The stealthy snacking giant behind Dippin’ Dots, Icee and other popular treats
When Gerald Shreiber acquired a struggling soft pretzel company out of bankruptcy for $72,000 in 1971, a foundation was laid for one of the most successful, yet largely unknown, businesses in snacking.
J&J Snack Foods has since evolved into a juggernaut across the food space with a portfolio of well-known brands, including Dippin’ Dots, SuperPretzel, ¡Hola! Churros and Icee, even if the company name itself is largely unrecognizable to the average consumer.
Built around the motto, “Fun served here,” J&J’s roughly 30 brands are available across nearly every retail channel, from movie theaters and amusement parks to supermarkets, convenience stores and restaurants.
“Gerry used to say it was dusted from ashes,” Dan Fachner, J&J’s CEO, said of the company. “He built what it is today, and last year we did roughly $1.5 billion [in net sales.] It’s a good story with a lot of great brands.”
Few executives are as familiar with J&J as the 64-year-old Fachner. He has worked for the company since 1979 when he started repairing Icee equipment and delivering the flavored syrup used to make the frozen concoctions to retailers.
Fachner rose through the ranks at Icee, gaining experience in everything from finances and operations to sales and marketing, before assuming the role of president. J&J eventually purchased Icee in 1987, bringing Fachner into the fast-growing snack food company. When Shreiber retired in 2021, Fachner was chosen as CEO.
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Christopher Doering/Food Dive
He has been careful not to drastically alter what made J&J successful. But Fachner’s appointment, as only the second CEO in the company’s more than 50-year history, provided him with an opportunity to rethink how it sold and marketed its fun-focused brands.
He has used the opportunity to refresh the company’s executive ranks, often going outside J&J to bring in experience from other CPG sectors. Within 10 months of taking over, Fachner hired his CFO from Walmart and added a chief marketing officer with 23 years of experience from Coca-Cola. It marked the first time J&J had an executive to oversee marketing company-wide in its history.
“Like a lot of founder-led organizations, [Shreiber] was kind of the heart and soul of everything that happened, and at some point it has to be bigger than you,” Fachner said. “I found when I got here some opportunities to what I believe will take us to the next level.”
Todd Brooks, an equity analyst at Benchmark, noted that J&J has amassed a “unique collection” of brands that are leaders in their respective categories. He praised the executive team’s work on spurring innovation, accelerating cross-selling among its brands and improving margins since it took over.
“They’ve really professionalized the business so dramatically over the past four years,” Brooks said. “I honestly don’t think they get enough credit for the work they’ve done because so much of it has been masked by outside influences” like the pandemic and supply chain disruptions.
Shake it up
During much of its existence, J&J executives showed little willingness to change how they ran the business.
Sales to stores, foodservice and bakeries — the three segments responsible for its $1.6 billion in annual sales — were run independently within the company. Brands were largely siloed, too. A product did so well in one category, and was often a market leader, there was little incentive to mess with success by bringing it into a new domain where a similar performance was far less certain.
The structure led J&J to miss out on sales and limited its ability to tap into efficiencies, resources and innovations embedded within its snacking portfolio.
“For a long time, this was a company that really didn’t do much, and kind of just kept doing what it was doing,” said Connor Rattigan, an analyst at Consumer Edge. “Obviously in CPG, the world is constantly evolving. They’re constantly talking about innovation and that really kind of didn’t happen for a long time with J&J Snack Foods.”
Fachner made changing that a top priority.
Each employee at J&J is given a laminated card outlining five strategies and seven principles they are expected to adhere. Fachner carries his card in his wallet. One of the key principles centers on collaboration among brands and business units. Fachner holds quarterly meetings where leaders discuss ways they can work closer together.
A big part of that centers on cross-selling among its brands. A salesperson with a close relationship at a larger retailer is encouraged to use their connections to open the door for a colleague to sell another product, providing instant credibility and shortening the time to market.
Few brands exemplify this strategy and the growth potential for J&J more than Dippin’ Dots.
For much of its 36-year existence, the beaded ice cream was a staple of outdoor fairs, sporting events and amusement parks. Fachner, who for years had observed Dippin’ Dots alongside J&J’s offerings at the same venues, lobbied hard for the food manufacturer to buy it, finally getting his chance two years ago. J&J purchased Dippin’ Dots for $222 million — the largest acquisition in the company’s history.
