Entrepreneurs

How an ex-lawyer built Halo Top into an ice cream sensation with $347 million in sales

During the summer of 2017, low-calorie Halo Top Creamery was the best-selling pint of ice cream in America. In grocery stores across the country, Halo Top sales eclipsed those of beloved legacy brands like Ben & Jerry's and Haagen-Dazs.

Doug Bouton, president and COO of the company, remembers the moment he found out.

"I would say that's probably the single most memorable moment we've had in the company's history," Bouton tells CNBC Make It of Halo Top, which launched in 2012.

"I remember emailing and texting Justin [Woolverton], my business partner, and then we got on the phone and digested the data," he says, referring to sales numbers for the four weeks ended July 16, 2017. He immediately called Margie Brevidoro, who runs Halo Top's public relations, and said: "You won't believe this. We actually are the No. 1 pint in the United States."

Since then, Halo Top has remained in the top three best-selling pints with Ben & Jerry's and Haagen Dazs, Bouton says.

"Depending on what period you look at it, it shifts among all three in terms of who's the biggest or who's selling the most," he says. (A spokesperson for Ben & Jerry's tells CNBC Make It that low-cal option Halo Top gained "quick popularity" but its growth has slowed. And a representative for Nestle, which licenses the Haagen-Dazs trademark in the U.S., says Haagen-Dazs had a strong season "with steady upward growth.")

In roughly the last year, Los Angeles-based Halo Top did $347.3 million in sales, according to the company.

For Bouton, even being in the top three is "insane."

"It's surreal to even say that," he tells CNBC Make It. Because that certainly hasn't always been the reality.

Woolverton just wanted to eat a whole pint of ice cream

Halo Top was started by Woolverton, now 39, in his home kitchen in L.A. "without any idea of starting a business," Bouton, 33, says.

"He just wanted to eat an entire pint of ice cream and not hate himself for it."

 Halo Top founder and CEO Justin Woolverton h
 Kirk McKoy / Contributor
 Halo Top founder and CEO Justin Woolverton h

In 2011, Woolverton was a lawyer, working in the litigation department of Latham & Watkins in Los Angeles. To satisfy his sweet tooth, he wanted to concoct something that tasted like ice cream but was healthier and had less sugar. So he mixed together some Greek yogurt, fresh berries and Stevia (a natural sweetener).

He liked his creation so much that he eventually bought an ice cream maker (on sale on Amazon for $20). As Woolverton made his recipes in the ice cream machine, he had a eureka moment, says Bouton. He thought, "Wait, if I like it, maybe a lot of other people will like it. We should bring it to market."

"And that's kind of how it happened," says Bouton.

Woolverton spent 18 months playing around in his kitchen. There was a lot of trial and error because he had no experience with recipes.

"He experimented with virtually every variation of ingredients and sweeteners to try to find the perfect recipe," Bouton says. Early iterations were based on Greek yogurt, but Woolverton then started using milk and more traditional ice cream ingredients, says Bouton, like cream, eggs and sugar. (Today, "we use egg whites where we can, skim milk where we can," says Bouton.)

When Woolverton hit on what he thought was a winning recipe, he started cold-calling production and distribution partners. Woolverton bootstrapped the business and the first iteration of Halo Top hit the market in June 2012.

That year, revenue was "something like $12,000 bucks," says Bouton.

Woolverton kept his job until around mid-2013 when he quit to work on Halo Top full time. The company was growing and Woolverton knew he needed help. He brought on Bouton (a friend and former lawyer who'd recently quit his job too). The two went on a couple of business trips together in early 2013 (one to Whole Foods in Oakland, California, in January and another to the product trade show Expo West in March) and then formalized the partnership.

Doug Bouton President and COO at Halo Top Creamery
CNBC Make It
Doug Bouton President and COO at Halo Top Creamery

Neither Bouton nor Woolverton had any experience launching an ice cream company. "[W]e were outsiders coming in," says Bouton.

To make things even more risky, both had massive student loan debt and maxed out credit cards, too.

"We both had hundreds of thousands of dollars — more than $200,000 each, I believe — in student loan debt coming out of law school," Bouton tells CNBC Make It. "Beyond that, Justin had five credit cards maxed out and probably something close to six figures in credit card debt. I had something like $40,000 to $50,000 in credit card debt.

