How a multimillion-dollar ice cream startup melted down and bounced back

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A Brooklyn-based ice cream shop was getting buzz, and Disney was pitching a brand partnership. So how did the business wind up filing for bankruptcy? A case study by Thomas Eisenmann and Lindsay N. Hyde examines the rise and fall—and recent rebound—of Ample Hills Creamery.

Ice cream making started as a quirky hobby for Brian Smith, whose zeitgeisty flavors and fresh ingredients would become his trademark. For example, his “God Save the Cream,” inspired by the 2018 Royal Wedding of Prince Harry and Meghan Markle, combined elderflower wedding cake, buttercream frosting, and lemon-ginger ice cream.

When the Brooklyn-based screenwriter first met his future wife and business partner, he wooed her by hosting ice cream socials with homemade concoctions that guests raved about.

Flying high on these enthusiastic reviews, Smith and wife Jackie Cuscuna opened Ample Hills Creamery in 2010, a Brooklyn ice cream parlor that would grow to 16 stores in four states by 2020. Smith’s clever flavors—mixing pecan pie and Sufganiyah jelly donuts in “Thanksgivukkah,” for example—were so enticing that Walt Disney pitched a brand partnership and Oprah Winfrey touted the ice cream as one of her “favorite things.” The Food Network named Smith’s salted chocolate and brownie-flavored ice cream, “It Came From Gowanus,” as the No. 1 ice cream in the country.

So how did Ample Hills Creamery, with its celebrity buzz, $10 million of annual revenue, and $40 million valuation, end up filing for bankruptcy? And more importantly, how did Smith and Cuscuna rebound from their first failed venture to open another successful ice cream shop?

The startup, like many others, was a victim of its own success, says Harvard Business School Professor Thomas Eisenmann and senior lecturer Lindsay N. Hyde. Eisenmann and Hyde wrote two case studies with HBS case researcher Tom Quinn that analyze the smart moves and simple errors at Ample Hills Creamery, as well as the launch of the company’s new shop afterward. The cases illustrate the challenges of turning a passion project into a viable business.

“You don’t raise $19 million and launch 16 stores and have $10 million in revenue and get on The Oprah Winfrey Show without doing a lot of things incredibly well,” says Eisenmann, who teaches an MBA course called “Entrepreneurial Failure” with Hyde. “But they tried to grow too fast.”

A dream flourishes in Brooklyn

In summer 2010, Smith and Cuscuna got serious about selling their homemade ice cream. They opened a pushcart during a neighborhood arts festival, where they could test flavors with the public—a smart move, says Hyde.

“Brian had his whole period of doing it as a cart and really understanding demand and understanding what flavors were working; it was rigorous upfront testing to see if there was really a business there,” says Hyde. “This is one of the key lessons for people who are trying to understand bridging a passion project into a business.”

They saw that people were enthralled by their inventive “mix-ins” of fruit, candy, and even maple-candied bacon into traditional ice cream flavors. Moreover, they felt they had a story to tell about childhood and dreams, and their backgrounds—Cuscuna, as a teacher, and Smith, a screenwriter—positioned them to tell it.

They fell in love with a Brooklyn storefront and bargained down its rent. But on the day they were to sign a lease and open their scoop shop, Smith was offered a sought-after executive position at an audiobook company. His two children weighed heavily on his mind as he debated the tradeoff between financial security and pursuing a dream, according to podcast interviews cited in the first case.

A case of wrong investors, mismatched personnel

The outsized branding partnership would set off a wave of questionable decisions.

“It set them on a cycle of, for the first time, raising outside capital, borrowing money from a bank, but also taking equity from venture capitalists,” Eisenmann says. “And that’s where the story becomes catch a tiger by the tail. They just can’t keep up with it.”

The couple turned to venture capitalists with little experience in food and beverage businesses, and with the addition of bank loans, backed by a personal guarantee, were able to raise $20 million. To keep up with the pace of their rapid expansion, they hired people who were not well-matched to their roles.

 “It’s a tricky thing given Brian’s commitment to handmade fresh ice cream with these mix-ins and so forth,” says Eisenmann. “But all the big players in grocery and in retail chains with lots and lots of stores, they use what are called co-packers, third-party factories, that will make ice cream to your specifications. That was always an option for Ample Hills.”

 Hiring a co-packer would have helped Ample Hills scale production in line with store expansion. Instead, the company fell far short of the 400,000 gallons of ice cream it needed to sell annually just to break even on its Red Hook factory, selling about 250,000 to 280,000 gallons per year.

 ‘Taking away part of my family’

When the company’s finance director told the couple in 2019 that Ample Hills was running out of money and may not make it through the lean winter months, Smith and Cuscuna were surprised. Sales had been brisk.

“They built a giant factory costing almost $7 million that required sales that were beyond their reach,” says Eisenmann. “And in the process of all that, didn’t pay enough attention to financial discipline and keeping track of cash in and cash out, [which] can get an entrepreneur into trouble.”

Even with an average store profitability of 15 percent, and the fact that it was shipping its product to 800 grocery stores, the company simply did not have the sales it needed, given the scale of the new factory. If it wanted more sales, it would have to open new stores, but it lacked capital.

The couple appealed to their largest investor for support. They appointed one of the investor’s friends as co-president and ultimately CEO to win over the investor. Even so, the investor wouldn’t commit the capital to bail them out, according to the cases. In 2020, when no investor stepped in to save the company, Ample Hills filed for bankruptcy.

 No more ‘going with the flow’

Smith and Cuscuna licked their wounds, took time off to reflect, and decided to open a new Brooklyn ice cream shop called the Social in 2021 that mirrored the values of Ample Hills—that is, fresh, homemade ingredients and a store serving as a community connection point. They planned flavors like “Oh Captain, My Captain,” a reference to a Walt Whitman poem; another Whitman poem had originally inspired the Ample Hills name. This time, however, they resolved to avoid the pitfalls of their last venture. “They undertook a very structured reflection process,” says Hyde. “They really took understanding what went wrong very seriously.”

 Smith remembered: “We had what I would call a ‘go-with-the-flow’ vibe at Ample Hills. It seems strange and counterintuitive, but that ‘go-with-the-flow’ vibe, when stretched as far as we stretched it, can result in lots of miscommunication, lack of accountability, and unclear roles.”

Lessons for those on the rebound

About half of failed founders relaunch a new business within five years of a business closing, says Hyde. They often jump right back into the same industry and repeat the same mistakes. Instead, Eisenmann and Hyde say that entrepreneurs should follow the lead of the Ample Hills founders and:

Take time off. “The entrepreneur really needs just to get some distance and to grieve the business,” says Hyde. The mourning process might also involve taking time to build new skills, save money, or even just rest. Often entrepreneurs experience life changes that also change the direction of their interests.

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