The State of the Frozen Yogurt Industry

the state of frozen yogurt

Is It In or Out, the Skinny on Frozen Yogurt Today

Frozen yogurt is Dead! Froyo Is the Next Cupcake! Frozen Yogurt’s Future is Bleak! Endless Closings of Frozen Yogurt Shops, Who’s Next? Frozen Yogurt Is So Yesterday! Can FroYo Survive?

Recent headlines on frozen yogurt are relentless and scary, but are they true? In the eyes of the industry’s experts and leaders it’s a resounding no, but not without further insight.

A Natural Progression

According to most industry professionals, frozen yogurt is taking its natural course. From saturation to stabilization in mature markets, to growth in middle and smaller markets, and a slew of new opportunities in specialty sectors, the decline of frozen yogurt is merely a myth.

Ranked 22 out of Inc.’s 500 fastest growing private companies in 2014, sweetFrog® is proving that froyo is here to stay. President Vance Spilman states, “We believe frozen yogurt as a category is here to stay.” Spilman is however realistic about the market, further adding that “given the velocity of growth of new store adds, certain markets were oversaturated so some rightsizing is to be expected.”

Dan Doromal, Director of Marketing, Argosy Foodservice, explains, “Over the past 10 years, frozen yogurt has gone through the traditional product lifecycle: introduction, growth, maturation, saturation and decline.” However, Doromal clarifies that the cycle is occurring at different speeds based on the location of the market, citing that the trend more recently “has found its way to small towns.” Stefano Pavesi, VP Key Accounts, Carpigiani, provides a similar analysis, by simply stating that the trend has “stabilized.”

Survival of the Fittest By Traditional Standards

Category survival often comes back to employing the basic business principles especially in the foodservice sector. Patti Kroening, product manager of Frozen Desserts, Taylor United Technologies and Larry Capalbo, CEO, Taylor Freezers of California, share, “The market is culling the weak and poor operators. Absentee owners, shops that fail to reinvest to keep their stores fresh and clean will not make the cut.” It’s no secret that the closing rate in the restaurant business is high and the reasons are often the same poor location, bad operations, inconsistent product and an overall lack of passion. It seems the frozen yogurt shops that are closing are the ones that have failed at all of these things.

Stores that don’t use the age-old tactic of selecting the right location and knowing their audience also have higher chances of fading into the background. “Only the best locations with good marketing capital are able to sustain,” Pavesi points out.

Part of poor operations includes failure to invest in quality product. “There is a stigma to many consumers that frozen yogurt does not taste good. As the frozen yogurt trend continues … frozen yogurt flavors will continue to get better,” shares Jeff Resnick, CEO, Spaceman USA. Doromal provides additional perspective stating “Quality is playing a big factor moving forward. Stores are looking towards quality to differentiate themselves in the market.” Cutting corners is no longer an option to cut cost. Consumers are intuitive and the moment a degrade in quality is detected, is the moment they question the brand’s integrity. “Product first, followed closely by customer engagement and store operations,” points out Spilman, “the stronger brands offering the highest quality products will be the beneficiary of this trend.”

The Constant Truths

Regardless of its critics or supporters there are some inherent truths that prove the viability of frozen yogurt. Healthful options, customization and convenience are the biggest trends impacting the Food Industry and have been for more than 10 years. Frozen yogurt has always and continues to speak directly to these trends.

The Health Trend Swirls On

According to Spilman, “More consumers now recognize the inherent health benefits of the product.” What hasn’t changed is that frozen yogurt is still one of the healthier dessert options out there. And it will only continue to bring about more healthful options – a growing trend is adding dairy-free sorbets to the mix. “I think that frozen yogurt and soft serve in general will continue to evolve. Healthy options, more flavors and better product,” offers Resnick. From dairy-free sorbets to probiotics, the options in frozen yogurt are expanding. Soft serve ice cream is even being introduced back into the mix for those who do want to indulge.

Customized for New Generations

Frozen yogurt stores whether self-serve or full serve were one of the first to introduce the concept of “customized just for me” to the forefront, which is a major concept affecting the industry today. “Frozen yogurt is a very profitable model because of its self-serve and instant customization characteristics,” Doromal shares. Consumers like options, and endless topping bars and multiple flavors cater directly to consumers’ needs to eat food the way they want, when they want.

