Dippin' Dots Looks For Next Flash-frozen Hit: Coffee Dots

The guy who reinvented ice cream is desperately trying to reinvent his company � before it melts.

More than two decades ago, microbiologist Curt Jones devised a way to flash-freeze ice cream into colorful pellets about the size of BB's. Now in a tough economy, the outside-the-box company he founded, Dippin' Dots, is searching for a new concoction to take it beyond the quirky-but-costly ice cream's seasonal popularity in amusement parks and stadiums.

PHOTOS: Dippin' Dots seeks profits from pellets YOUNG ENTREPRENEURS: Still in school? Send us your success stories "We changed the way folks eat ice cream," Jones, 49, half-boasts. "Now, we've got to change our business model." Summer is the season when Dippin' Dots rise to the top of every kid's must-eat list. The company does 60% of its business in summer. But in this coming summer-of-the-recession, all bets are off for a sweet treat that at $5, $6 or even $7 a pop can cost cash-strapped parents as much as they're used to plopping down for a burger.

FIND MORE STORIES IN: United States | Illinois | Las Vegas | Shaquille O'Neal | Superman | Lindsay Lohan | Santa Cruz | Jacob | Paducah | McDonald's | Joe Frazier | Metropolis | Carvel | Entrepreneur Magazine The dots, cryogenically frozen with liquid nitrogen at 320 degrees below zero, are so tongue-tinglingly cold and flavor-packed that it's hard for most kids to resist. The question is: Do Dippin' Dots have legs? "You've probably made up your mind that you're going into poverty when you step inside an amusement park," jokes Howard Waxman, publisher of Ice Cream Reporter, a trade magazine. "But something this pricey is an especially tough sell at retail outside the amusement park." Which is precisely where Jones hopes to go with the brand this summer via upcoming rollouts of Dots 'n Cream ice cream blends and ice cream cakes. Yet that may be the least of Jones' challenges.

Dippin' Dots is several million dollars in debt after years of lawsuits and countersuits. Jones says although his company has millions of dollars in assets, the bank can foreclose on it at any time. Rivals have successfully sued Jones for filing an invalid patent. After stepping aside and letting someone else run the company for several years, founder Jones recently returned as president in a recession.

It hasn't been easy. With sales tanking, he found himself laying off nearly a quarter of the company's payroll � including the president and operations chief. And desperate for cash, he came within a whisker of selling the company.

So why is Jones still smiling? Because Jones � whose company has regularly ranked high atop Inc. magazine's list of fastest-growing privately held companies and Entrepreneur magazine's fastest-growing franchises � has got another big idea.

This one, Jones hopes, will finally take Dippin' Dots outside the arena of seasonal treats. He's about to take a similar colder-than-cold instant-freezing process that makes Dippin' Dots so delectable and redirect that technology to fresh brewed coffee. That's right, coffee dots. Add hot water and presto, "fresh-brewed" coffee without brewing.

Just as he dubbed Dippin' Dots the "ice cream of the future" two decades ago, he says the new coffee dots will adopt the slogan "coffee of the future." It's still early, but he's thinking about naming the new coffee dots Smokin' Joe. He will roll it out next month in Las Vegas when the specialty coffee world gathers for its trade show, Coffee Fest. His once-kid-targeted dots will get a very adult twist.

"I hesitate to tell you about this," admits the microbiologist, entrepreneur and go-to idea guy. "I'm afraid someone will steal it." He's got good reason. After spending more than $10 million the past decade in court battles, the company was stripped of what may be its most important franchise: the Dippin' Dots patent. After a rival's lawsuit, a court ruled in 2003 that Dippin' Dots did not supply all the required information for its original patent. So now, anyone and his brother � with access to liquid nitrogen � can make 'em using the process that Jones devised.

Lots of competition Several companies are making similar versions. There's IttiBitz. There's Mollicoolz. And there's Mini Melts, which is the company that successfully challenged the Dippin' Dots patent. More competition is likely on tap. Dippin' Dots is so wildly popular at family attractions including Hershey Park and the Santa Cruz Beach Boardwalk, that it outsells all other desserts by more than 2-to-1 at both locations.

