Dippin' Dots, Inc. History

Address:

5101 Charter Oak Drive
Paducah, Kentucky 42001
U.S.A.

Telephone: (270) 443-8994
Fax: (270) 443-8997

Private Company
Incorporated: 1988
Employees: 160
Sales: $34 million (2002 est.)
NAIC: 311520 Ice Cream and Frozen Dessert Manufacturing

Company Perspectives:

Whether it's "Butter Pecan" or "Banana Split," once you try one of our many flavors of ice cream, yogurt, sherbet or ice dots, you'll have to agree, it's the world's most unique ice cream experience.

Key Dates:

1988:: Inventor Curt Jones forms Dippin' Dots, Inc. to sell beaded ice cream.
1989:: Jones closes his initial store but sales to fairs and Opryland USA take off.
1990:: The company's production facilities are moved from Illinois to Paducah, Kentucky.
1991:: The firm establishes a dealer network for sale to fairs, festivals, and other sites.
1994:: International sales begin through licensee in Japan.
1995:: The company opens a new 32,000-square-foot production facility.
1997:: The company's plant is expanded by an additional 20,000 square feet.
2002:: Dippin' Dots are added to the menus of more than 250 West Coast McDonald's.
2003:: An Asian licensee opens a new manufacturing plant in South Korea.

Company History:

Dippin' Dots, Inc. makes a unique form of ice cream which consists of tiny beads that have been flash-frozen at an extremely low temperature. The patented process, which was invented by company founder and owner Curt Jones, virtually eliminates the presence of trapped ice and air and gives the ice cream a fresh flavor and a hard texture. The company sells its ice cream--as well as beaded versions of frozen yogurt, flavored ices, and sherbet--at more than 2,000 locations in North America, Europe, and Asia, many of which are owned by franchisees. Dippin' Dots outlets are found at shopping malls, amusement parks, stadiums, movie theaters, and special events, and the firm has recently begun marketing its products through McDonald's restaurants on the West Coast. The company is ranked third in the United States in number of ice cream franchise locations behind Baskin Robbins and Dairy Queen.

Beginnings

Dippin' Dots was founded by Curt Jones, a former vocational education teacher turned research microbiologist. In the mid-1980s, while working in Lexington, Kentucky, for Alltech Biotechnology Center, he developed a process for making cattle feed by freezing it in pellet-size chunks at 350 degrees below zero, which better preserved the nutritional content. One weekend in 1987, when he was making ice cream at home with a neighbor, he was struck by the idea of using the same technique to make the frozen dessert. He began to experiment, and after six months of trial and error arrived at a method of flash-freezing a stream of raw ingredients with liquid nitrogen vapor. The result was a product which contained virtually no ice crystals or air and had the appearance of tiny, hard beads that were between the size of a BB and a small pea. When a spoonful of them was eaten, it would slowly melt to release an intense, fresh flavor. Different varieties of beads could also be mixed together to create new flavors. Though the first experimental versions had been consumed at such a low temperature that Jones later recalled, "They welded our tongues to our jaws," the firm established a shipping and storage standard of 40 degrees below zero and a serving temperature of 20 degrees below. After being served, the beads could retain their shape for more than ten minutes, even on a warm day.

Once Jones had perfected the process, he patented it, then quit his job, bought production equipment, and opened a retail outlet for the ice cream with his wife Kay. The operation, which was christened Dippin' Dots, was based in their home town of Grand Chain, Illinois, though the first store was located at a shopping center in nearby Lexington, Kentucky. The location was not a busy one, however, and the Joneses found themselves struggling to keep the business afloat. After using up most of their savings, selling a car, and running up the balance on six credit cards, they decided to try a new tack and took out a loan to fund distribution to fairs and amusement parks, using their farm as collateral. In late 1989, by the time the Joneses had decided to close down their store, Dippin' Dots was already being sold at such places as Opryland USA in Nashville, Tennessee, and at events like the Tulsa, Oklahoma, State Fair. Though it was slightly more expensive than regular ice cream, small samples handed out to passers-by proved irresistible to many of them, especially children, and sales began to take off. A small pouch-size container of the beads cost $1.25, and flavors included vanilla, strawberry, or a combination of the two. Several varieties of frozen yogurt were also offered.

In 1990, production was moved to a new site in Paducah, Kentucky, and the following year a formal dealer network was established for distribution to fairs, festivals, and retail locations. The treat was especially popular at outdoor venues, where it was often sold alongside carnival fare such as corn dogs and elephant ears. The company promoted Dippin' Dots as "the world's coldest ice cream" and "the ice cream of the future." More than a dozen flavors such as mint chocolate, banana split, and blue bubblegum were added, and frozen sherbet and flavored-ice beads were offered as well. Because of its unusually low serving temperature, selling Dippin' Dots as a packaged product through food stores was avoided. Although grocers could maintain the necessary storage temperature, not all home freezers could, and in some cases the beads would clump together before use.

Expansion in the 1990s

Dippin' Dots was now growing rapidly, and sales shot up by 1,385 percent during the first half of the 1990s. Outlets were being opened in shopping malls as well as at amusement parks, fairs, and other seasonal sites, and by 1995 numbered more than 150 in 33 states across the United States. Some were owned by the company, while others were run by independent dealerships. The product was typically distributed from a free-standing cart or kiosk, rather than a full-scale store.

