Meltdown Ahead For Yogurt Shops?

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It’s clear to lovers of low-calorie desserts that frozen yogurt is back in a big way in Los Angeles.


What isn’t clear is whether it’s back in too big a way.


Since Pinkberry Inc. launched from Los Angeles more than two years ago, frozen yogurt stores with such names as Kiwiberri, Mr. Snowberry, YogurtLand, Roseberry and Berri Good all have opened Los Angeles County locations. At least five frozen yogurt stores opened here just in the last week. And that’s not the end. A big chain with Korean backing, Red Mango Inc., plans to launch its American initiative from here next month.


Various fights have broken out among them. And some in the industry already are predicting a frozen yogurt meltdown.


“There are so many Berries coming out,” said Shelly Hwang, co-founder of Pinkberry. “At first I was really disappointed, but now I see that they’re making us more famous.” Pinkberry has, however, sued Kiwiberri, alleging unfair business practices and imitating its concept.


Culver City-based Red Mango, which is owned by the original Korean Red Mango chain and several local investors, will open two stores in Los Angeles next month.


“I am concerned in L.A., where copycats seem to be surfacing every month,” said Red Mango President Daniel Kim. “It definitely saturates the market and creates too many places for customers to choose from.”


Rather than focusing too intently on Los Angeles, Kim said Red Mango will open 10 shops this year in a cluster of cities including Chicago and Miami that will be receptive to a health-conscious product.


Even though Red Mango has not opened shops in the United States yet, it already is in a scrap. The company has litigation pending against stores using the name in the United States. And a store called Blue Mango is poised to open soon on Sunset.


To the uneducated palate, there is little to differentiate the shops.


Pinkberry, Red Mango and most of the others sell or will sell non-fat frozen yogurt products in the same two flavors plain and green tea. The menu typically includes shaved ice, smoothies and a variety of yogurt toppings including fresh fruit, sugary cereals and chocolate or yogurt chips. An aficionado might find the Pinkberry product sweeter, grainier and likely to leave a lemony aftertaste. Red Mango yogurt is subtly smoother, creamier and has a similar taste to the plain yogurt in your grocery aisle, albeit colder.



Can’t believe it’s yogurt?

The proliferation of frozen yogurt shops isn’t the only problem the resurgent industry is facing. They can’t always be called frozen yogurt, at least not officially.


The California Department of Food and Agriculture has guidelines about the definition of frozen yogurt. It can’t be reconstituted from powder, for example.


Pinkberry, which makes it yogurt from powder, has removed the “frozen yogurt” name from its Web site.


It’s unclear how many of the others meet state standards, although Kim said Red Mango exceeds the requirements.


At this point, the most visible difference among the yogurt shops is in reach. Pinkberry, for now at least, is something of the frozen dairy queen.


Pinkberry has 20 stores in California including three that were to open last week and three in New York. Although that’s slower growth than projected last year, the chain still plans to have 40 California locations alone by the end of this year.


“We thought we were going to do well but we didn’t expect this much,” said Pinkberry’s Hwang. “God blessed us. That’s the truth.”


Red Mango will bow next month with Culver City and Westwood Village locations, and then it expects to fan out into major U.S. cities, without getting too deeply into the L.A. fray.


Kiwiberri has four stores, two of which were to open over the weekend. The other frozen yogurt stores have one or two shops each.


As if the stores needed another fight, at least three companies claim to have developed the concept of two flavors regular and green tea with fresh fruit toppings.


Red Mango was founded in South Korea in 2002 and now has 140 locations there. The holding company that owns the chain in Korea is the majority investor in the Culver City-based company. Kim said that the Pinkberry concept is an attempt to copy Red Mango’s two-flavor concept and even its modern, stripy d & #233;cor. (Red Mango stores in the U.S. will have a warmer look, Kim said. “Just because it works in Korea doesn’t mean it’s going to work here,” he said.)


But Hwang’s partner, Young Lee, who designed the Pinkberry store concept, said he started thinking about his yogurt concept 16 years ago during a trip to Italy, long before Red Mango.


“It was such a striking flavor,” he said of the Italian yogurt. “I’ve never forgotten it.”


