The branding challenge for Forte Gelato, a maker of all-natural, high-protein gelato, is an unusual one: the product may be perceived as simply too good to be good for you. Today’s consumers are rightfully suspicious of big claims, particularly when it comes to “healthy” snacks. Though ice cream is still a $10 billion dollar industry, it is steadily losing favor as Americans become more health-conscious. Unfortunately for consumers, products that claim to be healthy also tend to be more reminiscent of cardboard than real food.
But Forte’s four gelato flavors (ginger, espresso, chocolate, and vanilla) are all designed to be creamy and rich while managing to be to high in protein and low in fat. In short: the very differentiators that should launch Forte to top of grocery lists are the very same characteristics that tempt consumer suspicion. Herein lies the challenge — and opportunity— for Forte.
Adrian Pace, Forte’s founder and CEO, understands this suspicion. His congenital heart condition required five separate heart surgeries before 2007 when he was told he needed a transplant. All of these surgeries and the nine months he spent in the cardiac care unit of NewYork-Presbyterian Hospital meant a lot of hospital food. And it was bad.
“I was given these unpalatable supplements, many of which were in the form of ice cream but weren’t really ice cream,” he says. “Everything about them was awful: the packaging, the ingredients, the way they tasted, even the nutrition facts. They just made you feel worse.”
Before checking into the hospital, Pace had worked 15 years on Wall Street, first as Broker, and later as a General Partner of a hedge fund. But in the seemingly endless stretch of time while he was stuck in the hospital, waiting for a heart, the idea of making an ice cream or gelato that was better in every way started to take hold. “I wanted to try something new, something that was a little more satisfying than the world of finance, something that could have an immediate satisfying impact on people and make a difference.” Pace spent the next years formulating his recipes. In the end, he came out with a protein-rich gelato that is absolutely delicious.
We asked Pace to about the inherent challenges in making a high-protein ice cream, how he snagged a co-packer, and what’s ahead for Forte once this funding round closes.
Let’s start with formulating: how did you get more protein than any other brand on the market?
Protein, when you get into high levels, is a very difficult thing to include in ice cream without the texture go awry. There are some brands out there that are doing more of a mid-tier, with twice the protein of normal brands, giving their ice cream up to 6-9 grams. But once you get beyond that it becomes highly problematic. The proteins denature, they absorb water and they gel. Our protein formula is heat stable, so it avoids that problem. But it’s a very tough thing to do and it took a very long time to create our proprietary formula.
And how did you go about solving that problem?
I read as many food science books as I could find; I took the ice cream short course at Penn State, I studied gelato with Carpigiani; I met with people in the protein industry, and got samples of over twenty different kinds of proteins: milk, soy, hydrolyzed, casein, whey. Every variation. And then I tested combinations for taste and texture and their ability to handle heat and pasteurization. That takes a long time. One batch of gelato takes about a day to make start to finish, so imagine all the different combinations from all the different blends. In the end we created a formula that was heat stable, clean tasting and had a smooth gelato like texture.
The taste and texture are everything. For protein bars, you can make a range of texture and consistency that work — anything that’s chewy or crunchy can be a good protein bar. But in ice cream or gelato, there’s only one good texture: smooth and creamy. So if you can’t achieve that, your product isn’t going to be as good. And people may still buy it because it’s better than nothing. But that’s not what we want to do. We make real gelato with the side benefit that it’s good for you. We strove to make Forte the gelato that’s better in every way; better taste, better texture, better ingredients and better for you.
Fortified gelato is a new idea… How’d you validate this is something that Consumers actually want?
I researched the market: its size, distribution channels, the cost of moving product around, how big the margins can grow. I also met some people who worked on big brands in the frozen section, like Marie Callender’s. From them I learned that the rules are very different in the food world than on Wall Street. In this industry, you must trust then verify. That’s just how it is. However, the market for functional foods is an established one with protein being among the most sought after functional ingredients. The question was whether or not consumers were looking for function, specifically protein, from their dessert. What we’ve learned is that the answer is yes as long as you satisfy the desire for enjoying a rewarding dessert first, and delivering the added benefit of it being good for you second.
How did you approach manufacturing? Did you start in a small kitchen or a factory?
From the beginning the manufacturing had to be in a factory. Ice cream is a large volume business. But there’s a catch 22 in the industry: manufactures only want to work with companies producing large volume, but you can only start to produce a large volume once you have a manufacturer. We did all of our initial formulating in our test kitchen and we still do as we develop new flavors, new formulas and new products. Our finished product is made at a professional ice cream processing facility. This is one of the aspects of our business that was attractive to me as a former hedge fund manager. This business doesn’t need to allocate large capital expenditures for equipment and space or have the ongoing expenses of laborers and regulation compliance. We just pay for what we produce, as we produce.
How’d you land your first co-packer?
