they then forced their distributor to take me on. What was that chain? Bristol Farms. Bristol Farms. OK. Yeah. And they have a distributor that handles ice cream or frozen goods. That's right. And they agree to carry or to distribute your stuff. That's right. And that's the big catch 22 of starting a food beverage company is in order to get a store, typically a store chain, you need a distributor. And in order to get a distributor, you need a store chain. So what you really need to do is convince some store chain that they really want your stuff so much that they force the distributor to basically take it on.

39:16And that's what happened. So, all right. So you've got now this label, this Eden ice cream. And I guess around this time, this is around 2013, you bring on a partner, because you were doing this by yourself more or less up to this point. That's right. And you bring on a partner named Doug Boughton or Boughton? Boughton. Doug Boughton. And who is Doug? Tell me about Doug. How did you meet Doug? So I met Doug in late 2012 in a lawyer basketball league, actually. And he was also not happy about being a lawyer. Yeah. No, he kind of worked at a firm similar to mine. And he actually emailed me for two reasons.

39:59Number one was he was leaving his firm to start his own law practice. And he was pitching me as a client, which was actually very, very intriguing because I was going to need investment pretty soon. And the second thing was he was involved with a startup that was at the spot that I was in like a year, year and a half prior and was looking for advice on like, hey, how do you, you know, get into a store? Kind of the basic questions. Yeah. So in late 2012, through 2012, I had basically gotten into about 80 stores, like I said. And I still thought I could do it myself. But at the end of 2012, I had a little miniature boom.

40:36in the natural foods world there are kind of two major store chains it's whole foods and it's sprouts and uh at the end of 2012 i basically somehow convinced sprouts not only to uh carry me but to uh that i could make enough ice cream for them they were like can you make enough to handle 300 more stores uh and i'm like of course i could do it tomorrow and then i was told by whole foods and norcal in your region actually that they were going to bring me in. And I just realized at that point, I physically couldn't do it alone. So I started kind of looking to bring on somebody, somebody out there.

41:15And Doug was obviously from writing me and from already being in LA and with his legal background was definitely on my radar for the first person I would bring on. All right. So, so Doug joins and, and, but the challenge at this point is to, I mean, there are many challenges, right? It was to obviously scale and figure out how to sell more ice cream. And, you know, and by the way, just being in Sprouts and Whole Foods in California, you're not going to become a big business. You know, that's not possible. And just being in Whole Foods nationally, maybe you can grow to like seven, maybe 10, maybe$12 million in annual revenue, but like you're going to max out.

41:59Yeah, it's really hard to make money. The real money is made in the Kroger's and the Walmarts, you know. But it's very cool to be able to say that you're in Whole Foods and it definitely helps the brand image. I guess Eden Ice Cream is now in these stores, not many, but still quite a few. And I guess pretty soon you get a cease and desist letter from a company that makes Eden's soy milk. Yeah. You know what? This is actually back in 2012, right after I got that first distributor. So it was an absolute nightmare. I mean, thank God it came earlier rather than later. But they basically said, look, you can't use the name Eden.

42:41We make Eden chili and Eden pasta and Eden soy and all of this stuff. How did you, by the way, how did you not know that as a lawyer? Wouldn't you have done, I'm not trying to like, you know, pound a man when he's down. I'm just curious, you know, didn't you do like a name check? No, I deserve it. It was very, very stupid of me. It was a very stupid thing to do. And then when it happened, I was like, you know, maybe I can fight this because Eden Creamery, you know, they don't make any perishable or frozen products. And I was like, this is going to cost$100 ,000 at minimum just to fight. And again, this thing is bootstrapped.

43:16No chance. But yeah, I had to cave. And yes, it was very stupid to pick that name. So how did you come up with a new name? When they sent me the cease and desist, my marketer said, okay, let's stay with the heavenly angelic concept. Eden is four letters. Why don't we just go with Halo, H-A-L-O Creamery? And I said, well, okay, first, Halo to me is a video game. You know, second, maybe there's some trademark issues with that because it's a very basic name. and I thought Halo Top rolled off the tip of the tongue and the gold lids were kind of like, you know, the top was a halo. So I was like, let's do Halo Top.

