According to the case study, Dippin’ Dots is the manufacturer of flash-frozen small ice cream beads as well as sherbet, yoghurt, and flavored-ice products. The company’s founder, Curt Jones, has invented the process of ice cream freeze under the very low temperatures. The organization has more than 200 employees. Its manufacturing facilities are in Kentucky. It sells Dippin’ Dots products in all the US states as well as 11 other countries.

However, the promising innovative idea faced numerous challenges. In 2011, Dippin’ Dots appealed for the protection from bankruptcy. The key reasons were the high liabilities before the lenders as the result of costly patent litigation process as well as sharply decreasing sales and high operating costs. The number of international franchises became stagnant, while the number of domestic franchises was not growing steadily.

Problem

The key problem of Dippin’ Dots is the poorly established distribution channels that limit the access to the customers. Despite the high investments in the research and development as well as focus on the marketing activities, Dippin’ Dots does not have a clear strategy on how to cut costs to be able to compete with the corporate giants, such as Unilever and Nestle, as well as private labels in supermarkets. Despite claiming that Dippin’ Dots is “The Ice Cream of the Future”, the company is stuck in the past with the presence in scoop-shop retail and inability to be present in the supermarkets due to the complexity of the storage equipment and a high price for the products.

Analysis

SWOT analysis was selected since this tool assists in identifying the weaknesses of the company as well as opportunities to pursue and threats to monitor. It examines the strengths that can deliver the growth in the external environment and describes how to mitigate weaknesses to achieve the maximum from the market opportunities (Bolland, 2017).

The strengths of the company identified in the case study are:

1. The innovative nature of the business – flash-frozen ice cream produced under very low temperatures.

2. Strong current management – visionary innovator CEO, Curt Jones, and experienced president, Scott Fischer.

3. High quality of the products, in particular, richer taste and texture.

4. A variety of products lines, including the introduction of the recent Dinner Dots, Monster Munch, and Kettle Corn Dippin’ Dots.

5. Entering the market segment of healthy ice cream with Chillz: coffee dots innovative products.

The weaknesses of the company are:

1. The high operating costs due to the outdated equipment and inefficient manufacturing processes.

2. Serious issues with patent protection.

3. High liabilities before lenders.

4. High price for the ice cream.

5. Complexity of transportation and storage of the flash-frozen ice cream.

6. Despite the introduction of the mix of the conventional ice cream with the super-frozen beads, the products were present only in a few locations.

7. Low presence in supermarkets.

8. Dippin’ Dots products should be eaten near the mall or kiosk or store due to the specific serving and storage needs.

The threats present in the ice cream industry are the following:

1. Growing competition from the similar franchise operators, such as Ben & Jerry, as well as from those companies that copy the idea from Dippin’ Dots, namely Mini Melts and Frosty Bites.

2. Aggressive introduction of the new products by the corporate giants trying to woo the customers from the competitors by the new products and loyalty schemes.

3. Flat market regarding the past growth of sales.

The opportunities that can be explored by Dippin’ Dots are:

1. Further innovating and attracting attention of the customers that increasingly require new “Surprise” products to switch from the competitors.

2. Economic growth that would influence the level of customers’ income.

3. Change in the lifestyle with the priority of family time spending and tasty ice cream eating.

4. Adding new distribution channels to boost sales.

Thus, SWOT analysis helped see what weaknesses should be overcome to pursue the opportunities and minimize the impact of the threats. In order to boost sales, Dippin’ Dots must reevaluate its key distribution channels. Therefore, the key weaknesses that should be addressed are the high cost for the ice cream, dependence on the unique storage, and transportation issues.

At the same time, in order to understand whether Dippin’ Dots has the chances to boost sales and achieve the desired level of profits, there is a need to analyze the strengths of key industry forces (Thompson, Peteraf, Gamble, & Strickland, 2014). It can be achieved by the means of using Porter’s Five Forces analysis.

The bargaining power of suppliers in the ice cream industry is medium since Dippin’ Dots can access the raw sources, such as milk, sugar, and other ingredients, but their quality must be high.

The bargaining power of buyers is medium. Nowadays, there are a lot of customers who like ice cream, but the level of their brand loyalty is low, and sophisticated demand with the focus on nutrition, quality, and novelty can hinder the sales (Hosch, 2018).

The level of competition is very high. Together with the large corporations, such as Nestle and Unilever that apply the strategy of mergers and acquisitions, there are numerous private label brands that specialize in regional sales.

The threat of new entrants is medium since there is always a place for the innovation in the ice cream industry that allows the new player to win the market share from the competitors.

At the same time, the level of cost savings that the large corporations have, their marketing budgets do not allow the new comers to reach higher profits.

The threat of substitutes is medium. The customers have a variety of choices to replace ice cream with other delicious items. At the same time, ice cream became the part of the traditional free time spending, especially among families.

To conclude, Porter’s Five Forces analysis demonstrated that the ice cream industry is highly competitive with the growing sophistication and demand of the customers, where the costs level, price, as well as marketing activities highly matter. At the same time, the strengths of the majority of forces are medium, which gives the place for growth, especially for the innovative companies.

Alternatives

The limited distribution channels do not allow Dippin’ Dots to reach a large share of customers who prefer take-home option for ice cream. The list of alternatives is the following:

1. A first alternative that might allow to add supermarkets into the distribution channels is to switch from the much-narrowed market niche – only specialized flash-frozen small ice cream beads. The company may still use the differentiation strategy with the higher prices.

2. A second alternative of how to increase presence in the supermarkets is to focus on cost leadership to attract value-for-money customers.

3. A third alternative is to continue being present via the specialized retailers due to the extreme competition in supermarkets segment.

Recommendations

In order to make the recommendations, it is necessary to give data from the market research data and forecast for the nearest five years. According to TechNavio (2016),“the take-home ice cream products segment currently dominates this market and accounts for more than 50% of the total market share.” The customers’ demand in this segment would be driven by the varieties and innovative favors (GrandView Research, 2018). The share of the sales in supermarkets is growing and would be more than 50% of sales due to the convenience and price advantage (Mordor Intelligence, 2018).

Regarding the aforementioned, a blend of first and second alternatives is the following. Dippin’ Dots must heavily invest in the enhancing of its internal manufacturing processes to make the producing of ice cream cheaper. Moreover, the technologies must be focused on the development of the products to appeal to the large share of customers who prefer take-home option. The ability to cut costs for the ice cream might require refusing from the brands that are cost inefficient due to the complex storage and transportation options.

The course of action for Dippin’ Dots includes the development of the strategy on what products to leave and what to develop more to boost sales in the supermarket. It has to be implemented through the focus on the combination of the conventional ice cream with the flash-frozen ingredients to boost the interest of the value-for-money customers. Thus, the difficulties in special storage and transportation must be addressed.

Conclusion

Dippin’ Dots is losing the appeal to the high number of the customers preferring take-home ice cream option due to the limitations in the retail presence. The company distributes its flash-frozen products mainly in shopping malls, fairs, festivals, and water parks but lacks the established relationship with the supermarkets as well as vending distribution. In order to boost sales, it is recommended for Dippin’ Dots to invest in those brands that could be more cost efficient as well as be innovative to attract the interests of the buyers. It should be executed via making the storage and transportation easier and proposing unique combination of conventional ice cream and innovative ingredients. With these products – innovative in nature but cheaper than the current products – Dippin’ Dots can compete with the large corporations in the supermarket segment.

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