In 2017, Halo Top became the #1 selling pint of ice cream in the United States and was even named one of the top inventions of the year by TIME Magazine. The ice cream was one of its kind, igniting an entire category of low-calorie and high protein products where top companies even launched copycat competitors to get in on the craze. Halo Top was co-founded by former lawyers, Justin Woolverton and Doug Bouton, and the brand had one of the most dramatic growth stories within the CPG industry—going from $2 million in sales in 2015 and skyrocketing to over $300 million in just two years.
Today, Bouton is starting his next brand as he takes aim at a category that is double the size of ice cream: chocolate. In 2021, Bouton founded GATSBY Chocolate, the lowest calorie chocolate on the market, and already released nearly 10 products with ambitious plans to introduce more innovations this year, including unique products like Peanut Butter Cups (for only 50 calories per cup!) and an upcoming Oat Milk-based line that is vegan and plant-based. I sat down with him to talk more about the lessons he learned in Halo Top and how he is applying those experiences as CEO of GATSBY Chocolate.
Dave Knox: Before launching GATSBY, you were the co-founder of Halo Top. But your professional background was as a lawyer. How did that first entrepreneurial journey begin?
Doug Bouton: I always like to say it’s a straight line between taking the bar exam and making ice cream. I graduated college in 2007 and, with the economy the way it was, it was an easy decision for me to say, “Hey, I’ll keep the school thing going for a little bit.” I looked at a list of the Fortune 500 CEOs and it had their degrees beside them. A ton of them had MBAs, but I noticed a ton had law degrees as well. I figured I could go to law school and it would open doors of opportunity for me, so I went into law school already knowing that I didn’t want to practice law.
My former business partner, Justin Woolverton, the founder of Halo Top, created the original recipe in his home kitchen. He was a lawyer as well and we met in a lawyer basketball league of all places. As I was getting ready to quit my current law firm, he told me about this healthy ice cream he had made in his kitchen. He needed a partner to help raise money and scale the business. I took the leap of faith, and I think both of us naively thought it would be easy. We thought the product was the best thing since sliced bread and if we just got it out there, it would fly off shelves. We were humbled quickly in that respect!
Knox: With both of you coming from a background on the legal side, how did you divide up what you’d each focus on with Halo Top?
Bouton: A lot of people get caught up on this about trying to find somebody with complementary skill sets. It’s just my two cents, but I couldn’t disagree more. Nothing is rocket science and anything can be learned. It’s more important to have similar work ethics, similar passions, and similar ways of styles of working. Those are the critical things in finding a successful business partner, as opposed to “he’s great at marketing and I’m great at supply chain.” Justin and I complemented each other so it allowed us to be great partners and divide things up. Initially that meant he started with finance and marketing, while I focused on sales and supply chain.
But that wasn’t because of our experience by any means. We had to learn everything from the ground up. That stayed true as we grew. As we started growing and had to hire people, I found out the hard way that hiring somebody based on a resume, who has a decade of marketing experience is often a way worse hire than just hiring somebody who is younger and hungrier and less experienced. Someone who has that go-getter mentality, will do anything and everything and will work their ass off. I learned that one the hard way.
Knox: If you aren’t looking for someone’s professional experience, how do you find the right mindset and talent?
Bouton: It’s really hard. We made so many mistakes, so a lot of what I’m saying today is hindsight 20/ 20 and taking those lessons learned. Our first hire was famously our worst hire, and we had to move on pretty quickly from them. What I would look for usually is not the resume builder. Not somebody who’s done the right things or checked the right boxes, always looking for the next promotion. Somebody who’s focused on title or somebody who’s focused on promotion are just huge red flags for me. I want somebody who’s just like, “I will join for anything. I don’t care about my title. I don’t even care about my salary. I just want to help. I’m so fired up about what you guys are doing. What can I do?” If you can find that type of person, jump and hold onto them for dear life. They will be the best hire that you ever make.
The other thing I’d say that goes against conventional wisdom is that friends and family are the best hires. Those are people who you know intimately and who know you intimately. They are people who you, in theory, can trust. They are people who will treat it as more than a job. I think that’s a huge part of startup life—finding somebody who treats it as more than a job.
Knox: In those early days of a startup, how do you suggest entrepreneurs tackle those unfamiliar challenges?
Bouton: It starts with outside the box thinking and using a few tactics. First, you just must have this insatiable desire to learn. You need to want to talk to anybody and everybody, and just learn about who they are, what they’re doing, how they do it and why they’re doing it. That curiosity needs to be in your DNA. Second, you need to go in with the beginner’s mind, using first principles logic of Silicon Valley. You need to come in and ask questions like, “Why are you doing that again? Why is that important?” And then being able to not accept their answer as gospel, but think through their answer and say, “Does that make sense?” Or is there a better way to think about this or do this? That’s the crux of innovation. It is about finding gaps and finding places that you can really have an opportunity to do something special.
Knox: As the business started to quickly scale, did you always have the aim to sell the business at some point?
