Ep. 220 [Bonus] – Business Lessons From Three Twins Ice Cream, with Neal Gottlieb, founder of Three Twins

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?

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