Convenience for a Go-Go-Go Generation

Meal replacement, snack or dessert, frozen yogurt caters to all dayparts. Self-serve models are quick and easy to maneuver, and the endless toppings and flavors provide options great from morning to evening. Traditional breakfast, lunch and dinner hours have faded and for busy consumers it’s all about grabbing the quickest yet tastiest thing, and frozen yogurt consistently delivers. For a society that is evolving to include all-day snacking and variety, frozen yogurt is an important player, because of its healthy options, especially during warmer seasons.

Sustaining Froyo

If frozen yogurt is here to stay it still begs the question – what’s going to continue to sustain it and how will it evolve?

An Innovation Strategy is a MUST

“Frozen yogurt is no different than any other food retailer in that you constantly have to offer new and thoughtful refinements to your offerings,” reveals Spilman. “We rely on customer research which drives our R&D initiatives.”

What many businesses fail to recognize is that innovation never stops and no matter what the cuisine offered is, if they don’t keep a foot in the future, it will pass them by. “Innovation is what sustains a business and provides future growth,” Pavesi adds.

Frozen yogurt stores have to continually research their market, look into consumer insights and pick their audience’s brain to understand what they want, and how the business can meet evolving expectations. “I would take a heavy look at your local market and local clientele. Adding a Keurig to your shop does not put you in the coffee business,” adds Doromal. “It’s really not so much about doing things to remain current, but rather, doing things to really understand your target market.”

Stores also have to keep their eye on trends, new developments from their vendors and what’s happening in the marketplace as well as at their competitors’ shops. The key is they don’t have to do it alone. Businesses should talk to their customers, go to their vendors for ideations and reach out to their peers, as people love to share their thoughts and insights, and help solve problems. “We are constantly working to help our customers innovate and create products to help grow their business,” explain Capalbo and Kroening.

Diversification, Done Right

Once the research and ideations are complete, the most important step for frozen yogurt businesses is to test new concepts and ideas, and understand how they fit with the operation’s current offerings. “There’s a lot of danger here if the store pushes other products that distract their focus, from their identity and what customers expect,” Capalbo and Kroening assert. Both also agree that building on your main offerings is the ideal starting point. “Make sure that your customers have multiple opportunities to spend money at your store with items made from your core product.”

The easiest realization of menu diversification for frozen yogurt is frozen novelties. “We developed a few new concepts such as frozen pops and tartlets,” shares Pavesi. Variety is key and often times it’s about creating a new hybrid such as frozen yogurt sandwiches, frozen cakes and milkshakes.

Diversification can however translate to new and different aligned offerings as well, but the main point is to always test them before making a full investment. Launch in one store if a multi-unit company, or if a single unit, try new concepts for a week and gather as much research and feedback as possible. Then, when ready to implement, really make the effort. Doromal suggests, “If you now offer crepes and paninis, then make sure you change your name so that it reflects it. Get signage all over the inside and out of the store so that people understand the change.” Menu diversification is an expensive investment that when done right can payoff, but all too often providers jump in without the research to find that the new additions fall flat.

New Segment Exploration

Perhaps the greatest sign that frozen yogurt is here to stay and evolving is its entry into new market segments such as convenience stores, groceries, fine dining, bars and entertainment venues. According to Doromal, “You will find froyo options in more and more non-traditional frozen dessert businesses. This is fueled by the grocery and c-store markets’ need to grow their foodservice.” Foodservice is expanding rapidly – popcorn and candy used to be the main items available at movie theaters but now everything from gourmet coffee and entrees to frozen desserts are available. Frozen yogurt’s healthy and fresh-made approaches combined with the convenience factor are easy additions for these segments. “I also see soft serve coming into finer dining as chefs and mixologists get creative to include gourmet soft serve items,” adds Resnick.

FroYo Lives On

Frozen yogurt is a survivor because it understands the concept of product evolution. It is more than one dimensional and meets the constant demands of its followers, including offering up health, variety and innovation. The best time to watch the segment is now as it goes through a new phase of redefining itself. At the end of the day, every food concept, trend, provider and shop are fighting to survive. There are just some that are meant to continue on and frozen yogurt looks like it’s here to stay.