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® JUNE 2013 / NO.181 WWW.QSRMAGAZINE.COM

THE SCOOP ON

PLUS INSIDE ICE THE TEST KITCHEN PAGE 54 CREAM MANAGING Sales may have chilled, YOUR ONLINE but is fi nding its REPUTATION footing after fro-yo boom PAGE 60 PAGE 46 ICE CREAM’S FUTURE

// AT JENI’S SPLENDID ICE CREAMS, EACH INGREDIENT IS HAND-MADE OR HAND-PICKED TO CREATE UNIQUE FLAVORS.

CAN Old favorites, new strategies keeping ice cream alive as fro-yo explodes.

BY KEVIN HARDY

46SURVIVE? JUNE 2013 | QSR | www.qsrmagazine.com ICE CREAM’S FUTURE

hey seemed to pop up almost overnight. In strip malls Creamery’s annual sales dropped to $366 million from $430 and on street corners across the country, frozen-yogurt million, and its store count dropped to 1,086 from 1,198. Baskin- Tshops suddenly offered an exciting new option for Robbins, meanwhile, saw sales drop to $496 million from $570 America’s collective sweet tooth, teasing at healthfulness and million and store counts tumble to 2,457 from 2,597 in that innovating with self service and customization. Once concen- same time period. trated mostly in warm coastal cities or urban centers, fro-yo But ice cream brands say they’re nowhere near ready to concepts spread to countless towns, suburbs, and neighbor- surrender. hoods across the country, with names like , Red “Ice cream is so entrenched in the American culture that it’s not Mango, and Menchie’s. really even close at all to being transplanted as being what people Fro-yo’s sudden hot streak appeared to threaten a mass melt- want, whether it’s after dinner or after seeing movies,” says David ing of one of America’s tried-and-true dessert darlings: ice cream. Wild, director of for South Florida–based Sloan’s Ice Indeed, some of the nation’s top ice cream concepts took a beat- Cream. “I don’t think that it really stands a chance of being over- ing with fro-yo’s arrival. Between 2009 and 2011, Cold Stone thrown, just because it has so many roots in American culture.”

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With the frozen-dessert market more crowded than ever, ice and offer a variety of ice creams, candy, toys, chocolates, and cream brands are finding new ways to stay competitive. Classic baked goods. concepts are leaning on their popular product lines and loyal cus- “We are so unique and different that we really almost don’t tomer bases while rolling out new offerings. Many have learned have any competition,” says founder and owner Sloan Kamen- from ’s use of novelty and are making their prod- stein, a classically trained chef turned ice cream proprietor. ucts more customizable than ever. “Because there’s nobody that does everything all together in one Ice cream newcomers, in the meantime, are adding their own space the way that we do it, with the fun atmosphere and all the unique twists to the dessert by tapping into the local-foods move- excitement of coming to our stores.” ment, handpicking artisan-quality ingredients, promoting healthier Kamenstein says the company will pursue an aggressive options, and innovating with new techniques and flavors. growth plan in the next few years. So far, 17 franchises are signed Insiders say these shifts within the ice cream industry have and the company hopes to open 200 stores within five years. poised it for a bounce back; many believe frozen yogurt has Some ice cream operators are taking a page right out of fro- reached its saturation point. yo’s playbook. Whereas that category has thrived on the self-serve “They come and go. But Americans will eat ice cream until the model, in which customers can choose their precise portion pref- end of time,” says Michael Branigan, vice president of marketing erences and toppings and be charged by weight, nearly all ice for Pennsylvania-based Bruster’s Real Ice Cream. cream shops have relied on a model that set standards for por- « Executives with Sloan’s say the brand is not just setting itself tions and toppings. apart from frozen yogurt, but also from others in the broader, But not anymore. congested dessert arena. The sensory-overload stores are billed as “One of the things the yogurt shops offer is control,” says Dave a dreamland for kids and adults. Whimsically decorated shops Guido, senior vice president of operations and franchise sales at are covered in bright colors and lit with twinkling chandeliers, Bruster’s. “So we promote the fact that you can customize your

// ICE CREAM BRANDS NEW AND OLD ARE UPPING THE ANTE ON INNOVATION. FLICKR/SIMONQ, FLICKR/LIS FERLA, FLICKR/STU SPIVACK, JENI’S, JENI’S, DAIRY FLICKR/SIMONQ, FLICKR/LIS FERLA, FLICKR/STU SPIVACK,