43:57We fought back and forth because that would have taken a lot more packaging changes just to go from Halo Top to Halo. And I'm like, no, let's do Halo Top, end of story. And the funny thing is, in retrospect, like even my close friends, when I'm like, you know, the top is a lid. So it's like the top or the top is a gold lid. So it's like the top is a halo. They're like, I had no idea that was even the case. I had no idea. And 50 % of the population still calls it Halo anyway, like Halo ice cream. So this whole fight over Halo Top was pretty much for nothing. Yeah. So from what I understand, this is also a pivotal moment because I think from what I understand, in 2013, you did about a little over$200 ,000 in revenue.

44:43So still very small brand, but that's not discouraging. But I guess you were having, and you alluded to this a little earlier, quality issues, like with the ice cream not being consistent. Sometimes people would get it would be chalky. It had to thaw for a long time. Tell me what the problem was. Yeah. So it was kind of like starting to be a come to Jesus moment where it's like I do not understand why this stuff is not selling the way it should sell. and especially with how good it tastes off the line. And really it just came down to this supply chain issue to where you never knew what you were going to get.

45:26Like half the pints were rock hard, another 20 % were chalky and just kind of ruined. So that was the big, that's why 2013 and 2014 was by no means a runaway success. There were some financial difficulties, especially with cashflow. But it really, I think, came down to the fact that we didn't have much of a marketing budget and the product just needed to be more resilient through the supply chain. And it was at that point I realized I need to get serious with a food scientist here. So what did you do? Did you have to change the recipe? I did, yeah. I went up to good old Cal Poly San Luis Obispo.

46:05It's really cool. They have a dairy science department. We signed an NDA. I went up there with my recipe, and doing the testing at this place was just so seamless. And it was a pretty funny experience. Like when I went and parked by the dairy science building, I almost hit a cow. Like I pulled into the spot and this cow's snout was hanging over the curb and I almost ran into the poor guy. Very agricultural, you know. And what were they doing? They were trying to figure out why you were having these quality issues? Yeah, we were trying to use different ingredients and adjusting some ingredients just to make it more resilient through the supply chain.

46:42And the big challenge, too, was we had to use, quote-unquote, all-natural ingredients, which is, again, a problematic term. But what I mean by that is Whole Foods-approved ingredients. They kind of set the bar for what all-natural is. And there were some ingredients that would have been simple additions to make Halo Top more resilient, but that I wouldn't be able to stay in Whole Foods if I had used that ingredient. Well, like what kind of ingredient? Oh, man, I can't even. Like monoglycerides, words that are really boring. Yeah. Right. A lot of these things. And how long did it take to get it down, to get it down right?

47:21It took about six weeks. You know, all of these things in the food business, it moves like an aircraft carrier, not like a little boat. Yeah. And by the time we were able to make it and buy the ingredients for it, put it in a packaging, get it into stores, you know, it took nine months. So even though that was done in 2014, the new recipe didn't hit until 2015. So given that the cash flow situation was challenging and you were certainly not profitable, what was your cash situation like in 2014? The entire company was funded by my legal salary and my credit card debt. And the good thing about being a lawyer is that you have high income and you get huge credit limits.

48:02I guarantee you my credit card companies really regretted that. But I was funding it through my legal salary and through about$300 ,000 in credit card lines, credit card debt. And as could be expected, that eventually ran out. We're kind of hanging by a thread in a number of stores. Your sales are just on the cusp to where we could almost discontinue you or lower your SKU count. So, yeah, it was not a runaway success by any stretch. And so we actually raised our first round. And we raised two rounds of money totaling a million, which is really not a lot. And it was a combination of that was kind of all we could get.

48:45So, for example, we raised a little bit of money in 2013 and we raised money in 2015. And you raised in 2013, you raised it from? From mostly friends and family. Yeah. And I didn't want to give up control of the company whatsoever. So we did not want to get in bed with venture capital firms unless we absolutely had to gun to our heads, you know. So, I mean, how close were you to, you know, you've got the debt, but I mean, were you ever close to a place where you thought, I don't know if this is going to make it or were you always confident you were going to be? No, it's kind of a mixture of the two.

