This summer, more Canadians than ever were noshing like the Kardashians.
The boom in low-fat soft serve frozen yogurt joints exploded in popularity first in California, and spread across the U.S. over the past seven years. It has now ventured north. High-profile brands such as Pinkberry and Menchie’s – already marketed in pop culture through paparazzi shots of the product in the hands of Hollywood starlets and featured on television shows such as The Hills and Curb Your Enthusiasm – have been building a Canadian presence.
And they have spawned homegrown competition, such as fast-growing Canadian chain Yogurty’s. But when consumers fill their cups with chichi new flavours such as almond cookie, crème brûlée or red velvet cake at Yogurty’s, they may be on more familiar ground than they think.
The chain is owned by International Franchise Corp., the company behind Canadian frozen yogurt stalwart Yogen Fruz. Why would the marketing team sacrifice a well-known brand name for those new locations, effectively starting from scratch in its marketing in a competitive category? Because Yogen Fruz is too strongly associated with the last frozen yogurt craze in the 1980s – something its existing locations are trying to change. A new brand was needed.
“Because the name was so embedded in people’s minds as the company that blended the fruit, we felt that might have been a disadvantage to us,” said Aaron Serruya, chief executive officer of International Franchise. Mr. Serruya launched Yogen Fruz with his brother Michael in 1986, also capitalizing on a trend they had seen gain popularity in the U.S. at the time. When their company CoolBrands International saw its fortunes decline in the last decade, he spun off the franchise business and still runs Yogen Fruz today.
While these frozen yogurt brands began to be spotted in Canadian urban centres last summer, industry watchers identify this as the year that the trend has really begun to take root and expand.
“There’s going to be growth – you’ll see it ramping up the way the U.S. saw it three to four years ago … We’re going to see kind of a battle of the brands,” said Darren Tristano, executive vice-president of the food services industry research firm Technomic Inc.
“The first wave was, ‘Fool me into thinking it’s ice cream.’ This wave is more about the control,” Mr. Serruya said. “The customers want to customize ... [Self-serve] soft serve is the way of the future. If Yogen Fruz stayed with its original system, you’d be a dinosaur pretty quickly.”
The younger customers targeted by these chains primarily expect customized service. The new restaurants allow people to take as much or as little yogurt as they want, and choose their toppings in whatever variety and quantity they like. (With the exception of Pinkberry, which also allows for customized toppings and has servers build the dessert at the customer’s request, most chains are self-serve.)
Marketing to that generation also means not penalizing them for customizing their products. The pricing model at Menchie’s and Yogurty’s has customers pay by weight, which Michael Shneer, the president of Yogurtworld Corp., which owns the rights to Menchie’s for all of Canada, believes is a welcome departure from the old model of charging 50 cents extra for sprinkles, and seems intrinsically more fair. (Pinkberry has a slightly different system, that allows customers to choose a size of cup but then servers will add as many toppings as a customer requests, as long as it fits inside.)
Yogen Fruz’s owners expanded the Yogurty’s brand to attract those customers, but is also imitating the trend in its older stores, which are being renovated to include “U serve” machines. Yogen Fruz will continue to have a brand presence in shopping malls and cinemas, but the plan is for Yogurty’s to be the brand on the street.
Beyond the desire to customize, consumers’ eating habits are also changing, with more emphasis being put on health. Most flavours at the new frozen yogurt chains are low-fat or no-fat, and many even address the new pariah of the diet-conscious, by offering sugar-free flavours.
“We felt that a healthy indulgence would be much more preferred than an unhealthy indulgence,” Yogurtworld‘s Mr. Shneer said. Before banking on frozen yogurt, he was also responsible for bringing the Nutrisystem and L.A. Weight Loss diet plans businesses to Canada. Pinkberry is also marketing to a health-conscious crowd. It offers mini servings that are under 100 calories, for example.
“People are a lot more concerned about what they eat than they have been before,” said Ken Thicke, the franchisee and area developer for Pinkberry in Western Canada. “Children are growing up with those habits, and that’s why it’s a trend that’s going to continue.”
