Red Mango USA dishes up healthier frozen yogurt

The frozen yogurt business puts a sour taste in Daniel Kim's mouth. And that's good.

Kim is on a mission to bring a more tart and better-for-you version of frozen yogurt to the USA. Already a hit in South Korea, it is fermented in a way that he says makes it less sweet and more healthy than desserts that are often called frozen yogurt.

Winning over U.S. consumers, though, won't be easy. Red Mango USA, headed up by former investment banker Kim, 31, has only 10 stores open. It is facing stiff competition from West Coast upstarts that are attempting to get consumers to try this new type of frozen yogurt, often called fro-yo, that's served in a cafelike environment.

Complicating things further: Red Mango's chief rival, Pinkberry, has a big head start in the key Los Angeles market and has deep pockets behind it from the investment arm of Starbucks sbuxfounder Howard Schultz. Pinkberry has about 40 locations.

Meanwhile, frozen yogurt hasn't exactly been one of consumers' top choices. Production of frozen yogurt has fallen 43% to 303.5 million pounds in 2006 from 1990, says Don Blayney of the USDA Economic Research Service, which means the average person ate just a pound of frozen yogurt that year.

But despite the major hurdles, Kim thinks consumers are ready for premium yogurt much as they were ready for deluxe coffee when Starbucks first started. "Yogurt is healthy, natural and tastes good," he says. "People love this concept."

The fact frozen yogurt isn't yet mainstream means it's possible to grab a bigger slice of the market for frozen dessert, Kim says, which the International Dairy Foods Association sized at $23 billion in 2006.

Made like beer and cheese

But what is the concept? The first key ingredient is the product itself, the yogurt. It's real yogurt, meaning it's fermented in much the same way that beer or cheese is made. Most desserts called frozen yogurt are made by mixing powder, milk and sugar.

Red Mango's process leaves behind living organisms called live and active cultures. These cultures give the yogurt probiotics, or organisms believed by some to have health benefits that continue to be studied, says Jeff Blumberg, professor of public health at Tufts University.

Probiotics are thought to assist digestion and the immune system. "It's better for you than ice cream," he says.

Unlike most products served by its competitors, the yogurt at Red Mango meets the National Yogurt Association's criteria for live and active culture yogurt.

Red Mango yogurt also has less sugar than many other frozen yogurt desserts. A half-cup serving of Red Mango contains 90 calories, about 18% fewer than a similar serving of TCBY's yogurt.

The next thing that sets Red Mango apart is the setting of the stores. Red Mango stores are designed to encourage lingering and feature comfortable stuffed chairs and hip music, much like a Starbucks.

Blending healthier yogurt with a place to hang out is what made Red Mango popular in South Korea, where it was founded in 2002 by a former colleague of Kim's from investment banking firm Donaldson Lufkin & Jenrette. Kim still recalls being bewildered when he first heard the idea. "Frozen yogurt in Korea? OK …," he says. But in just a few years, the chain was booming.

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