Advice for ice cream entrepreneurs

Ice cream always seems to draw entrepreneurs of all types from all points of view with food and non-food experience. The good news? There always seems to be room for new ideas, new business models, novel approaches to formulation, new products, new flavors, and more.

The not-so-good news? Many entrepreneurs are “newbies” to the business (or new to general business) and may have not considered how ice cream is fundamentally different than any other food product.

As we have said numerous times before, ice cream and related products are the only foods designed, formulated, manufactured, distributed, marketed and sold with the express intent of being consumed frozen. This makes ice cream different and special. When conceived, manufactured, distributed and sold in consideration of these factors, good things can happen.

Yet, here’s some important considerations before jumping into the ice cream business.

Declarables: What do you want to say about the finished product? These have got to include technical (content claims, etc.) and non-technical (country of origin) barriers to competitive entry and associated reasons to buy. The more facts/features with associated reasons to buy (“benefits”) the stronger the market positioning of the final food. Setting a set of declarables aids, in turn, setting definitive objectives that can be formulated into the final ice cream. Simply a list of “gotta haves” that no one else has and, perhaps, no one else wants to execute.

Supply chain: Many ice cream entrepreneurs fail to go shopping. Where do you expect to offer goods for sale? Have you considered existing competitive products? This includes other products similar to yours, nationally marketed brands, and store brands. Is food service (to restaurants, dip shops, or similar) the focus? What about handheld novelties? If the latter, have you considered the form (filled cups/cones; molded; extruded?) What about flavors? Many fail to understand straight vanilla (~ 30% of all volume), straight chocolate (~ 15% of all volume) and vanilla/chocolate-based flavors (~ 60-70% of any given product line) may be necessary to leverage costs (see below), so to allow for more novel flavors. This doesn’t need to be a complex marketing study, but due diligence is necessary. Good news — when shopping, the market and what sells are right in front of you.

Scale-up: Going from lab bench to pilot plant to industrial “tests” to full commercialization can be daunting as chemistries, microbiologies, physics and food safety, among other concerns, can change dramatically along the way.

Manufacturing locations, capacities and capabilities: Where would the product be made? What are the capabilities at that location? Does that location have capacity to offer? Minimum batch sizes can kill many a new product. This is often the greatest obstacle to launching new products. Expect a hefty bill to get even the first of commercial sell-in samples made.

Distribution: Who is going to store and distribute finished products? The ice cream supply chain is different reflecting the special nature of the food. There may/may not room for new products entering the supply chain.

Economics: It’s important to understand ice cream economics. Wedged between commodity considerations and specialty finished goods are elements of raw material costs, fixed and variable manufacturing costs, costs of distribution, and presentation for sale. The good news? All this can be done early in any development project to approximate any given price per unit to be sold whether that be a scoop of ice cream at a dip shop or individual units sold at retail.

Simply put for development purposes, consider that:

~ 60% of all costs are associated with ingredients and packaging.

~ 40% of all costs are associated with fixed and variable costs.

Entrepreneurs need to recognize the concept of “line cost averaging.” That is, requirement of same point-of-sale pricing for ALL flavors within a product line. All flavors are not exactly the same cost through the supply chain. Something has to give. This requires making of assumptions. Assumptions are only as good as the facts or information used to support same. The good news… assumptions can change and often do.

Margins: Expect razor-thin margins. To get rich, consider another business. Again, margins for manufacturing/operations, storage, distribution run ~ 20% each (for comparison, ready-to-eat cereals may have margins near 70-80%.) Thus, it is possible to back calculate from current point of sale pricing of other similar products (product quality, features/benefits, declarables, packaging, etc.) to determine what formulation costs will need to be managed. Formulation costs may not allow for the formulation objectives. Some declarables may need to be omitted or modified.

Slotting allowances: Many entrepreneurs fail to realize that retailers — particularly large national retailers — need some sort of assurance that goods will sell (initial and repeat sales.) To secure shelf-space a “slotting allowance” may be required. The amount/type of such fees will vary throughout the grocery store. Ice cream is particularly susceptible as the ice cream cabinet is limited in size and space. It’s valuable real estate.

Shelf-life: Even as ice cream and its distribution are special, this is "good news." If the product is protected and no supply chain change in temperatures exist, ice cream can be held indefinitely at any given temperature. However, this is not on Mother Nature’s “gotta do” list. End of shelf-life of any product, ice cream included, is the time when any given feature, or fact, about the product fails first. In most instances, ice cream shelf-life ends when the product fails in delivering targeted textural elements of bite/chew; smoothness/creaminess.

Other factors can cause end of shelf-life. For example, the presence of hazards to human health; off flavors or simply wrong flavors; mispackaging, packaging failures, etc. The list goes on. For even the “big boys,” shelf-life expectations of six to 12 months under classical ice cream distribution conditions can be arbitrary. Expiration date or “best by.”

Other miscellaneous considerations:

• Use of available and GRAS ingredients
• Standards of identity? Dairy? Non-standard dairy? Non-dairy?
• Kosher/Halal considerations?
• Common and usual names of ingredients
• Allergens?
• “Implied” claims? May be associated with brand names, etc., that may reflect back on composition and other considerations
• Use of “process aids” and/or “incidental additives.”

Understand the message?

Ice cream science and technology is ever so critical to all the above. Elements of marketing, manufacturing, supply chain and point-of-sale pricing are rarely considered, especially by entrepreneurs when even the “big boys” consider the same. You’re not alone. Nor will you be the first or the last. It’s a great business and needs entrepreneurs to push both technical and non-technical boundaries. DF

Steven Young, Ph.D., is principal, Steven Young Worldwide; Bill Sipple is principal, Wm Sipple Global Services.

In 2026, Tharp & Young marks 25 years of its column in Dairy Foods, alongside 30 years of industry courses and 15 years of its reference text. This milestone reflects a long-standing commitment to education and expertise within the dairy industry.