Yogurt has become a growing staple of people’s diets in general. Yogurt is the fastest growing product in the consumer packaged goods segment in Canada, according to marketing research firm NPD Group. And in the past two years, there have been roughly 12 million servings of frozen yogurt in Canada.
“It is absolutely a growth category,” said Robert Carter, executive director of food service at NPD.
That shift in consumer palates has helped: Mr. Serruya remembers some American consumers in the early Yogen Fruz days thinking that the product was spoiled because it had a strong yogurt taste. With the craze for probiotic and Greek yogurts now, that’s rare.
How healthy a frozen yogurt is – even if it is low-fat – depends on how much a customer chooses to eat. Toppings offered in these stores include fresh fruit and granola, but also cheesecake pieces, crushed candy bars, and marshmallows, all of which can make the treat much less guilt-free. But the simple presence of low-fat flavours and fruit is a marketing tool. “We call it the halo effect. If you’ve got salads on your menu … people are going to go, ‘Ooh, wow great,’ and then they’ll go and order a hamburger. But there’s a halo effect, just having healthy items there,” Mr. Carter said.
Another halo comes from the celebrities who endorse these brands for free. The walls of Menchie’s locations are covered in snapshots of stars such as Taylor Swift and Selena Gomez buying cups of yogurt. Last year, Menchie’s opened a pop-up shop at the Toronto International Film Festival to market the celebrity connection. When Pinkberry opened its first location in Vancouver, it invited Glee star Cory Monteith to perform with his band, and attracted more than 4,000 visitors. Canadians who have spotted the brand in pop culture have posted on Pinkberry’s Facebook page asking when it will expand further, Mr. Thicke said. In its first year of operation in Canada, Pinkberry exceeded its sales targets by nearly 20 per cent.
There are some big names investing in the trend: Starbucks chief executive officer Howard Schultz has invested nearly $28-million in the Pinkberry chain (along with partner Dan Levitan through venture fund Maveron) and sits on its board. (The brand benefits from that connection, since reliable Starbucks franchisees have frequently been chosen to expand Pinkberry globally, Mr. Thicke said.)
But as the category grows, fuelled by some of the lowest franchise costs in the fast food industry, it will have to fight to keep that premium image. “We have not seen McDonald’s or Burger King go in with this style of frozen yogurt. When it does, then the bubble bursts,” Technomic’s Mr. Tristano said. “Remember Krispy Kreme? Everyone wanted those donuts. But when you could get Krispy Kreme everywhere, nobody wanted it anywhere.”
A GROWING TREND
If last summer was the year that California-style frozen yogurt joints began to appear in Canada, this was the year the trend began to grow. In many urban centres, shops opened on the same block vying for the dollars of the crowd seeking out the low-fat soft serve and its constellation of customizable topping options. Here’s a look at some of the big brands in Canada:
Headquarters: Markham, Ont.
First store opened in Canada: June, 2011.
Current number of stores: 27 (17 franchisees and 10 corporate-run) in Ontario.
Estimated sales in Canada this year: $18.8-million*
Expansion: Company plans to have 60 locations open by the end of next summer. Its next province is Quebec, and it is currently negotiating a partnership for a master franchisee for Western Canada.
Headquarters: Los Angeles
First store opened in Canada: Late 2010
Current number of stores: 23 coast to coast.
Estimated sales in Canada this year: $11.2-million*
Expansion: It will open seven more by year’s end. In 2013, growth will be exponential: 117 locations are in development for Canada, with plans to eventually reach 200 stores nationwide.
Headquarters: Los Angeles
First store opened in Canada: July, 2011
Current number of stores: Three in Western Canada.
Estimated sales in Canada this year: $3-million*
Expansion: A minimum of 17 more stores are planned for B.C. and Alberta in the next three years. The company is exploring expansion in Ontario, likely before next summer.
*Estimates from Technomic Inc., a food-service industry research and consulting firm.
Editor's note: Michael Shneer's last name was spelled incorrectly in an earlier version of this article. Also, the number of Yogurty's stores that are currently open in Ontario has been corrected.Report Typo/Error