Dippin’ Dots to be acquired by Icee owner J&J Snack Foods for $222M

Dive Brief:

• J&J Snack Foods has reached an agreement to buy Dippin’ Dots, a producer of flash-frozen beaded ice cream treats, for $222 million. 
• The snack maker said the purchase will allow it to add a strong consumer brand with a profitable, growing business that it can scale further. The deal is expected to close by the end of June.
• “Dippin’ Dots aligns perfectly with J&J’s portfolio strategy by adding an iconic, differentiated brand that uniquely complements our frozen novelty and frozen beverage businesses,” said Dan Fachner, president and CEO of J&J Snack Foods. “This transaction further positions us for accelerated growth across our business.”

Dive Insight:

The current iteration of J&J traces its origins to 1971 when a failing pretzel company was purchased at a bankruptcy auction for $72,100, according to the company. At the time, the company had eight employees and sales of $400,000.

Half a century later, the company has grown to more than 4,200 people, a market cap topping $2 billion and a portfolio of brands well beyond pretzels.

While J&J itself may not be a household name, several of its food and drink offerings sold in convenience stores, supermarkets, movie theaters, stadiums and amusement parks are popular with consumers. Its brands, many of which have been acquired, include Superpretzel, Icee, Luigi’s Real Italian Ice, Minute Maid frozen ices, Sour Patch Kids flavored ice pops and The Funnel Cake Factory. The company said it has made more than 30 “value-building transactions” throughout its history.

“Dippin’ Dots presents an opportunity to acquire a company that aligns with our focus on accelerating growth while delivering incremental shareholder value,” said Ken Plunk, J&J Snack Foods’ CFO. “We are leveraging our strong balance sheet and healthy liquidity position to acquire a profitable and scalable business that complements our long-term growth strategy.”

As the company noted, J&J is no stranger to successfully integrating a new brand into the fold. It’s also knowledgeable about frozen foods and novelty brands, insights that should allow it to seamlessly integrate and further grow Dippin’ Dots.

In this case, the snack food company is buying a product ubiquitous with flash-freezing to create beaded ice cream, yogurt, sherbet and flavored ice products consumed by millions of people. Fachner outlined the opportunities J&J sees in buying Dippin’ Dots when he said the company aims to use its marketing and innovation expertise to promote the brand and expand its distribution into new markets.

While Dippin’ Dots is well known in ice cream, it has made inroads in recent years to enter other food categories.

It signed a licensing agreement earlier this year to bring it into popcorn and in 2018 debuted a cereal in partnership with General Mills. J&J is no stranger to licensing through its partnerships with companies such as Minute Maid with Coca-Cola and Sour Patch Kids with Mondelēz. It undoubtedly will tap into that insight to leverage Dippin’ Dots. In addition, Dippin‘ Dots should continue to thrive as people venture out more frequently following the height of the pandemic.

After struggling for years following the Great Recession when consumers were more reluctant to spend money for one of its cups or packets filled with tiny ice cream pebbles, Dippin’ Dots finally filed for Chapter 11 bankruptcy protection in 2011. It was purchased out of bankruptcy a year later by current CEO Scott Fischer.

In recent years, it expanded beyond ice cream to bring its technology to plant-based meat manufacturers, pharmaceutical companies, probiotic brands and animal feed, among other industries, that require high-volume cryogenic freezing. 

Dippin’ Dots seems to be on a much better financial footing. The confection, for years touted as the ice cream of the future, generated $300 million in gross retail sales in 2019. J&J said Dippin’ Dots also is profitable and will be accretive to its earnings per share. In addition, the acquisition provides “significant tax benefits contributing to an even more attractive overall valuation,” Plunk said.