Disrupting the Ice Cream Aisle: Talenti's Path to Success
Following his college graduation, entrepreneur Josh Hochschuler booked a one-way ticket to Buenos Aires with two suitcases and enough money for a few weeks. After five years of ex-pat living there, while working in finance, he returned to the U.S. with a new-found appreciation for the country's gelato.
It's a passion that propelled Hochschuler on a years-long quest to carve out a successful niche in the premium American ice cream market.
"When I moved back to Dallas, where I'm originally from, I couldn't find anything similar so I decided that I would bring something I loved back to the states from Argentina," Hochschuler said.
To understand the intricate gelato-making process, he had spent months apprenticing with a local family in Argentina. They had been making the dessert for generations using a traditional Argentine gelato method that uses pure cane sugar rather than high-fructose corn syrup. The recipe also has less fat than ice cream.
Together, Hochschuler and the Argentine family opened up a retail store in Dallas named Talenti — a tribute to Bernardo Buontalenti, the Florentine artist credited for inventing gelato.
But Hochschuler soon realized he didn't like retail's hours or the business model, which usually only focuses on in-store consumption. Instead, he wanted to get quality product into people's homes and restaurants.
Shifting Gelato Gears
Hochschuler closed the gelateria by 2005 and parted ways with the family. He focused on selling to restaurants, hotels, convention centers and eventually grocery stores.
As Talenti's business grew, Hochschuler decided to seek out partners in 2007, who were more experienced in growing businesses and honing corporate strategy. Through a college friend, he met Steve Gill and Eddie Phillips, two liquor executives, with a strong consumer-product background. They had co-founded Belvedere and Chopin Vodkas before selling them to luxury goods company Louis Vuitton Moet Hennessy.
The three became partners in 2008. Following Eddie's death in 2011, his son Dean joined company full time last summer as its chairman.
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Since 2007, Talenti's revenue has exploded from $1 million to $49.3 million last year, said Gill, who serves as chief executive. The company's revenue grew annually, even during the depths of the recession. Turns out a pocket of consumers are willing to shell out around $5 for a pint of premium, high-quality dessert.
Although Gill said he never had any doubts about the company's prospects, he admitted this period was difficult. "There was a lot of heavy lifting that we did in '08, '09, 2010, convincing people that American consumers want and need gelato, and for them to take something else off the shelf and replace it with us at a higher price point."
This year, the company projects sales to double to about $100 million.
Look Out Haagen-Dazs, Ben & Jerry's
Talenti has positioned itself as a fast-growing competitor in the premium ice cream market, traditionally dominated by large food companies such as General Mills' Haagen-Dazs and Unilever's Ben & Jerry's.
Increased customer awareness has contributed to the company's rapid growth. "I remember often people would ask me, 'What is it? Gelatin? Do I put it in the freezer? What do I do with this?' And now we don't face that almost at all," Hochschuler said.
Talenti's ability to convince Americans to buy something that deviated from traditional ice cream fare evokes comparisons to Chobani, a brand that has helped fuel Greek yogurt sales. Since 2007, Greek yogurt has jumped from about 1 percent of the U.S. yogurt market to 36 percent, with Chobani grabbing about 40 percent of the market, according to Bernstein Research.
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Both Phillips and Gill describe themselves as ice cream-market disruptors, akin to the way Chobani transformed the traditional yogurt market.
And like Chobani, Talenti waited years before deciding to debut its first national ad campaign, set for later this year.
"They did it by putting a great product on the shelf, making it very intuitive, having what's inside either taste better or have more attributes that people want," Talenti's Phillips said. "And so what they've done in yogurt, I very much believe we're doing already in ice cream."
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Marketing Affordable Luxury
At first glance, it may seem like Phillips and Gill's liquor roots are out of place in the frozen foods aisle. But Phillips said their approach to brand management is similar for the two luxury categories.
"The package is what attracts people, the product inside has to wow people," he said. "The price is incrementally premium. You create an affordable luxury for people, and you can transfer that same template from vodka to premium ice cream, and it's exactly the same special sauce, if you will."
Talenti's unique see-through jars, which showcase the company's 25 flavors, help draw consumers. Packing in the food business is serious stuff. Chobani spent $250,000 to create unique, European-style cups that would pop on store shelves.
"It's like someone's clothes," Phillips added. "It says a lot about you instantly — what your style is, what kind of person you are. Same thing about the product. ... It gets people to stop and go, 'Huh, what's that?'"
No detail is too small. Talenti urges grocers to arrange the colored jars in a gelato rainbow.
More Growth to Come
In addition to putting on its first national ad campaign, the company is focused on additional growth, what Phillips calls "Talenti 2.0." The company has redesigned the look of its jars for the first time since its founding, and next week will introduce its first line of gelato novelty desserts on a stick.
By summer, a new plant should be fully up and running, with the ability to generate up to $175 to $200 million more in revenue.
And while the company isn't a global brand yet, Gill said the offers to go abroad are getting higher and higher in quality.
Although time will tell if the brand is able to achieve success internationally, Phillips is hopeful the company's product will stack up. "If Starbucks can sell their coffee in Italy, I think we can sell our gelato in Italy."
—Written by CNBC's Katie Little. Follow her on Twitter at @Katie_Little_