On a subsequent trip to Hawaii, he tasted some fresh fruit on soft serve yogurt and remembered his Italian dessert, thinking the two might be an even better match.


Any similarity to Red Mango, he said, is incidental.


“It’s not doing that well in Korea,” he said. “Why would I want to copy a failing concept?”


For his part, Kim of Red Mango said the company’s rapid growth has slowed in South Korea, but the company is doing fine.


Kiwiberri, like Pinkberry and Red Mango, also claims to have come up with the concept. In its case, the founder was gelato-obsessed as a child and spent years trying to create a healthy dessert, said the Kiwiberri’s vice president of business development, Evan Chi.


Kiwiberri’s plan is to differentiate itself partly by building attractive stores, spending about $500,000 on each build out. Of course, it maintains its product tastes better.


Berri Good representatives did not return phone calls.


Darren Tristano of Technomic Inc., a food industry consulting and research group, has been studying the frozen yogurt explosion. He compares the latest craze with the advent of Krispy Kreme Doughnuts Inc., which created round-the-block lines whenever the company opened a location. Enthusiasm for the glazed concoctions has significantly waned in recent years, in part because of more consumers eschewing fatty food for health reasons.


“If somebody is doing well, you can easily copy their success and that’s been happening forever,” Tristano said. “That’s the competitive nature of the business, as long as you don’t encroach on logos and trademarks.”


Tristano has no doubts that the yogurt bubble will burst at some point, it’s just a question of when.


Pinkberry’s Hwang agrees. “Some of the Berries aren’t gong to survive,” she said. “First it’s a timing issue, second is the brand issue and third is the product issue.”



Battle of Berries

The deluge of shop openings is somewhat reminiscent of the 1980s frozen yogurt craze. Back then, Penguin’s and TCBY locations were nearly as common as McDonald’s. The novelty wore off, however, and the overcrowded market hit the skids. National frozen yogurt sales have been declining since 2001, according to Mintel International Group Ltd., which studies consumer activity. Frozen yogurt rang up $162 million in sales in 2006, down 24 percent from $214 million in 2001.


Those shops sold a more sugary version of the frozen yogurt sold today, with many different flavors. The new shops sell yogurt with a stiffer texture and a tarter flavor. And, of course, there are only two or three flavors.


If there is another market shakeout, the executives at Pinkberry and Red Mango believe their greater brand identity will help insulate them.


Here in Los Angeles, it all started with Pinkberry. The distinctive flavor and healthy appeal of the products led to long lines streaming out of the locations in Larchmont and West Hollywood. There was a flood of press when local police issued a slew of parking tickets to Pinkberry faithful in need of a yogurt fix and unable to find legal parking.


Although Hwang and Lee opened their doors at the West Hollywood location in January 2005, the cold weather kept patrons away for months. She couldn’t even give samples away on the street. But as the weather warmed, appetites grew.


Others soon followed. A Kiwiberri frozen yogurt store opened on Robertson Boulevard near the Beverly Center, offering plain and green tea yogurt with never-frozen fruit toppings, just like its popular competitor. That store recently closed, although others opened.


Berri Good, a kosher frozen yogurt store on Robertson Boulevard in Beverly Hills, also brings Pinkberry branding to mind.


When Red Mango opens its two local shops in June, it will market the health benefits of its nonfat yogurt. Kim maintains that his product has a much higher culture count than any of his competitors, which he says accounts for his yogurt’s tarter flavor.


“A lot of these other guys are capitalizing on a trend,” he said. “We’ve spent a lot of time manufacturing a yogurt product made the same way as regular yogurt.”


Meanwhile, Kim is concerned about protecting his intellectual property from copycats. While some businesses are selling similar products with similar names, others are simply using the same or a similar name. His lawyers recently got a Red Mango in Chicago to change its name, and are currently dealing with Red Mango Caf & #233; in Walnut.


Kim is hoping that he can grow to about 300 stores within the next five years, with about half of those locations franchised.


“My model is to do for frozen yogurt what Jamba Juice did for smoothies, or what Starbucks did for coffee,” he said. “The concept of healthy indulgence is something I’m really excited about.”

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