Fruity Frozen Yogurt Wars Heat Up

NEW YORK, Sept. 27, 2007 — -- Dessert has always been about choice — lots of choice.

Baskin Robbins built an ice-cream empire on the motto of 31 flavors. Ben and Jerry's rose to fame with wacky flavors, such as Chunky Monkey and Cherry Garcia.

But now, a new trend is taking over the frozen dessert industry: simplicity.

A number of frozen yogurt stores are popping up that offer only a few flavors, and they allow customers to personalize their snack with fresh fruit, granola and cereal.

So, instead of getting that raspberry-flavored snack, customers get vanilla and add their own fresh raspberries, mangos and pineapples.

Leading the charge in Los Angeles and New York is Pinkberry, a chain of tiny shops with funky colors and loud music that aim to make eating dessert more fun — even if its product is low in calories.

Pinkberry and a number of knockoffs — some call Pinkberry the knockoff — are appearing on street corners everywhere in the two cities, with ambitious plans to expand.

The companies offer a frozen treat that tastes less like ice cream and more like actual yogurt. They offer just a few flavors, and then give customers a bevy of toppings.

CLICK HERE FOR PHOTOS OF THE BATTLING YOGURT SHOPS

Pinkberry has only vanilla and green tea but offers nearly 20 toppings, ranging from kiwi to almonds to blackberries and mangos.

The stores have drawn large crowds willing to wait in long lines to buy the frozen treats.

Pinkberry has done very little marketing, relying almost entirely on word of mouth.

"One customer came and tried it, they liked it, they brought their friends," Pinkberry co-founder Young Lee said. "All of a sudden, we were starting to make money."

Peter Golder, a marketing professor at New York University's Stern School of Business, said such word of mouth is incredibly important for new businesses.

Not only is it inexpensive, but it's more credible to people.

"We're sort of programmed to discount advertising we hear," Golder said. But we tend to trust those we know.

People love to sample and try new things, especially food, and word of mouth and the company's long line help. Golder said that if a customer sees others waiting for the food, they think it must be good.

"Who wants to walk into an empty restaurant at dinner time?" he said.

But once a company gets some buzz, Golder said, "the challenge for the company is to make sure that it's more than a fad."

They need to get a sense of how many customers are first-time customers and how many of them are repeat customers. Over time, they should be getting a larger percentage of your business from repeat customers.

"Eventually," Golder said, "you'll run out of first-time customers."

Nancy Zenna lives in New York's Chelsea neighborhood and walks down the block to her local Pinkberry three to four times a week.

"It tastes so good. It's very healthy. It's very refreshing and low in calories," she said the other day.

Joining Zenna was Aliza Weston on her first-ever Pinkberry outing.

"It's amazing," Weston said. "You don't feel like you have to run the marathon afterward."

Berry Wars

Its first store opened in January 2005, and it has expanded to 30 stores in Los Angles and New York. Pinkberry now has plans to open a store in London and is looking at Arizona, Texas and Northern California, according to Lee.

Lee said that only 10 of those stores are franchises right now, but that more than 3,000 people have applied for a franchise. He plans to expand, but carefully.

"Some of the good ideas can be expanded too quickly, and a good idea gets wasted," he said.

Lee and his partner, Shelly Hwang, own the company now but are in talks for something larger. Lee would not elaborate.

But they need to act quickly. In the last two years, a number of competitors have sprung up.

There's Berri Good, Red Mango, Blue Mango, Diet Berry and the list goes on and on.

"It's like time is our enemy, not our friend," Lee said. "There are lots of fake berries. The fake berries are out there trying to copy us."

But at least one of those copycats says that Pinkberry stole their formula.

Red Mango has about 130 stores in South Korea, where it first opened in 2002.

But it did not open up a store until this July in the United States. It now has two stores: the original Los Angeles one and another in Las Vegas.

"Pinkberry basically copied our design and had brought it before us. But we had the intentions of bringing our design to the U.S," said spokeswoman a Red Mango spokeswoman.

Red Mango plans to open 10 to 20 stores by the end of the year in cities including New York, Miami, Chicago and San Diego and wants another 10 to 20 stores in the following year.

The battle of the berries has also led to a fight over who can or cannot call their product yogurt.

"Our product is actually authentic frozen yogurt," the spokeswoman said. "We have live and active cultures in our product. We have actually over 500 million cultures per gram."

Pinkberry does not, forcing the company to back away from selling "frozen yogurt."

Instead, Pinkberry sells "swirly goodness."

Almost a Tea House

If it weren't for some zoning and liquor license issues, Pinkberry might never have been born.

Lee owns a small architectural firm doing mostly interior design work. One day Hwang came in looking to have a tiny, 650-square-foot space in West Hollywood designed as an English tea house.

"I discouraged her from getting that location," Lee said. "I told her she would be making a mistake to do high tea there because she would need all 650-square-feet or more just for kitchen space. But she'd already rented the space, paying a year's rent ahead of it."

So the pair moved forward trying to get permission to allow outdoor seating and serve liquor. At a public hearing the plan got strong opposition.

"The whole entire neighborhood treated us like we were Frankenstein," Lee recalled.

So a new business plan had to be created.

Lee said he was working on the side to set up a frozen yogurt business at a mall and simply adapted the idea for Hwang's location.

Where Did That Name Come From?

Lee said he draws his inspiration for running a business from several other companies that he admires. The first is Apple, which he said somehow brought together generations. Then there is In-N-Out Burgers, a hamburger chain that keeps its menu very simple. Lee admires Hermes and its high standards of quality and tries to emulate that. For instance, Raspberries are very expensive in winter, but Pinkberry still carries them. Rounding out the list is Starbucks and Target.

So what about that name?

"We wanted to create a name that had something to do with berries but couldn't go with a single berry," Lee said.

So they made up a name that tried to incorporate that concept.

"Pinkberry is a refreshing kind of name," Lee said. He also likes it that as the company prepares to enter England, the name sounds a bit like the British clothing company, Burberry.

The stores are also designed with memories of an ice-cream truck in mind.

"You hear the sound of an ice-cream truck first and then you go run and find it," Lee said.

The same is true of the stores, which play loud music, and there is even a Pinkberry theme song.

Ice-cream trucks are also often found at the beach or at playgrounds, so the store floors are designed with pebbles to replicate the sounds of the beach or playground.

The stores also use colors like French vanilla yellow and pistachio green to resemble the ice-cream flavors.

Then there is the bright orange. Well, Lee simply likes Hermes.