“Absolutely we could continue to grow on our own,” observed CEO Steve Gill, who said Talenti would be run as a standalone business in Minneapolis (where it has its HQ), and would retain its “entire management team for at least two years”.
“But if we had the right partner, could we grow more quickly? The answer is yes," he told FoodNavigator-USA. "We can put more flavors and more sizes in front of more consumers, more quickly.
“We’ve been growing at around 68% this year in a category that is basically flat or growing in the very low single digits, and we started to ask the question, are we still the best custodians of the brand?”
We’re custodians of the brand DNA
He added: “We’ve always applied a value add test to this business; we partnered with [Talenti’s founder] Josh [Hochschuler] in 2008 because we felt we could add value; we bought in capital, sales and marketing expertise, production expertise, and put structure around the business, and we’ve taken it from just over a million dollars to over $120m in revenue.
“But at some point the business kind of outgrows our capabilities and we felt it was time maybe to think about selling to fully maximize Talenti’s potential.”
He added: “As much as Unilever selected us, we also selected them. We love the business and we love what we do, and now we have the awesome resources of Unilever behind us, it will just help us do what we do best and hopefully turn into one of those situations where one plus one equals four.
“We’re kind of custodians of the brand DNA, which we will transfer over to Unilever, and our hope is that we will stay on and continue to run this business for a while. We also have the nice benefit of being able to run this business autonomously.”
People see it, they try it, they like it and they want it
From a distribution standpoint, Talenti has been able to build a strong presence in US mainstream and natural retail channels, but has made less progress in c-stores, drugstores and channels serviced by direct store delivery (DSD) distribution networks, he said.
“Unilever has a very strong presence in the out of home market, up and down the street independent retailers, convenience stores, and drugstores. These are important channels but hard to penetrate if you are not integrated through that DSD network.
"And while we have a growing representation in grocery we don’t have the breadth and depth of distribution there that Unilever has, so we also hope to make more gains there.”
Longer-term, however, there are huge opportunities in international markets, where Talenti will be able to leverage Unilever’s scale and distribution systems, said Gill, who talked to Unilever “for about a year” before signing on the dotted line.
“We’re basically just in the US now plus a few Caribbean islands, but we have had consistent requests for Talenti from all over the world. People see it, they try it, they like it and they want it. We’ve thought about trying to penetrate some of these overseas markets but we thought it’s better to wait and do it right rather than stub our toes and go into a market where we don’t really know what we are doing."
We believe the Talenti brand has broad potential around the globe
So will Talenti be selling gelato to the Italians any time soon?
Said Gill: “We’ve not had specific discussions about particular markets yet but Talenti is an elegant and premium product and we think it would work in Latin America, Asia and Europe. My dream, some day, is to sell Talenti all over the industrialized world; we believe it has broad potential around the globe.”
Foodservice is another area that could be explored with Unilever, he added: “We exited as we didn’t have the skillset to do it properly, but there are definitely opportunities there.
“Talenti was sold in a Major League Baseball stadium that houses the Minnesota Twins and it created a lot of publicity and trial. Gelato is also becoming more ubiquitous in the US and I’d think with Unilever’s scale and scope we’d be talking to them about foodservice.”
Manufacturing: When we started, we were hand-filling gelato jars with a spatula
As for manufacturing, he said, “In 2008, Talenti was operating in a 1,500 square foot room and we were hand-filling gelato jars with a spatula. We later purchased a semi-automated line where we’could make six pints a minute; and then moved to a 10,000 sq ft facility in Dallas where we eventually had three of those lines running pretty much 24-7. Then in 2012 we bought a much larger facility in Marietta, Georgia.
“In 2013, we closed our Dallas facility so currently we just manufacture in Georgia. We’ve got enough capacity to get us through 2015, but at some point in 2016 we would be coming up against capacity constraints, so that’s where Unilever will come in.”
There could also be procurement savings where Unilever purchases the same ingredients, he said, but the formulations and the trademark clear packaging won’t change.
“The last thing Unilever wants to do is change the formula, it’s working well, so why fix it.”
Do we really need seven different cheap priced half gallons of vanilla?
So how is 2015 shaping up?
So far, things are looking pretty exciting for Talenti, which has been significantly outpacing rivals in the frozen desserts aisle in recent years, and is on course to generate revenues of $120m in calendar year 2014, said Gill.
“Retailers are allocating about the same space overall to frozen dairy desserts, but they are changing the mix and allocating more space to premium products, so brands like Talenti are seeing their facings expand. Retailers are asking, 'Do we really need seven different cheap priced half gallons of vanilla?' And the answer is no.”
As for conversations with retail buyers, he said, “Back in 2008 and 2009 when we had no data to support our vision and our dream, we were going in and hoping they would believe in us, but then as the data started coming in, it became less difficult to make the case that we deserved more space.”
We try and come up with new and different interpretations of flavors
But why has Talenti gone from $1m to $120m in six years while many other premium, artisanal brands have struggled to break into the mainstream?
“Product, packaging and promotions.” said Gill. “Ultimately consumers vote with their feet and the data is overwhelming; people typically prefer Talenti to other options.
"But we also innovate, we don’t want to be like everyone else, we try and come up with new and different interpretations of flavors so when people try our new pumpkin pie it’s different to what they expect.
"The packaging has also been a big part of our success, it’s unique and differentiated and really stands out and generates trial. Finally on promotions, we’ve worked hard to get the offer right at the right price.”
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