"This was all going into the company," he says, but "we're both personally bankrupt if the company failed. There was no way, no other option for either of us than declaring bankruptcy and starting over doing something else."

There was something to having their backs against the wall though, says Bouton.

"The risk was certainly high — there was no backup plan. We didn't have parents who were funding this or funding us or paying our rent or anything like that," Bouton says.

Eventually the business partners did raise money, "But ultimately ... we really had faith in the concept that there was a big market for a product like this if we could just get the traction."

Building the brand

Halo Top had some fundamental challenges to overcome in the early years.

In particular, the quality of the ice cream wasn't holding up when shipped and stored. "Right off the production line, it'd be great, but by the time the end customer had it ... it'd be a really bad customer experience. It would be chalky or ... sawdust," says Bouton. "The product wasn't resilient enough."

In September 2013, Halo Top raised its first $500,000 from friends and family, but it still took months of iterating and improving the recipe to the point where the texture was satisfying when it reached the consumer.

In 2015, they made a significant change to the formula, removing some ingredients, adding others, says Bouton, with the end result being a much more consistent "ice cream texture" than before. Halo Top also changed to its current packaging, which prominently features the calories per pint: "pretty, Instagram-able packaging that serves as a billboard on a shelf," says Bouton.

That September, Halo Top raised $1 million in second-round funding, also largely from friends and family. (There was a $200,000 check and the rest were about $10,000 to $40,000 a piece. "We have quite literally 50 people on our cap table, five-zero," says Bouton, referring to the list of who owns a portion of a company.)

During that time, Bouton and Woolverton took "small salaries, enough to pay rent, for food — to get by," Bouton says. But there were "multiple periods of time" when they had to suspend their salaries "for cash flow reasons."

With U.S. sales around $1.4 million in 2015, according to Halo Top, Woolverton and Bouton decided that their $1 million raise was their last shot. They projected the money would support Halo Top through the end of 2016.

"We said, 'We're not going to raise money again. This is it. This will be four or five years of giving it our all, raising money twice. If it doesn't work by the end of 2016, we're done,'" Bouton tells CNBC Make It.

A lucky break

With its new runway, Halo Top got lucky.

"January 2016 is when the real hockey stick growth began," says Bouton. A GQ writer detailed eating nothing but Halo Top for 10 days ("not recommended," according to Bouton).

"It put millions of eyeballs on the product and at the time we had the formula right, the packaging was right — it was the perfect time for that type of article to run," Bouton says.

Two months later, BuzzFeed taste-tested the product with positive results.

In January 2016, Halo Top did "a few hundred thousand" in revenue. "Then we doubled in February and then we doubled in March," says Bouton.

"We both couldn't believe it because it had been so many years of struggle, frankly, that, you know, we were both reluctant to believe. We were like if this happens again in April maybe we can actually take salaries again or maybe we can take a slight increase to our salaries," Bouton says.

"When you look back at that, you realize how many things are outside your control and just how big of a factor of luck in a lot of ways is to the success."

Halo Top also benefited from celebrities posting about the product on social media. Khloe Kardashian Snapachatted about it and model Karlie Kloss said in 2017 that she had an "obsession" with Halo Top and called it her favorite cheat food in a YouTube video.

Others stars like Ashley Benson, Nina Dobrev and Hilary Duff have all posted on Instagram about their love of Halo Top as well. (None of the celebrities were paid to post, Bouton says.)

In 2016, U.S. sales were $44.3 million and in 2017, $350.6 million, according Halo Top's custom research based on analytics company IRI's data. U.S. sales so far in 2018 have topped $248.5 million. The ice cream market in the U.S. was $6.7 billion for the 52 weeks ended Sept. 28, 2018, according to Nielsen.

The company is also growing: At the end of 2016, Halo Top had seven employees and now it has 100. Except for a few dedicated seats at co-working spaces in Los Angeles and Chicago, employees work remotely.

Is it really good for you?

Today, the ingredient list for a pint of vanilla reads as follows: "Skim milk, eggs, erythritol [a low-calorie sugar alcohol], prebiotic fiber, milk protein concentrate, cream, organic cane sugar, vegetable glycerin [an additive that can help maintain moisture levels or act as a sweetener], natural flavor, sea salt, vanilla beans, organic carob gum, organic guar gum [both stabilizers], organic stevia leaf extract."