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product at Bruster’s, the point of distinction being that we’ll do that for you.” The Rise of Fro-Yo There’s no question that frozen-yogurt Ice cream may still reign as the shops have encroached upon 200-unit top frozen dessert, but frozen- Bruster’s territory. But executives don’t see yogurt shops are eating into that fro-yo as a direct threat. In fact, the brand market share. thinks its biggest competition comes from quick-service giants like Wendy’s, McDon- ald’s, and , which continue to experiment with dessert options. While those companies may not offer the same intense focus on dessert, they do offer a convenience SALES UNITS TOP (THOUSANDS) and affordability that’s hard to match. FROZEN DESSERT % % That’s what ice cream chain Dairy Queen CHAINS 2012 2011 CHANGE 2012 2011 CHANGEsees as one of its key advantages. Most Dairy 4,488 -0.5 Queen stores have drive thrus, so customers 2,457 0.2 can get popular items like Blizzards quickly in the size they want, while still choosing 1,086 -5.1 from countless combinations of flavors and add-ins. 278 0 “There’s no question that just the sheer number of outlets offering frozen sweets has grown,” says Dairy Queen’s executive vice Rita’s Ice 132,000* 122,500* 7.8 624 579 7.8 president of marketing Barry Westrum. “But 126,000* 100,000* 26 185 152 21.7 if you look at the trends in the ice cream industry—consumer demand for convenient 125,000* 115,000* 8.7 145 113 28.3 Pinkberry single-serve options, their desires for eat- Freshens 123,000* 130,500* -5.7 850* 850* 0 ing on the go, portion size, customization, unique flavors—all of those trends really Ice Cream 121,000* 122,500* -1.2 409 414 -1.2 play into our favor.” With 2012’s sales topping $2 billion, Dairy Menchie’s 119,000 89,700 32.7 236 138 71 Frozen Yogurt Queen’s 4,600 U.S. stores swallow about 40 percent of the frozen-dessert market, accord- 99,500* 76,000* 30.9 211 151 39.7 ing to Technomic. Ben & Jerry’s 96,500* 103,000* -6.3 297 298 -0.3 Westrum thinks frozen-yogurt customers will start to find the self-service model expen- Häagen-Dazs 95,000* 100,000* -5 227 233 -2.6 sive and inconvenient. Brands like Dairy

Tastee Freez 92,000* 93,000* -1.1 357 365 -2.2 Queen, he says, can still develop fresh offer- ings mixed with a high level of customization. TCBY 84,000* 98,000* -14.3 359 405 -11.4 The brand continues to roll out new Blizzard flavors, including Chocolate-Covered Pretzel, Orange Leaf 76,500* 49,000* 56.1 217 123 76.4 Frozen Yogurt Lemon Meringue Pie, S’mores, and Peanut Butter Brownie, as customers increasingly Marble Slab 57,214 66,500* -14 231 250 -7.6 Creamery come to expect new-and-improved products. “As you look at consumer trends in all Bruster’s Real 56,000* 59,000* -5.1 210 214 -1.9 forms of how they eat today, consumers love Ice Cream what they love,” Westrum says, “but they’re 50,000* 62,000* -19.4 93 96 -3.1 always looking for what we call ‘safe adven- Frozen Yogurt tures’ in those popular items.” Tutti Frutti 45,000* 22,500* 100 275 100* 175 That sense of adventure is being scooped into cones and dishes in many new ways FFosstert rs Frereezze 44,000* 43,500* 1.1 91 91 0 across the ice cream industry. As customers

swsweetFe Frogr g 42,000* 15,000* 180 180* 100* 80 develop more sophisticated palates, higher- end ice cream stores have started offering TOTAL 5,199,977 5,097,420 2.0 13,434 12,981 3.5 bolder flavors previously unheard of in ice

*TECHNOMIC ESTIMATE / SOURCE: 2013 TECHNOMIC TOP 500 CHAIN RESTAURANT REPORT cream, like bacon, avocado, and tomato. ISTOCKPHOTO.COM/ © NIGHTANDDAYIMAGES

