Hawaii ice cream maker fears meltdown in wake of Meadow Gold restructuring

A lot of Hawaii-made ice cream could disappear from restaurants around the state following last month’s bankruptcy of national food and beverage giant Dean Foods.

Dave’s Ice Cream Inc. typically sells around 15,000 gallons of ice cream made in Pearl City to numerous restaurants including Zippy’s under a wholesale arrangement with Dean Foods subsidiary Meadow Gold Dairies-Hawaii.

Meadow Gold, however, plans to bring in ice cream from a plant it owns in St. George, Utah, to supply its Hawaii restaurant customers starting next month in a move that would cut off a third of Dave’s business, amounting to more than $1 million a year, according to Dave’s owner Dave Leong.

“They’re my largest customer,” Leong said. “I’m crippled. I’m really crippled.”

Dean Foods, based in Dallas, said the change helps centralize manufacturing, provides better internal quality control oversight and has some cost benefits for the company.

“As the last remaining dairy processor in Hawaii, we do not take moving our business away from another local manufacturer lightly,” Anne Divjak, a Dean Foods spokeswoman, said in a statement. “We continue to maintain business with local vendors as much as possible, recognizing that it can often be more costly. And we will continue to work with local ice cream manufacturers to develop specialty ‘island’ and other unique flavors preferred by our local consumers.”

Leong said he’s scrambling to establish a direct supply with restaurants that received his ice cream through Meadow Gold, but he doesn’t know which restaurants received his ice cream under the wholesale relationship except for a few.

“I’m now making sales calls,” he said. “It’s something I haven’t done in over 20 years.”

Leong, 66, started Dave’s in 1982 as a shop in Waianae serving scoops of Meadow Gold ice cream. Soon, though, Leong started making his own ice cream in the back of the shop, and now his factory in Pearl City Industrial Park can produce up to 50,000 gallons a month for six retail outlets operated under the Dave’s name, a handful of restaurants supplied directly by Dave’s such as Teddy’s Bigger Burgers and Big City Diner, supermarkets that sell pints of Dave’s ice cream and Meadow Gold.

Meadow Gold had made its own ice cream in Hawaii until 2003 when Dean Foods shut down what it said had become a money-losing operation.

Leong said Meadow Gold reached out to him shortly after that for a local supply because of logistics difficulties Meadow Gold encountered with importing ice cream for its Hawaii restaurant accounts.

“I can’t thank Meadow Gold enough that they were a partner with me for about 15 years,” Leong said. “It’s very difficult for me to say anything negative about Meadow Gold. I’m so torn about this situation, but it has hurt me financially. They could put me out of business.”

Leong said Dean Foods received about 21,000 gallons of his ice cream that wasn’t paid for when Dean Foods filed for Chapter 11 bankruptcy reorganization Nov. 12. Dave’s is now a creditor in the bankruptcy case, and Leong doesn’t expect to have his bill, which he said is for more than $100,000, to be paid given how much money Dean Foods owes to other creditors.

Dean Foods had debts totaling around $2 billion when it filed for bankruptcy, including $722 million in pension obligations and $700 million in bank debt. The company’s largest trade debt is $173 million owed to the Dairy Farmers of America, which could end up owning Dean Foods.

To sustain Dave’s, Leong is calling representatives of restaurants that he knows serve his ice cream in an effort to convince them to buy from him through retail distributor Pint Size Hawaii. But he said he doesn’t know most of the accounts and has no idea how many there are.

“You always hear — for years — buy local, buy local, buy local,” Leong said. “We’ll see what happens. Here’s a great opportunity.”

Matsumoto’s Shave Ice in Haleiwa is one customer that decided to buy ice cream from Dave’s after unknowingly receiving Dave’s ice cream through Meadow Gold.

“We absolutely wanted to support local,” said Remy Matsumoto, manager of the store, started by her grandparents.

Leong is hopeful that others follow. But in the meantime he’s reduced ice cream production in his factory from five days a week to about three days a week. To keep his roughly 20 workers employed and avoid layoffs or reduced hours, Leong said he has found maintenance projects for workers in the short term.

On Tuesday a crew that normally makes ice cream was painting a hallway and machinery in the factory.

“I feel bad for my employees, but everything is based on sales,” Leong said. “I need local businesses to get behind us.”