02/08/2021
Is your company experiencing a financial melt down? Do you know if it is?
80% of companies fail because of financial mismanagement. You have to be familiar, comfortable and knowledgeable about your numbers. Here is a great example.
The Shocking Meltdown of Ample Hills — Brooklyn’s Hottest Ice Cream Company
They had $19 million, a deal with Disney, and dreams of becoming the next Ben & Jerry’s. Then everything fell apart.
The after-school rush had just ended one weekday in the spring of 2015 when the phone rang at the Vanderbilt Avenue location of Ample Hills Creamery, the Brooklyn ice cream brand famous for its whimsical and elaborate flavors. Scooper Jason Smith answered the call, expecting to tell some customer what time they closed or that, yes, they still had Nonna D’s, a brown sugar cinnamon ice cream with oatmeal cookies. But it wasn’t just any customer, it was Oprah Winfrey, the kingmaker of modern media, calling to say how much she liked the company’s Ooey Gooey Butter Cake and Salted Crack’d Caramel.
Ample Hills was barely four years old, but even before Oprah called, it was clear the company had struck a chord. Ample Hills’ married co-founders Brian Smith (no relation to Jason) and Jackie Cuscuna, had opened their first shop in Brooklyn’s Prospect Heights neighborhood in 2011, and almost immediately sold out of 130 gallons of homemade ice cream. The musician (and known foodie) Questlove started coming by for sundaes. On warm summer days, lines stretched out the door, and seven employees would somehow manage to serve 100 customers an hour — nearly two a minute — pulling in some $9,000 a day.
Disney head Bob Iger also had become a fan, and by 2015 Ample Hills had earned itself the title of official ice cream of Disney’s Star Wars film franchise, with limited-edition flavors like Dark Side, an ultra-dark chocolate, and Light Side, a marshmallow base with cocoa crispies. (Later, it would also partner with Disney’s Marvel, releasing flavors such as Spider-Man, with swirls of cherry pie filling, a nod to Peter Parker’s favorite dessert.)
And that was just the beginning. From 2015 to 2019, Ample Hills raised around $19 million to fund its ambitious expansion plans, hoping to conquer the $11 billion ice cream industry. The company went from a handful of stores in Brooklyn to 17 locations, including one in Disney World. To support all this growth, Smith and Cuscuna built a W***y Wonka-esque, 15,000-square-foot production space — part factory, part museum — in arty and increasingly expensive Red Hook, Brooklyn, three blocks from an enormous Tesla showroom. Meanwhile, sales continued to climb.
But on March 15, the day before New York City shut down for the pandemic — and as signage bearing Ample Hills’ farm animal mascots and the words “ice cream coming soon” was still up at a second Disney location — everything came crashing down. Ample Hills filed for Chapter 11 bankruptcy, just short of the company’s 10th anniversary. It had nothing to do with the pandemic: Even as annual sales had grown, reaching nearly $10.7 million at their peak, so had the losses. Over 2018 and 2019, the company lost about $13 million. In June 2020, Ample Hills sold for just $1 million to perhaps the unlikeliest of buyers — Schmitt, an Oregon manufacturing company that makes laser scanners and sensors for propane tanks.
What happened to the ice cream company the New York Times dubbed “Brooklyn’s Most Beloved”? The bankruptcy filings tell a straightforward story: “In practical terms, Ample Hills built out a factory in order to increase volume and lower costs, but the opposite happened, and the losses have mounted.” But Smith acknowledges to Marker that while the factory was “probably the financial decision that ultimately led to the bankruptcy, in a way it’s too simple a hook to hang your hat on.”
Interviews with Smith and Cuscuna, along with more than a dozen employees, from scoopers to executives, reveal the perils of what can happen when a hot startup puts growth ahead of business fundamentals. As Smith tells Marker, having Disney behind them fueled much of the co-founders’ overconfidence, encouraging them to think they could become the next Ben & Jerry’s. Disney’s interest also helped the company attract investors, he says, which created “a runaway train of raising and raising and growth and growth.”
By chasing rapid expansion without paying enough attention to how much they were actually spending, the co-founders ended up making big bets that cost the company millions — and mistakes that left thousands of gallons of ice cream literally swirling down the drain. “It was a fairy tale,” says Greg O’Connell, one of Ample Hills’ biggest investors. “They were kind of living in a dream world because their marketing was so great.”