“They’ve really professionalized the business so dramatically over the past four years. I honestly don’t think they get enough credit for the work they’ve done because so much of it has been masked by outside influences.”
Todd Brooks
Equity analyst, Benchmark
Since J&J added Dippin’ Dots to the fold, it has aggressively expanded where the frozen novelty is sold, often partnering with corporations that already carry its other snack products. Movie chain AMC, which has offered Icee and SuperPretzel for decades, started selling Dippin’ Dots in 2023.
A similar cross-selling strategy emerged at the restaurant and entertainment chain Dave & Busters. It began carrying SuperPretzel soft pretzel bites in 2011, a brand new SKU created for them, before adding Icee in 2024. It’s rolling out Dippin’ Dots this fall.
Theaters and indoor amusement centers are especially valuable for Dippin’ Dots. Not only do they bring the frozen treat into new outlets, but they help balance out the seasonality that naturally comes with ice cream sold outdoors in variable climates.
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Permission granted by J&J Snack Foods
J&J also is deepening Dippin’ Dots’ presence in convenience stores, which Fachner calls “a really big opportunity,” with the installation of ultra-cold freezers. (Dippin’ Dots must be kept at minus 40 degrees Fahrenheit so the frozen beads keep their shape. The average store freezer is typically set at minus 32 degrees.)
The expansion effort is paying off. Dippin’ Dots achieved its highest sales and profitability levels in its 36-year history in 2023.
“The brand is a great fit and a natural complement to wherever people are having fun,” Fachner said. “It’s … universally appealing, allowing lots of channel expansion opportunity.”
Rattigan said J&J has a ”more focused business” compared to other CPG food companies that generally sport broader portfolios and typically play in more categories. J&J’s deep, but heavily focused portfolio centers on entertainment outside of the home, giving it a leg-up on competitors who try to encroach on its business.
“When you’re a unique player and you have that kind of established moat, you have that entrenched presence in those certain locations, you own the stadium, you own the movie theaters,” he said. “It’s hard for someone else to come in there and win and take those away from you.”
J&J is “primed” to further increase distribution of its products, Rattigan added. He said the company is “currently demonstrating progress” and gaining foodservice distribution in theaters, c-stores and other establishments.
Retail also could be a lucrative opportunity for J&J. Dippin’ Dots, for example, is in just over 2% of the retail locations where it could conceivably be carried. Luigi’s Real Italian Ice and Icee also have opportunities to command a bigger presence at stores, Rattigan said.
Spreading the risk
J&J’s commanding presence in three channels and multiple usage occasions has proven valuable in allowing the company to reach more consumers. Roughly 60% of J&J’s net sales last year came in foodservice, a quarter in frozen beverages and the rest in retail.
This diversity has proven especially valuable amid the volatility and uncertainty that has roiled the market in recent years.
During the pandemic, movie theaters, which at the time made up 25% of Icee’s sales, shut down. But retail sales of J&J’s products rose 40% as homebound shoppers stocked up, benefiting brands such as Whole Fruit, Luigi’s and SuperPretzel.
More recently, a prolonged period of inflation has led every food manufacturer to pass along multiple price hikes. J&J has been no exception. The company increased the price for items it sells at retail three times during an 18-month period.
But higher costs for groceries and other everyday staples have prompted cash-strapped shoppers to cut back on how much they spend when they go to the store. This has resulted in sharp product volume drops for many CPG companies, including J&J.
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Permission granted by J&J Snack Foods
Despite challenges at the supermarket, visitors to movie theaters and theme parks — places some families are choosing as alternatives to more expensive vacations — are not afraid to spend on treats like Dippin’ Dots. Other consumers might opt to stop by a convenience store for an Icee rather than spend $20 on a meal at McDonald’s.
“These are affordable luxuries,” Fachner said. “We have a really broad selection of places that we sell to today, which gives us some protection from an economic struggles. I call us recession resilient, not recession proof, but resilient because we have that broad array of customers.”
Brooks with Benchmark said J&J’s product mix is ideally positioned for an environment where consumer spending is under pressure. “It gets back to brands that matter, brands that differentiate versus the me-too brands that don’t feel like a special way to spend money,” he said.
Let’s make a deal
While J&J hasn’t shied away from developing its own brands — most notably ¡Hola! Churros and Dogsters, an ice cream-style treat for dogs — the company has largely depended on acquisitions to build its brand portfolio. It’s a strategy that’s unlikely to change.