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Others, like Utah-based Sub Zero Ice Cream, are experiment- still has its draw among consumers. After experimenting with new ing with liquid-nitrogen freezing, hoping to spark a new frozen product add-ons, San Francisco’s Mitchell’s Ice Cream found that fad through science. its history and tradition were the main draw. Owner Larry Mitch- Ben & Jerry’s has integrated a swath of fair-trade ingredients, ell says he’s seeing more premium ice cream brands popping up while Baskin-Robbins resurrected its flavor-of-the-month promo- offering higher-quality products like his ice cream blend made tion. And Carvel joined forces with sister brand Schlotzsky’s to with 16 percent butterfat. open up new daypart and demographic opportunities. “We brought in coffee and yogurt and dropped them both. We The competition with frozen yogurt isn’t necessarily new to don’t need it,” he says. “Ice cream is so much better. It’s such a these ice cream companies. Many outlasted the 1980s fro-yo nicer dessert to eat. People like this kind of ice cream and they boom, when brands like TCBY enjoyed explosive growth. But don’t mind paying more for it.” insiders believe today’s fro-yo success is stronger—and actually Baskin-Robbins is attempting to bridge the gap between inno- tastes different. vative and classic ice cream products. Bill Mitchell, senior vice “It’s not frozen yogurt trying to be an ice cream alternative,” president and chief brand officer of Baskin-Robbins U.S., says says Mary Chapman, director of product innovation at Chicago- the company is bouncing back with the help of a wide array of based foodservice consultancy Technomic. “It’s frozen yogurt products that provide something for all customers. In addition to trying to be its own tart, yummy flavor.” traditional ice creams, stores offer low-fat and no-fat ice creams, And while some fro-yo shops have closed in more saturated as well as a live cultured yogurt. markets, the segment doesn’t seem to be going anywhere. New Baskin-Robbins also gives nostalgia a nod with the re-entry of brands and stores are still opening up, especially in small and flavors like Lunar Cheesecake, which first debuted in the 1960s mid-sized markets. and made another landing in 2012 with the release of the movie “We’re still getting calls from smaller markets saying, ‘Who “Men in Black 3.” are all these frozen-yogurt chains coming into our city?’” Chap- The array of flavor options, along with Baskin-Robbins’ new man says. “So the wave is still coming.” store designs, have helped the brand enjoy six consecutive quar- Chapman adds that gelato concepts are also starting to pop up, ters of growth, Bill Mitchell says. which could spark even more competition for frozen-dessert busi- One leg up frozen yogurt has on ice cream is its nutritional ness. Considering all this, she says, it’s vital for ice cream brands value. With lower-fat and lower-calorie options, the yogurt market to think outside the box. earns a reputation as a lighter dessert. But experts believe that ice “I think consumers are always looking for something new and cream can make a run with healthfulness, too. Consumers continue different,” she says. “The ice cream stores and the ice cream spe- to rewrite their own definitions of healthy, and some may view cialists that have maintained their sales have been the ones that ice cream shops that offer all-natural products or locally sourced continue to innovate, to promote and offer new treats. I think ingredients as being in line with what they desire health-wise. they’ll continue to stay competitive.” “Every consumer is viewing health in their own way,” says Ohio-based Jeni’s Splendid Ice Creams is one upstart ice cream Eric Stangarone, creative director at The Culinary Edge, a San brand pushing the limits of what kind of innovation is available Francisco–based consultancy that works with both ice cream and in the category. The company hand-makes or hand-picks nearly frozen-yogurt brands. “People will make their concessions in all every component of its ice creams, from Ugandan-imported kinds of ways.” vanilla beans to cream from grass-fed cows to salted caramel And those shifting attitudes are allowing both ice cream and that’s made in-house over an open flame. The high-quality ingre- frozen yogurt to carve out their own niches in the customer base, dients are used for flavors like Whiskey & Pecans, Wildberry Stangarone says. “The two in my opinion are really living in har- Lavender, and Juniper & Lemon Curd. mony,” he says. “They’re competing for different consumers and Jeni’s executives say frozen yogurt’s recent success isn’t even different needs of those consumers.” on their radar. Further, frozen yogurt’s success might ultimately be benefi- “We don’t think we are competing in any way with the frozen- cial for ice cream, Stangarone says. “Because of the popularity yogurt shops that have sprung up everywhere,” says John Lowe, of one or both of them, I think people are becoming more inter- CEO of Jeni’s Splendid Ice Creams. “We’ve done absolutely noth- ested in them as a whole,” he says. “And consumers are willing ing to change what we’re doing. We don’t focus on what others are to trade between the two pretty seamlessly.” doing. We are simply trying to make the best ice cream as possible Stangarone believes the future of frozen desserts will be built and serve it with an unparalleled customer-service experience.” on the backs of more specialty and artisan concepts that special- It seems to be working; Jeni’s has grown to 10 units in Ohio ize in very specific items instead of multiple menu options. and Tennessee, with online distribution as well as wholesale part- Everyone has a place in the frozen-dessert category, Mitchell nerships with grocery stores across the U.S. And Lowe says the says, especially ice cream. brand’s steady climb won’t detract from its innovative flavor devel- “I don’t think the landscape is crowded yet,” he says. “Just look opment. at the burger industry or the pizza industry and see how crowded “At the end of the day, it’s what’s in the cone or in the [bowl] they are.” q that matters,” Lowe says. “And that’s where others can’t match.” Some ice cream brands are finding that sticking to the classics Kevin Hardy is a regular contributor to QSR and QSRmagazine.com.

52 JUNE 2013 | QSR | www.qsrmagazine.com