49:22I still really believed in the stuff that I was – I don't know if I ever would have been able to give up on it. I just thought it was such a slam dunk. It wouldn't be so much that the company would go under, but we would have had to get in bed with the wrong people. An example is I don't want to sell them out, but the founders of a major, major company that everybody's heard of met them for lunch, and they were going to invest a million in the company, which would have saved the company. But of course, they wanted control. I'm a control-free guy, 100 % control. I didn't want to give up any control.

49:57But you know, these guys are sharks. That's their business. Yeah, sure. You can't hate on them. This is just what they do. And so every negative stereotype and every fear I had about working with a VC firm came true indeed when we got their offer sheets. And worse, they thought the product should be marketed toward the senior citizen market, just like those Insure protein shakes. So that certainly wasn't my vision for Halo Top. And, you know, so if the fun thing is to say, yeah, the company would have sunk, that's so dramatic. But really, we would have just taken money from an entity that would have steered us in a very weird direction.

50:37Yeah. All right. So you're trying to figure out how to deal with this cash crunch, right? Meantime, in 2014, Sprouts, from what I understand, they dramatically reduced how much Halo Top they're buying because I guess it's not selling. Yeah. Sprouts was my crown jewel before when it was just me and we got kicked out. We just didn't sell enough for them. Yeah, it was very demoralizing. That has to be the majority. It has to be more than 50 % of the stores you were in by that point. I think that it was somewhere pretty close. I don't remember it being quite that dramatic because we did have a steady climb in store growth.

51:18I couldn't tell you what percentage of stores. Independent stores. Independent stores and other chains because we had UNFI as a distributor. So they were putting us in a lot of stores that we didn't even know about, to be honest. But you weren't selling at Sprouts. That's right. Look, there's no way to minimize it. Whether that was 50 % of our stores or 20 % of our stores, it was crushing financially and mentally. It was a big deal. And I'm trying to remember if that happened before or after we were actually raising money because it came at a really awkward time. We might have just closed our second and final round for about$750 ,000 and then got kicked out of Sprouts.

51:58And it was like, oh, sorry, guys. Our bad. So just embarrassing, too. It's just embarrassing. So in like 2015, you're definitely still, you know, you're still a relatively small ice cream brand, right? In a sea of ice cream brands. But one of the things that you – because you have a whole lot of advertising dollars, right? You really start to lean into like Facebook and Instagram ads, which is like 2015, 2014. And this is sort of like the peak of really hopping on that train, right? Because you could target people based on their backgrounds and their interests and their zip codes and things like that, right?

52:42Yeah. You know how everybody is mortified by figuring out just how much data Facebook knew about us? The only people who liked that were us marketers. It was so – I was like, man, this is so invasive but so useful. Yeah. They could track, if you liked a page on Facebook, they could track that, link it to your wallet, and find out what type of products you were buying at the store. But it was also very useful in making sure that our ads got in front of the right people. So who was the kind of person you were targeting? Our main target was I always just basically said soccer moms. The type of people who liked Greek yogurt, you know, more or less.

53:25It wasn't ice cream gourmet people who tended to be the people who hated on Halo Top the most. You know, we tended to really do well with millennials, but I didn't quite foresee that coming. I didn't quite realize that they were so health conscious and stuff. And so to like a soccer mom, what would the message be? That was just kind of the general one, which was like ice cream that you can feel good about eating. So you're like a perfect angel, Halo, right? this idea like you can eat this and it's not sinful. That's exactly right. I think we even put in some of our ads a halo over the pint. Okay.

54:04That brings us to 2016, which was unprecedented. One of the unprecedented moments in the history of food, I think, in... Let's start with what happened, which started with an article. So what did you know about the making of this article? I knew nothing. Nothing. That's what made it so funny is I got a Google alert for Halo Top, realized GQ had written about it, and I opened the article with my hand covering my eyes, like with a little crack between my fingers like, oh God, what are they writing? Thinking they were about to just trash it. Yeah. I had no idea what they were going to say. When we come back in just a moment, how the content of that article completely changes the trajectory of Halo Top.