“There probably isn’t a week that goes by that I’m not looking at something. I’m looking all the time,” Fachner confessed. “But we’re being very disciplined in the approach that we’re taking here.”
J&J can afford to be patient. The business is growing and doesn’t need a deal to boost sales. In 2023, the food manufacturer posted its third consecutive year of double-digit net sales growth. Profitability also was the highest in its history.
Fachner is no stranger to deal-making. In addition to Dippin’ Dots, he recently acquired the Thinsters cookie brand from Hain Celestial. Fachner also purchased and integrated more than 20 regional Icee distributors during his time with the frozen beverage company.
Any future deal needs to follow the Dippin’ Dots playbook, Fachner said. The brand must be scalable across multiple channels and have $100 million or more in sales so it’s big enough to “be something meaningful” at a food company of J&J’s size.
“I’m not going to overpay. We have enough organic growth,” he said. “I can afford to be patient and disciplined in the approach that we take with M&A.”
Still, Fachner has broad ambitions for J&J. The executive wants to more than triple net sales to $5 billion and bring organic growth from 3% to 5% annually to the mid-single digits.
Dan McCarthy, an associate professor of marketing at the University of Maryland, said while J&J still has plenty of room to increase sales through cross-selling and other changes within its business, he was skeptical that the snack maker has enough opportunity to reach its more lofty organic growth targets.
“It’s certainly a noble goal to try and be able to squeeze more revenue out of the existing base,” McCarthy said. “But I’m not sure that I see a whole lot of new levers that they would pull to be able to do that.”
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Permission granted by J&J Snack Foods
For Fachner, obtaining a higher growth rate is not only dependent on having products that resonate with consumers but having the ability to manufacture more of them efficiently.
“We have invested a lot in distribution and capacity, but J&J Snack Foods is equally focused on innovation,” he said. “The categories go hand in hand and both are critical to our business’ success and future growth.”
Soon after taking over, he observed that J&J had no capacity to grow churros, pretzels and its other core products.
Fachner has since invested more than $100 million to improve and modernize the company’s supply chain through the addition of six production lines and three distribution centers. This has allowed J&J to increase production of its signature treats, save millions of dollars on shipping and generate more robust margins.
The extra production capacity provides J&J with opportunities its business didn’t have before. The snack maker can promote its products to customers rather than only responding to existing demand. J&J also can carry less inventory, address a sudden uptick during peak seasons and take on business it previously couldn’t.
“Those are the sort of things that will help them achieve those organic growth rates, just kind of the blocking and tackling of coming up with good new products and building up the supply chain,” McCarthy said. “It’s not the stuff that gets headlines, but oftentimes it can really help just kind of keep the company moving forward.”
Last year, J&J partnered with Subway to sell foot-long churros in the restaurant chain’s 22,000 stores, a partnership that could never have occurred without the extra capacity to produce the cinnamon and sugar-coated treats.
The three regional distribution centers in Arizona, New Jersey and Texas have helped cut the average time to ship a product by 38%. On-time performance also has improved, jumping to more than 82% versus 73% in 2023. The regional centers alone will save the company an estimated $10 million annually.
“We’ve made some really big investments [that allow us to] … go out and drive the growth where we want to grow,” Fachner said.
Analysts remain upbeat on J&J’s prospects but warn that a severe economic slowdown could be problematic.
So far, experiences that J&J serves “have proven more resilient versus more traditional foodservice businesses, but if economics worsen, that could change,” he said.
A slowdown also could hinder the company’s ability to get more of its products into existing or new locations, a key part of J&J’s growth plan.
“If you’re really struggling, if the macro environment worsens, you’re not taking the Disney trip and you’re not going to buy those Dippin’ Dots, then you’re probably not going to get that Icee,” Rattigan observed. “That’s the big concern for J&J is really the macro environment, and whether or not it can continue to grow distribution in a more challenging macro.”
Fachner said he is looking for ways to enhance J&J and better position it to withstand external challenges. He compared building a strong company to stacking blocks, emphasizing the need for a solid foundation among executives and employees before strengthening distribution and production networks.
“The company has come a long way in a short period of time, and our transformation has been phenomenal, across company culture, vision and strategy,” Fachner said. “There are a lot of great opportunities ahead of us, and I’m excited about what the future holds.”
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