Self-Serve Milkshake Maker Trial Threatens to Freeze Out Rival

(Bloomberg) -- The sock-hop days when ‘50s diners whipped up frosty milkshakes are gone. Now, convenience stores stocked with blenders serve up fountain treats -- and do-it-yourself milkshakes, smoothies and frozen cappuccinos are hot.

f’real Foods LLC makes what it calls a “magical blending machine.” On Monday, lawyers for the company will tell a federal jury that rivals Hamilton Beach Brands Inc. and Hershey Creamery Co. are stealing some of its magic.

At a trial in Wilmington, Delaware, f’real Foods and parent Rich Products Corp. will accuse their competitors of infringing blender patents. If Hamilton Beach and Hershey Creamery lose, they may eventually be forced to pay royalties and recall their own blenders. That could extend f’real Foods’s dominant position in the packaged-milkshakes market, which is expected to grow to $2.7 billion in 2022.

f’real Foods’s self-serve milkshakes come in basic flavors -- chocolate, vanilla and strawberry -- and those that are a bit jazzier: Reese’s peanut butter cup, Oreo cookies and cream, and Chips Ahoy milk and cookies.

Grab a container from the freezer, peel off the top, pop it into the blender’s stainless steel cup, and choose your texture -- less thick, regular thick or more thick. In a moment, the fluffy, chilled treat is ready.

The blending matters.

“The blending process is important primarily because, with the exception of the particulates in the product” -- the chocolate chips and bits of cookie dough -- “people want a uniform consistency” in their shake, said Robert Roberts, the head of food science at Pennsylvania State University’s College of Agricultural Sciences who teaches Ice Cream 101. He isn’t involved in the case.

f’real Foods’s founder, Jim Farrell, launched the business in his California garage, filing the first patent for his blender and blending process in 1996. The Emeryville, California-based company now sells its shakes at more than 20,000 locations in North America as it expands to Europe, Asia and Australia, President Dinsh Guzdar said in an email.

Its blenders add milk or water to the frozen product, making it easier to whip it into the texture that fountain-style milkshake consumers prefer. The blenders also aerate the shakes, fluffing the beverages. The company targets 18- to 25-year-olds.

In their complaint, f’real Foods and Rich Products said Hamilton Beach told them in 2010 it wanted to supply blending equipment to fast-food and full-service restaurants and ice cream shops. Hamilton Beach licensed three patents from f’real Foods but changed course a year later and terminated the deal, according to the complaint.

Core Market

Then in 2013, Hamilton Beach teamed up with Hershey Creamery to compete with f’real Foods in its core market -- convenience stores, according to the complaint. Hamilton Beach started selling its SmartServe Mix-in-Cup machines to Hershey Creamery in 2013, while Hershey Creamery leased the blenders to convenience stores for Shake Shop Express kiosks, according to the complaint. (Hershey Creamery isn’t affiliated with Hershey Co., maker of the iconic Kisses.)

At the trial, f’real Foods and Rich Products will argue that Hamilton Beach machines infringe their technology, including the processes for aeration and liquid-dispensing. But Hamilton Beach, of Glen Allen, Virginia, will say its blenders differ from f’real Foods’s because they’re not designed for aeration and don’t add fluid during blending.

Hamilton Beach and Hershey Creamery didn’t respond to requests for comment. Hamilton Beach says in court papers that its rival is suing chiefly to eliminate the “competitive threat” posed by other blenders. f’real Foods and Rich Products, which also owns Carvel Ice Cream, control more than half the market for self-serve frozen beverage mixers, Hamilton Beach says.

Alex Bassett Strange, the vice president of distribution at Bassetts Ice Cream, said milkshakes prepared by automated machines lack the artistry of old-fashioned, made-to-order shakes blended up at parlors like the one his 150-year-old company runs in Philadelphia.

“The spindle is able to cut that ice cream up, or blend it together, in a much finer way, and you don’t end up with a grainy texture at the end,” he said.

But just a mile away, milkshake sales are brisk at the Pennsylvania Hospital cafeteria, where a f’real Foods blender sits alongside other beverage machines. Trucie Jones, a cashier, said the countertop station has been a hit since it was installed about a year ago.

“That’s a popular item right here,” Jones said. “Oh, I sell a lot of them, honey.”

The case is f’real Foods LLC v. Hamilton Beach Brands Inc., 16-cv-41, U.S. District Court, Delaware (Wilmington).

To contact the reporter on this story: Christopher Yasiejko in Wilmington, Delaware, at cyasiejko1@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider

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