54:50Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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57:23Hey, welcome back to How I Built This. So it's early 2016 and Halo Top Ice Cream has a new formula, new packaging and a small amount of investment. And then GQ magazine prints an article about it. And Justin, he can barely summon up the courage to read it. But it was actually a fantastic article. A guy named Shane Snow, who I absolutely, I don't know, but I still love him. Even if I wasn't, you know, the founder of Halo Top, I would still want to read this because all that he did was eat Halo Top for 10 straight days. He ate Halo Top for 10 days. He wanted to show what it was like to eat only Halo Top for 10 days.

58:08Yeah, not just eat it for 10 days. Eat nothing but Halo Top for 10 days and talk about his experiences every day. So it was a really unique article. And this was not an article you pitched at all. No. You had no idea he was working on this. No idea. He must have pitched to the editor, and the editor was like, all right, you're crazy. Go for it. I mean, I'm just thinking that's not a good thing to do because, you know, we need fiber and roughage. I'm just thinking about, you know, things that I can't talk about here on the air. But just what would happen to you after 10 days of just eating pints of Halo Top?

58:44Well, if I remember correctly, Shane was very good at actually putting in the advice of a nutritionist who indeed told him, you're being stupid. Don't eat. Don't do this. But he was very honest about everything. Obviously, he was like, by day five, I'm sick of this stuff. But he's talking about how he hit new records in the gym. And after day 10, he's like, I don't even want to see Halo Top. But you know what? I found myself a week later getting more of it. So it was just like a fantastic viral article. And when did you start to see the ripple effects from that GQ article? How long after? So, yeah, I can give you an example.

59:21in 2015 is when the new product uh both on the inside and the outside hit the shelves the new reformulated and new packaging that's exactly right in 2015 and we started to see a little bit better turnover rate in stores and so it was all primed uh all the good stuff was on the shelves from like shame was in new york city and la and everywhere pretty much on the shelves at 2016 In March 2016, in that month alone, and March isn't a great month for ice cream, March 2016 alone, we did more revenue than the entirety of 2015. And then 2016 just from March just went up and up and up and staggering levels.

1:00:04It was just unbelievable. I've seen one figure that said your growth in 2016, you had 2 ,500 % growth year over year. from 2015 to 2016, 2 ,500 % growth in one year. Right. I mean, we set sales records, obviously. I think we might have set all-time sales records. A company isn't supposed to grow that fast. It became a phenomenon. No, that's insane. So just help me understand the demand because you're going from selling, I don't know, maybe 100 ,000 pints a year to like 25 million pints a year. Yeah, it was just insane. And the issue with it is it's not just like any company that hits it big. There were unique challenges because it was ice cream.

1:01:03For example, nobody knew how to handle this. So the stores, let's take a whole third. They couldn't keep it on the - It's like Tickle Me Elmo in 1985. Five, yeah. But the supply chain had problems. Whole Foods couldn't keep it on the shelves, but these stores only have so much room allocated in the back for extra overflow ice cream. And so they couldn't order enough of the stuff, and they had to change their entire design, how they store foods to hold more ice cream. Because what you do with ice cream is you buy a pint of Ben & Jerry's, you go Sunday and you watch Game of Thrones, and you eat the pint of Ben & Jerry's.

1:01:40It's like a once-a-week thing or once a month. People, for the first time, were buying an ice cream for every single day of the week and buying 14 pints at a time in some cases. Because they could just do it. Yeah. And to be honest, I think what fueled it a little bit was when you go to a store to buy something and it's always sold out, that just drives the fervor even more. So when you do see it, you're like, screw this. I'm getting every single pint here. So it's a plus. It's a pro and a con. I mean, it's mostly a con. You want to sell it if people want it. But there are some upsides to not having availability.

1:02:17How are you dealing with that demand? I mean, you had one co-packer, as far as I understand. Yeah, I can't quite remember if we had one or two co-packers. I think we had more than one. But it was just immediate, all hands on deck. This is where Doug really shined because he was COO. there are only so many ice cream factories in the nation and they're all taken up so we had to beg and cajole to like get space and our co-packers were like what is happening with this brand there's no way you're possibly ordering this much product and so we were working out ways to build on to their factory not by our own factory but to do a kind of build and lease thing where we put a new line in their factory dedicated to Halo Top.