With domestic sales growing by leaps and bounds, Jones began eyeing foreign markets, and in 1994 plans were drawn up to begin distribution to Mexico, Canada, and Japan. In the last-named country, a licensing agreement was signed with the firm Itochu, which began testing Dippin' Dots at an amusement park, a shopping center, and a movie/arcade complex in November 1994. The ice cream was a hit, and the number of Japanese outlets quickly expanded. To keep up with demand, the firm constructed a new 32,000-square-foot processing plant in Paducah, which opened in the spring of 1995.

Following Dippin' Dots' enthusiastic reception in Japan, sales were expanded to Korea, the Philippines, and other Asian countries. By 1997, Japan alone accounted for one-fifth of the firm's total sales. The company was also successfully exporting to Europe by this time, and Dippin' Dots could be found in England, Ireland, France, Germany, Belgium, and Holland at sites operated by licensee Dots Distribution. Cultural differences sometimes caused minor problems, as when Europeans rejected the relatively unfamiliar flavor of peanut butter. When its name was changed to "walnut," it became one of the most popular varieties.

Dippin' Dots' products continued to be manufactured only in Paducah, and because of their low storage temperature had to be shipped in special containers surrounded by liquid nitrogen. The beads could last up to 15 days in this form, though they typically reached their destination within five days. Import tariffs and shipping were not inexpensive, and as a result the ice cream was sold at a premium price. Nevertheless, the uniqueness of Dippin' Dots helped the brand take hold wherever it was offered.

With growth still surging, in 1997 the company added another 20,000 square feet of production capacity. By the fall of 1998, Dippin' Dots products were being sold in 42 states and 13 countries by 110 dealers at 350 different locations. These now included some frozen-food vending machines as well as movie theaters, sports stadiums, and such popular tourist sites as the Kennedy Space Center in Florida, where they were dubbed "Space Dots." A deal was also reportedly in the works for the ice cream to be offered to airline passengers. Annual sales now stood at approximately $18 million.

In 2000, the company formed a subsidiary, Dippin' Dots Franchising Inc., to further expand its reach. The year also saw Japanese distributor Itochu sell its rights to Gradco Systems, Inc. for $175,000 and three years of royalties on sales.

McDonald's Adds Dippin' Dots in 2002

Although 2001 started on a bad note with the layoff of 13 of the firm's 160 workers due to a sales slump, the year also brought good news when plans were made to test-market Dippin' Dots at more than 250 McDonald's restaurants in the San Francisco Bay area. The trial was a success, and an official rollout was begun in May of 2002. McDonald's spent $1.2 million to promote the ice cream, which was offered in vanilla, chocolate, and banana split flavors. Soon, other McDonald's in California and Nevada signed on, with additional locations expected to follow suit. To supply the restaurants, Dippin' Dots set up a special distribution system. Although concerns were expressed about a possible negative impact on sales at established outlets, it was felt that the increased availability would boost public awareness of the products across the board. In addition to the McDonald's restaurants, Dippin' Dots were available around the United States at 800 sites, including theme parks, stadiums, movie theaters, and travel plazas, as well as in 250 shopping malls and at 300 special events. The company was now ranked the third largest ice cream franchiser in the country behind Baskin Robbins and Dairy Queen.

Dippin' Dots' core customer group were children and teenagers, and during the summer of 2002 the company's first national advertising campaign was launched with ads in Seventeen and Nickelodeon magazines. A firm was also hired to place Dippin' Dots in movie and television programs to gain exposure through so-called "product placement." At the same time, a new freezer which almost doubled the firm's storage capacity was added to the Paducah plant.

The company was also now beginning the process of fighting a patent infringement lawsuit that had been brought against it by a Canadian firm, IQF, Inc., which alleged that Dippin' Dots' patent for freezing ice cream infringed on an earlier one held by IQF. Several years before this, Dippin' Dots itself had filed suit against a company called Mini Melts of Mystic, Connecticut, for alleged trademark, patent, and trade dress infringements, as well as against the makers of Frosty Bites, a knock-off product created by a former Dippin' Dots distributor and marketed in several cities in the South.

In early 2003, a second manufacturing plant was opened in Ansong, South Korea, which was owned by Dippin' Dots Korea, an independent licensee. It would supply the firm's products to Southeast Asian countries, including Korea, Japan, Singapore, and the Philippines. Dippin' Dots now came in more than 23 flavors, including the recently added chocolate-covered cherry, cotton candy, and chocolate chip cookie dough. Some varieties were low-fat and fat-free. Serving sizes were four, five, and eight-ounce cups, as well as special foil pouches sold in vending machines.

In the spring of 2003, Dippin' Dots celebrated its 15th anniversary by launching a sweepstakes in conjunction with Universal Studios. The prizes included four trips to the Universal Studios and Islands of Adventure theme parks in Florida, where Dippin' Dots was sold. The contest was advertised on the company's Web site and on Nickelodeon cable television, which broadcast a cartoon that was the basis for a new ride.

Dippin' Dots was now ranked 144th on Entrepreneur magazine's list of the top 500 franchises in North America, and 4th on its list of new franchise opportunities. It was the highest-placing food vendor in the latter category. The initial franchise fee charged by the company was $12,500, with startup costs estimated at between $46,000 and $190,000.

With its expansion still in high gear, Dippin' Dots, Inc. was celebrating 15 years in business with an eye toward greater triumphs ahead. The firm's unique bead-sized frozen treats were irresistible to many, and with further markets left to conquer the company's growth looked assured for some time to come.

Principal Subsidiaries: Dippin' Dots Franchising Inc.

Principal Competitors: Baskin-Robbins Ice Cream Co.; International Dairy Queen, Inc.; Allied Domecq PLC; CoolBrands International, Inc.

Dippin' Dots, Inc. History

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