"It's become the benchmark in our industry," says Ken Whiting, CEO of Whiting's Foods, food and beverage operator on the Santa Cruz Beach Boardwalk. "Everyone wonders: What's going to be the next Dippin' Dots?" He is asked that very question during a factory tour where he stops to admire the towering stainless-steel tanks where Dippin' Dots are made.

Jones isn't sure what will be his next hit. "It's hard to create a product that people really like." Which is why he's got several new products in the hopper.

For one, there's Dots 'n Cream, an ice cream with Dippin' Dots mix-ins that can be sold at supermarkets and kept in conventional freezers. He's also working on ice cream cakes that he thinks can compete with those from Carvel and Baskin-Robbins.

He's close to coming out with low-cal, low-fat Dippin' Dots that could be sold at schools. He's considering "frappe dots" that, when mixed with milk, would mimic the taste of Frappuccinos. And he's working on Fridgets, which are Dippin' Dots clustered with candy or cookie pieces.

Then there are the coffee dots on tap next month.

"I've always been a big thinker," says Jones. "A part of me still thinks anything is possible." That's been his motto since he was a twentysomething in 1987, when Jones and a neighbor were making ice cream. The two were trying to figure out a way to freeze homemade ice cream faster so it wouldn't taste so icy. Jones, a microbiologist, realized a project at his work related directly to the ice cream he wanted to make.

He took the ice cream mix to his lab at work and ultimately concocted a way to cryogenically freeze ice cream into tiny beads. The instant freezing means the ice crystals are one-thirtieth the size of ice crystals in conventional ice cream, so the product tastesmuch creamier � and much less icy.

People who tried it liked it.

So, less than a year later, Jones left his day job to produce Dippin' Dots out of the garage at his parents' farm in Grand Chain, Ill. Within two years � with amusement parks starting to nibble at the kid-friendly junk food � he moved the operation into a former liquor store in Paducah.

Things took off from there. By 1995, it moved into a giant facility in Paducah, then nearly doubled its size a year later. Its popularity grew so fast that by 2002, hundreds of McDonald's on the West Coast started to sell it. Celebs caught on, too. Basketball star Shaquille O'Neal is a big fan. Even A-lister Lindsay Lohan has been spotted with them.

The Oprah effect Then, the big break: Oprah Winfrey had Jones as a guest on a show about quirky ways people get rich. Sales surged, says Jones, after the often-dieting Winfrey nibbled some Dippin' Dots on the show � and gave them a thumbs-up.

Of course, Oprah's blessing can only take you so far. If the costly lawsuits weren't enough to rock the financial stability of the $40 million company, along came the recession, which resulted in Dippin' Dots' sales slipping 11% in 2008. Even before the recession, the company suffered its first loss in 2007.

"We went from being a company whose product everyone loves � and a company that makes money every year � to one that couldn't even get financing," Jones says.

But with the new product rollouts, Jones hopes Dippin' Dots will stop losing money in 2009 .

One possible path to profitability: retail sales. The company has 200 franchisees that sell Dippin' Dots at everything from stand-alone storefronts to mall kiosks.

Its biggest store sits off the town square in Metropolis, Ill., also known as the adopted home of Superman. It's where Cathe Glass of Metropolis hosted son Jacob's college graduation bash this month. "Dippin' Dots were the big draw," she says, as more than 125 guests showed up.

At a mall store in nearby Paducah, 6-year-old Paige Pope makes the twice-a-month trek with her mom for the same reason. She goes for the rainbow Dippin' Dots. But, says her mom, Alisha, "She asks for them more than she gets them." All this is a long way from the 276-acre farm where Jones and his family would crank out homemade ice cream two or three times every summer .

That's where he became an ice cream lover. Despite the 38 Dippin' Dots current flavors, from rainbow to banana, Jones remains a vanilla kind of guy.

Near the end of the factory tour, Jones steps inside the cavernous, 40-degree-below freezer, where the ice cream bits keep their unique shape. He seems utterly unfazed by the cold blast.

"Who knew that Dippin' Dots would take off the way it has?" he says. "Who knew?" he repeats.

Frigid air and a visible frost are on all sides of him, but Jones smiles the kind of smile that bespeaks an entrepreneur's optimism. In here, Jones seems at home with the endless stacks of Dippin' Dots. In this deep freeze, he's numb to all the challenges on the outside.

And, right now, this just may be the safest place to be.

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