1:03:07You would pay for all the equipment? Yeah, we would pay for it and then they would pay us back. It was a really complicated arrangement. And you would say, just we'll build you a line dedicated just to our product in your factory. So you can do all the other ice creams there, but we need you to focus this line on just ours. That's right. And I'm not too sure if there was a single ice cream, a serious ice cream co-packer in the nation that wasn't working with Halo Top at that point. We needed everybody. I want to get back to this in a moment, but let's talk about 2017 because that year, I can't believe, I mean, it's one of the craziest stories in food, I think, in the last 50 years.

1:03:49This brand, Halo Top, that was like two years earlier, a tiny brand, like a minnow in an ocean of ice cream brands, becomes the best-selling ice cream pint in the U.S., beating Ben & Jerry's and Haagen-Dazs, almost$350 million in sales a year. You want to know what a crazy part of that is? Our brand awareness at that point when we became the best-selling ice cream, our brand awareness was just over 50%. That means half the population didn't even know what Halo Top was. I mean, compare that to like Ben and Jerry's where 100 % of people know. So the people who liked Halo Top freaking liked it. You know what I mean?

1:04:31And it was a daily ice cream that other ice creams just simply weren't. You can't eat a pint of Haagen-Dazs every day. Lord knows we all wish we could, but you can't. I mean, you didn't have an office. You had no physical office space. You had no physical factory. You outsourced the factory, the production. You had everybody was working remotely. and the distribution was handled by a distributor. And what? I mean, it was a lot of the things you were doing were outsourced. In the co-packing thing, there are quite a few really successful ice cream companies that don't own their own factories. So the co-packing thing is a little bit normal.

1:05:12But yeah, there was a lot of outsourcing. I mean, just incredibly efficient. I mean, a business with very little overhead doing$350 million a year in sales. Yeah, and that was my focus was efficiency. I think so many of the kind of corporate habits are just such time wasters and just inefficient. And so that was always something to get away from. I should add that the ice cream was very polarizing, still is. It was definitely polarizing. Some people were like, oh, this isn't ice cream. I mean, this is just, you know, it's Stevia. It's not like if you want ice cream, get real ice cream. Just have a couple spoonfuls of it, you know, or right.

1:05:53You had haters out there. Absolutely. We never got defensive over that. I mean, think about how bad of a look that would be if we came on and said, oh, well, you're not real ice cream. I mean, who? We just kind of there's just nothing you can say to that. Some people are purists. I can tell you that in 2017, there was a period where I could tell that we had peaked and it's kind of like a band had gotten too popular. And the sentiment of us kind of being like a cool brand was starting to shift. It started to become cool to hate on Halo Top a little bit more. Does that make sense? Once you saw like everyone, it's like Von Dutch, right?

1:06:33You ever see that? Yeah, yeah, yeah. Those hats? Especially here in SoCal. Right, like they're cool. and then all of a sudden like everyone's wearing them and like everyone people wearing them to church and like it isn't cool anymore would that kind of start to happen to halo top yes and to me i always think of bands uh like nickelback everybody loves them at first and they're just top of the charts and then it's everybody poor nickelback poor nickelback everybody hates a nickelback and actually that's why i made a very very weird ad that they talk about polarizing i I mean it is a very weird ad, a very avant-garde ad where it's like this sci-fi dystopian future and there's a robot trying to feed this woman saying there is only ice cream.

1:07:15It's an old lady, right? It's like an elderly lady feeding her ice cream. Yeah. And everyone around her is dead. Yes. Yes. It was dark. It was weird. It was a very love it or hate it. The marketing world loved it. Um, and that was partly, the reason I did it was partly because I could kind of sense that, uh, we were becoming very uncool and it was honestly kind of like a band trying to stop making pop music and release something arty, something artsy, like their, their jazz record. That really was kind of the impetus for that. I could sense that we were becoming uncool. Yeah. Yeah. From what I understand, part of you probably was nervous about growing so fast, so quickly.