Much of that is pretty recognizable, but it's also a bit more complicated than what's in vanilla Haagen-Dazs: "cream, skim milk, cane sugar, egg yolks, vanilla extract."

There are more ingredients in a pint of Halo Top, but fewer calories, fat and sugar. For comparison, one pint of vanilla Halo Top has 280 calories, 8 grams of fat, 24 grams of sugar, 20 grams of sugar alcohol and 20 grams of protein. One pint of vanilla Haagen-Dazs has 1,000 calories, 68 grams of fat, 80 grams of sugar and 16 grams of protein.

Therein lies the sell. "Halo Top is the first-ever ice cream, first and foremost, that's actually good for you and actually tastes good, so it's kind of an oxymoron," says Bouton.

Whether Halo Top is "healthier" than regular ice cream depends on how much you're eating, according to Lisa Moskovitz, a registered dietitian and the CEO of The NY Nutrition Group, a Manhattan-based nutrition counseling practice.

"If you can stick with the appropriate ¼ pint (or ½ serving) then it can make for a much healthier alternative than regular ice cream," she says.

But the lower calorie count and sugar content (and arguably less satisfying taste) can cause people to eat more Halo Top than they would regular ice cream, she says. In that case, having one serving of regular ice cream might be a better choice.

Lauren Ott, a registered dietitian who calls herself "The Dessert Dietitian" for her love of sweets, agrees. She doesn't like that Halo Top's marketing encourages consumers to eat the whole pint. (The pint's foil topper says "stop when you hit the bottom.")

"Encouraging anyone to eat an entire pint of ice cream, low calorie or not, is encouraging binge eating," says Ott. (Bouton says Halo Top certainly doesn't want to encourage bad eating habits but that many people eat a certain number of calories a day and structure their meals to allow for half or a full pint of Halo Top, which he says is not binge eating.)

Plus, in large amounts the sugar alcohols in Halo Top can "wreak havoc on the digestive tract," Moskovitz says, but they are "completely fine in moderation."

So what's the bottom line? "As long as the consumer is eating Halo Top in appropriate servings, I think it's a great way to cut back on calories and sugar to curb your sweet craving," says Ott.

As for the taste, there are dissenting opinions. One Reddit thread from April starts with a bold claim: "I'm sorry but I think I'd rather have half of a serving of regular ice cream as opposed to an entire pint of halo top. Weirdest taste and texture EVER." The redditor was not alone: "I hate it too! So much. And i wanted to like it badly. I've tried at least 20 flavors, but still nope," another person writes.

Others love it.

But Bouton is realistic about the experience. "When it comes to the taste, I would never sit here with a straight face and tell somebody it's going to taste as good as a full-calorie, full-sugar, full-fat version. No chance," he says.

"It's meant to be something you can eat every day if you love ice cream," says Bouton. "But it's not meant to replace your full-calorie, your indulgent ice creams. I still eat full-calorie ice cream. Not every day but every couple weeks for sure."

So what's Bouton's favorite flavor? That changes every week he says, but when he spoke with CNBC Make It, it was peanut butter and jelly, a seasonal flavor. "[I]n the best way possible it tastes like a peanut butter and jelly sandwich in ice cream form."

Whatever its place in customers' diets, Halo Top has already become more than a couple of lawyers could have ever imagined.

The brand launched internationally, first in Australia in January 2016 and this year in the United Kingdom, Canada, the Netherlands and New Zealand. Woolverton and Bouton have also opened three scoop shops in Los Angeles since November 2017.

In the beggining, "We were probably a little more tunnel vision of you know it's a niche market ... a 'Skinny Cow' or something like that," says Bouton. (Skinny Cow makes diet frozen desserts.) "We couldn't have dreamed of what it has become and how big it has become."

And it could get bigger.

"At one point in time, Coca-Cola was a start-up company that sold a soda and now it's this iconic centuries-old brand," Bouton says. "Why can't we be the next Coca-Cola? And that's not in an arrogant way, but that's kind of the opportunity in front of us if we can execute on it."

— Video by Mary Stevens

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