I met with protein suppliers first. They try to find clients who are going to be worth their time, much like a co-packer. They’re not really interested in selling a couple of pallets of product to somebody, they want to sell many, many pallets. I just started networking in the industry, asking people who I should speak to, making phone calls, setting up meetings, and then flying out to see them at the plants. One was a protein factory in Wisconsin that does huge business in the United States. I got a tour of their facilities, had a meeting in their board room, asked them if they had co-packers they’d recommend. They drove me around Wisconsin for fifteen hours, meeting with ice cream co-packers and vouching for me. We’re still working with that team today.
You do some direct-to-consumer business, right? How’s that been for you?
It’s a tricky thing in the ice cream business to sell online. Shipping is very expensive. It cost $20 per cooler, dry ice can cost you another $20, and shipping can cost $60—you can be $100 in before you even put the product in there. The only way around this is to find a fulfillment center that specifically knows how to handle ice cream. And then you can work off their economies of scale, where they’re getting coolers and dry ice and shipping at huge discounts. All of a sudden you’re all in costs are closer to $25 for half the country, suddenly your margins are about the same as with distributors and stores.
But again, ice cream is a tricky business—you’re going to have product lost in the summer time; if UPS can’t deliver on the estimated day, the product is going to sit around for another 24 hours and it’s guaranteed to be melted. Ice cream and gelato are made of the most complex matrix in the food industry. They are a solid, liquid and gas all at once trying to maintain a delicate stability during transportation.
But I have to say I’d recommend it to anyone. Not only do you have another channel that your business can generate revenue, but you also have a national sampling campaign. A profitable one, at that. We’re in about 400 stores around the country, but we have also been shipping product through our online business to almost every state with those customers sharing their experiences with friends and on social media amplifying our exposure.
What’s been the biggest challenge in regards to manufacturing?
In the ice cream world, the smallest batch you can make is about 25,000 cups of a single flavor. And we have to buy the packaging in 50,000 increments. So if we want to launch a new flavor, we have to have the designs done, but then buy 50,000 cups and lids, and we haven’t sold a cup yet. You have to lay out a lot of initial capital in the ice cream world to create large quantities of your packaging before you’re able to just produce as you go. So for us the biggest challenge was making sure we had the money to move forward. We initially launched with just vanilla and chocolate in cups that could share the same lids. Now we’re in our 4th redesign of our packaging with all flavors having their own look and feel individually and collectively, including their own display case to help draw attention to them on the shelf.
What brought you to CircleUp?
I was at the fancy food show, and CircleUp was there. They came up to me and said, “I love your brand, if you ever need capital, let us know.” And I have about ten Wall Street investors in our company, so I said, thanks but we’re good. But then it came time where I wanted to do a bigger funding round and it’s just not respectful to go back to the same investors too many times, even if they have the money. You don’t want to take advantage. I also wanted to expand our network meet new people, and take us to the next level. That’s exactly what we’ve done.
What was the biggest challenge in team building?
In our particular business, we use brokers, so they’re both the first hires and independent contractors. Hiring brokers is a tough thing. A team of brokers that is big enough to get you into new stores nationally, often doesn’t have the time or interest in really paying attention to a small brand like us. We met with dozens of broker teams at various trade shows. But they were often just too small, they had just one person or a handful and couldn’t open the doors we needed. Our first broker didn’t work out well and it was a huge headache. Our current team is great, we found each other at one of the several trade shows we attend. We also just signed another team member to oversee our sales initiative leveraging his deep connections in the industry to fast track our 2015 growth and do it with greater cost efficiency.
What financial advice would give a new entrepreneur in the food space?
Make sure you have enough initial capital to run the business and know how and where to allocate money. You have to spend money on a very focused level. If you get into a large chain and they want you to do a demo at $160 a pop for a hundred stores, one round is $16,000 and you might need to do multiple rounds. That’s a lot of money when you’re starting out. And that’s for one store brand, if that brand wasn’t a good fit you could have spent your money better elsewhere. The best way to properly appropriate funds is to know your business. Once you know the ins and outs of the industry, know your product and know your customer, you’ll be able to make the right decisions on how to maximize allocation of capital to grow efficiently and profitably.
How will this funding be used?
First, working capital to fulfill order growth and add new flavors. Second, new forms, different sizes: Pints, quarts, and bars. And then we’re also working with an off-the-charts fantastic marketing company to reposition the brand based on what we’ve learned. Right now the way we package and advertise emphasizes the high protein, which makes some people believe it’s not going to taste good. We’ve sampled thousands of people, and we always get the same reaction: “Wow this is really good!” It sounds like a compliment, but what they’re really telling us is that they didn’t expect it to taste good. We need to flip the message a bit so that people can quickly understand it’s a gelato that’s better in every way possible, and that’s exactly what we’re going to do.