1:07:58Right. The real worry was exactly what happened, which is we somehow managed to fly under the radar of the big guys. Like they let us exist. They didn't squash us like the bug that we were for, you know, four or five years. and then suddenly in 2016 and then in 2017, especially when we became the best-selling ice cream, the cat was out of the bag. And so every single ice cream maker, even from startups to Unilever, were just straight up making copycats. And the one that hurt the most, and yes, I use the derogatory word copycat instead of competitor because it makes me mad. It's like a song. it's hard for me to understand why you can't patent a food, that people can just write your same song.

1:08:48I mean, it makes sense, and nobody will empathize with me because everybody likes competition, and I get it, but I'm still raw about it. You can't patent a recipe. You can't. You cannot, no. And what really started to cut into our bottom line was that stores would make Halo Top knockoffs. Like Kroger had their own brand, I think. Exactly, exactly. And I think Target did. And they were cheaper. And of course they were cheaper. And they got the better shelf space. Yeah. We had a copycat brand come out. And they copied our design so much that we actually sent them a cease and desist. But they copied it so much.

1:09:28And their calorie counts on the front, they put the lower number, the per serving number. And to be clear, there's four servings and a pint of ice cream. So if there's 280, we would have 280 in the pint. We'd put 280 on there. Dave would put 70. So it was like kind of an underhanded, clever trick. There are four servings in a pint of ice cream. That's not true. I thought there was one serving in a pint of ice cream. Isn't that crazy? Isn't that crazy? That's just my pint of ice cream. Yeah. Yeah. It's like a candy bar is like two servings or something. You're like, what? That's crazy. Who was ever going to cut a candy bar in half?

1:10:05And I got four servings. Who eats a quarter of a pint? Nobody. From what I understand, when you started this business, right, already at the beginning, you know, and we've had entrepreneurs on the show who are like, I'm never going to sell my business. I'm going to do this forever. Or some who say, well, you know, we'll see, but this is my career forever. I want to do this. That was not your intention. Your intention was to build a brand and eventually sell it from the beginning. You were clear about that, right? Well, 1 ,000 percent. Yeah. I mean, I had unlimited passion for the stuff when I made it.

1:10:40I mean, it was like my life. I had such a fire to get it done, but it was never, I want to have an ice cream business that I can hand down to my son one day or anything like that. I wanted to get it big and to sell it to a company. So at this point, 2017, 350 in sales, you would think, okay, here's your golden opportunity to sell this business. And I have to imagine you had suitors coming to you. We did. We constantly had suitors. In 2017 is when we got real offers to sell the full company. But even before then, I mean, every venture capital firm in America was, in some cases, sending people to my house to knock on the door.

1:11:25Because they wanted in. Unsolicited, yeah, to be like, hey, we want to buy 20 % and we'll give you this valuation. Probably for amazing terms. Oh, yeah, right. I mean, better than what it would have been in 2015. Yeah. Yeah. What's funny is when I first founded Halo Top, it was in my cheap little apartment in this place in West Hollywood on Genesee Avenue. And I'm talking about it's in an area where it's like next to a liquor store in two pawn shops. And I would have my neighbors take pictures of this kind of very low rent place of like one venture capital guy showed up with a gigantic human sized golden spoon and basically sat outside my door for an hour.

1:12:04And my neighbor was filming him and sent it to me. Wow, that's crazy. I didn't know that they were that shameless. Me neither. Isn't that crazy? And why didn't you take any of their money at the time? Were you just holding out to sell the whole thing? They wanted to give us money when we already had boomed. And now you're profitable. Now you've got a lot of cash. Yeah, and what was unique about that sales growth for Halo Top is we grew so fast that actually we were flush with cash to where we didn't have really cash flow issues. Wow. Wow. So you just ignored these people? Yes, 1000%. So in the year 2017, when you were just, it was gangbusters, were you and Doug at that point like, all right, we got to find a buyer.

1:12:52Now is the time to do it? Or did you decide to wait? Yeah, we were already in talks with the people that you would think we were in talks with. The Unilevers and the Nestle's and the big, maybe not those exactly, but big multinationals. That's basically right. And they were approaching us. We weren't actively looking to sell at that time. But it was like if an offer came along that we couldn't refuse, well, we wouldn't refuse it. It was in 2018 that we decided to actually go on an offensive sales pitch rather than just being defensive. I'm just curious about that. Because I think you made a very smart decision, and I'm not giving away the story.