Bouton: It definitely was the plan. We didn’t want to be the metaphorical Ben and Jerry’s selling ice cream 60 years from now. It was our intention to exit from day one. What was interesting about our story is we had crazy growth where we went from $2 million in gross sales in 2015 to more than $350 million in retail dollar sales in 2017. That’s over a two-year period from $2 million to $350 million. It’s the most incredible growth curve I’ve ever seen. To be a part of it and have a seat there at the table, it was amazing. The downside was we grew too quickly to be acquired. When you grow that quickly, it’s not as linear as from $2 million to $20 million to $50 million to $75 million to $100 million. That’s a more standard growth curve that companies can wrap their heads around. From $2 million to $300 million, nobody could really wrap their head around it. We got an offer in 2017 to sell the company for $50 million dollars. We walked out of the room asking if they meant to add in another zero there.
Then in 2018 and 2019, we faced year-over-year declines because that’s when the competition entered the market. We were on the other side of the growth curve. Even if you do $250 million, that doesn’t look as great compared to when you did $300 million the year prior. We had a difficult sales process because we grew too quickly to sell at a peak and then we had to sell while we were trying to explain a year-over-year decline and how we were stabilizing the business. It was always the plan to sell, but the best laid plans often go awry.
Knox: How have you taken those hard earned lessons about the growth of Halo Top and applied them to your next business with GATSBY?
Bouton: The further removed I get from what I now call legacy Halo Top and the sale, the luckier it feels. We worked our tails off and I do believe you make your own luck in life. But it does feel like that one was as thin as a razor’s edge in terms of being successful or failing. We fortunately fell on the right side of that razor.
At legacy Halo Top, we had never set a company culture by writing down a company mission or the like. We were so hell bent on being what we called anti-corporate and not having these corporate formalities or bureaucratic machine that slowed everything down. We wanted to stay nimble. But as you grow in scale, these things like a company mission become so important because at some point you don’t have a personal relationship with everybody. What I’ve learned in hindsight, is there’s a balance. It is critically important to provide a solid foundation in terms of people and team, as well as culture and mission on which you can build. If you have done that, when you face tough times, it can be the guiding light through the dark days, the north star that you look to.
The second lesson is really focusing on the process and not the results: the journey, not the destination. Focusing on only what you can control, not what’s out of your control. It’s a challenge for me. We’re all human and it is tough to block out that external noise, to not focus on your competitors, to not be on LinkedIn and to note worry about who just raised a $10 million Series A. The noise can be poisonous to your morale and your state of mind. What’s important is focusing on what your team does best. Focusing on the process and controlling what you can control. It is hard to have the discipline to do that. To me, it’s about revisiting that regularly and instilling that in the organization.
Knox: What was the inspiration for launching GATSBY Chocolate as your next venture?
Bouton: My favorite days of startup life are the grind, the early days when it’s just you and a small team. It’s so intimate, it’s so intense, but it’s my absolute favorite. I definitely had forgotten just how damn hard it is. But now that I’m back into it, I couldn’t be happier, but it is not easy.
With the GATSBY team, we asked ourselves what we wanted to do next. We had a non-compete so we couldn’t get back into ice cream, but anything outside of ice cream was fair game. We looked at a lot of categories. Ultimately, we settled on chocolate for a couple of reasons. Number one, there wasn’t any other low-calorie chocolates out there. Even the low sugar chocolates like Lily’s have almost as many calories as a brand like Hershey’s. Number two was the size of prize. The chocolate market in the US is twice as big as the global ice cream market. The sky was the limit with the innovation we could do and it was going to be a fun category to tackle.
Knox: Once you decided on the category, how did you start to tackle that insight around low calorie?
Bouton: It starts with a core product and a core formula. We spent over a year developing our recipe and this is where you try to do everything you can to cut calories. This isn’t rocket science to people in this space, but you try to cut the sugar, add protein, add fiber and cut the fat where you can. At the end of the day, the product has to be mind blowing. You aim to get to the point where the product itself will retain virtually everybody who tries it because they’re just blown away by how great it is in terms of taste and texture and nutrition.
Once you do that, phase two of innovation is to become innovative across multiple dimensions. Nobody has our caloric play but what else can we do to push the envelope when it comes to flavor or format in addition to nutrition? In the near term, we will be coming out with new products that not only have the nutrition play but will really surprise and delight everybody with something that’s very new in terms of flavor and format.
Knox: Once you have that differentiated product, how do you think about the right choices to make with distribution?
Bouton: For any brand, it starts with your product. It’s not worth acquiring a customer until your product will retain that customer. If you haven’t reached that threshold, I wouldn’t spend one dollar or one second of time acquiring anybody. Until you have reached that threshold, then you look at those different revenue verticals.
But I think there is not nearly enough focus on profitability, particularly your unit economics, and having a healthy, gross margin. The focus is usually on revenue and multiples of revenue that drive your valuation. And that leads to “successful” brands that that still aren’t profitable where they are losing tens of millions of dollars a year, and have even gone public.
That’s just crazy to me. That’s not to say you can’t have success that way, but it’s like trying to catch lightning in a bottle and winning the lottery. Or you can try to position yourself for the best chance at success, to make it probable instead of lucky that it happened. If you focus on profitability, particularly those unit economics within the revenue channels, that’s the critical piece. Don’t chase millions of dollars in D2C revenue, for example, if it’s going to cost you more to get that. I know a lot of brands that are doing $20 million in sales but spending $20 million in marketing to get those sales. You are doing all this work and all this effort, and you are just a hamster on a wheel, because at the end of the day, you still have zero or less if it’s not profitable. That’s something that we learned the hard way and are paying very close attention to at GATSBY.