1:13:34We'll get to it. You did sell it, of course. But you probably saw that you were going to start to lose market share as competitors came in and that you really – like the clock was ticking down on the value. And the longer you waited, the value would decline and that it was probably in your best interest to try and sell sooner rather than later. Am I right about that? Yeah, you are right. But that's actually not the full story. I had been, I was burnout. I had been doing this thing since 2011. You know, the first two years doing it alone had taken years off my life and probably given me mental issues that I'm still dealing with.

1:14:15And by the time - Yeah, I can tell. I'm just kidding. And the time 2018 rolled around, I was either going to look for a new CEO or I just needed to sell the company. So I'm telling you, if I were refreshed, I probably would have just held on to the company and kind of relished the challenge of getting through all these competitors and having a competitive market. But I was just burnt out, to be perfectly honest. And I was like, I cannot deal with this anymore. Yeah. And you really had no major outside investors. You just had friends and family, some angel investors. And I guess probably some of the folks inside the company had some equity.

1:14:56Yeah, of course, of course, of course. Yeah, and everything was drawn up to where it was a very easy process. I did have 100 % control. So when it came time to the sale, it was extremely easy. I mean, if we like to turn. It was your call to make. Yeah, just with a signature. You know, you could kind of, there was no board to run it past or anything like that. So you guys shop, the bank shops this round, and you eventually start to negotiate with this ice cream brand called Wells Enterprises. is these guys were based in Iowa and they made Blue Bunny, not to be confused with Blue Bell. That is a very good point.

1:15:35That is a very good point. A lot of common mistake. Blue Bunny, not Blue Bell, right? Because people in Texas are going to boycott this show if I say Blue Bunny is from Texas. And I guess they had ambitions to be bigger than Unilever in the ice cream space. That was their goal. That's right. I think at that point, they were the second biggest. So you had this negotiation with Wells and they came to agreement. They were going to acquire you for 100 % cash deal, no stock, nothing like that. Oh, 100%. That was one of my conditions because, like I said, one of the reasons I wanted to sell was that I was just flat out burnt out.

1:16:13And so one of the conditions was I'm not doing a thing. I mean I was willing to stay on for three to six months to transition to the next CEO or whatever. But I was like, there's not going to be some two-year standard earn out where I've got a boss and I'm sitting there obsessing over our earnings in order to hit a certain earn out. That wasn't going to happen. So we were clear about that up front during the sale process. Yeah. Because the sales were declining from 2017. That was, to this day, by far your peak year. Oh, yeah, for sure. And they were declining 10%, 15%, 20 % year over year now.

1:16:52Did that have an impact on the negotiations? It 100 % did because it wasn't 2017 anymore. You know what I mean? There was no place to go but down, to be honest. Revenue and earnings is like the end-all be-all during a sales process, right? Yeah. They bought you out, undisclosed amount of money, but I think fair to say that you did better than you would have done had you stayed on as a partner at Latham & Watkins. I was able to buy my parents a house and I was able to pay off my student loans. And seriously, those were the two things that I don't have a lot of, I don't have expensive taste. Those were the two things that made me very, very happy.

1:17:31So you signed the contract. The next day you're done. You're not Halo Top anymore. I'm done. I woke up and I'm thinking like, oh my goodness, you know, it's over. What the hell am I going to do with my life? And for two, three years, I seriously just vegged. It had taken so much out of me that I did. It's like, remember that movie Office Space? When he's like, what would you do with a million bucks? And he said, nothing. And they were like, nothing? That was me. I was like, I am doing nothing. You just like ate pints of Ben & Jerry's and watched Netflix? Yeah, I was like, thank God I don't have to eat Halo Top anymore.

1:18:07I was just scarfing Ben & Jerry's.

1:18:14Doug stayed on, your CFO. He stayed on. He did a deal with Wells, and he took over international distribution of Halo Top. And was that sort of the last time you guys worked together? Yeah, more or less. And they actually just released a product line called Gatsby, which is like a chocolate version of Halo Top. It's like a low-color chocolate. Yeah. Are you an investor in that? Yeah, I am. But it's absolutely fantastic. And you've got all the Halo Top rock stars. You've got like, I mean, exactly what I should have done. You've got 20 people at the start. You're not trying to do it solo. You've got all this expertise in terms of grocery stores and everything.

1:18:56I think it's going to be a big success and it's a great product. And so in the meantime, what do you, how are you keeping busy? What do you, are you investing? Are you, I don't know, do you go out? Do you, and I'm just, I'm just curious. Yeah. Well, yeah, I have a lot of passive investments out there. and I'm happy to give some advice to people who need it. I got a wonderful girlfriend. Finally, I gave up on girlfriends for 10 years while I was doing Halo Top. Not a chance. So I have a wonderful relationship. Yeah. Yeah, let's just say I'm looking for something else because it's, you know, I've got hobbies and I play basketball, but there's nothing I'm doing that's impressive right now that people would care about.

1:19:39Let's put it that way. Here's a weird question, but I ask people from time to time about this because it is awkward a little bit, right? When your life changes the way it does, things can get awkward. Like you did not grow up with money. You graduated college with hundreds of thousands of dollars in debt or law school. And then you had this huge success with this brand, which you sold and enabled you to become wealthy. How does that change interpersonal relationships? relationships? Like everybody you meet now is going to look you up and know you started Halo Top and they'll know that like you did well.

1:20:17Does it, does it change how you interact with people or how you make friends? Are you nervous that people are just kind of want some of your money or want, I don't know, or something from you? Yeah, it's a really personal question, but I'm happy to answer it. And you, you, you touched on it. People come out of the woodwork and there is all, people are much nicer to you. But when you do meet new people, you, it's, I've met a lot of people who are like, oh man, this guy's genuinely nice. And you know, three days later, he's sending me an investment deck. You know what I mean? It's like, do people like me for me or do they like my money?

1:20:53So yeah, that's definitely, your hackles go up a little bit on that point. Like I'm friends with startups. I've had a couple of awkward experiences. Yeah, so it does affect things a little bit. When you think about this journey that you've taken, I mean, how much of this do you attribute to the grind and the work you put in and how much of the success do you think had to do with luck? Yeah, that's a good question. I guess I would have to say it was about, I would have to say 50-50, I guess. I mean, what a cop-out that is, huh? But it took. It's okay. Sorry. But I founded the company in 2011 and it took until 2015, 2016 to see signs of life.

1:21:37And so, I mean, it's hard to attribute anything of that to luck. That was pure grind, probably a level of psychosis of not giving up and still believing in the stuff. And then I knew it could be successful, but the fact that it was that successful, that it was like a phenomenon like that, But there was a lot of luck involved in that. You know what I mean? I was fully confident that it could be a pretty good ice cream that could get into the top 10 or something like that and provide a good living. But becoming a phenomenon, there was a lot of luck, a lot of right place at the right time involved in that.

1:22:15So I'm going to give you the cliched cop-out answer and say 50-50. That's Justin Wolverton, founder of Halo Top Ice Cream. By the way, last year, Wells, the parent company of Halo Top, was bought by Ferrero, the Italian group that owns brands like Tic Tacs, Keebler Cookies, and Nutella. And whenever Justin thinks back to 2019, when he sold to Wells... The one thing I regret is that when I sold the company, I did not get free ice cream for life or something like that. So when I get Halo Top, I still have to go to the store and buy it, which I think is kind of unfair. You can afford it. I'm playing the world's smallest violin for you.

1:22:58You can afford it. It's come on. It's the principle. I'm playing the world's smallest violin for you. You can buy the Halo Top. You can buy me the Halo Top. Hey, thanks so much for listening to the show this week. If you want to contact the team, our email address is hibt at id.wondery.com. If you want to follow us on Twitter, our account is at HowIBuiltThis, and mine is at GuyRoz. On Instagram, we're at howibuiltthis, and I'm at guy.raz. This episode was produced by Carrie Thompson with music composed by Ramtin Arablui. It was edited by Neva Grant with research help from Alex Chung. Our production staff also includes J.C.

1:23:35Howard, Casey Herman, Sam Paulson, Elaine Coates, John Isabella, Chris Mussini, Carla Estevez, and Kira Joaquim. I'm Guy Raz, and you've been listening to How I Built This.

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