The Shakeout Begins

Implications: The new frozen yogurt fad has two distinct differences from the prior wave that launched TCBY and others. 1.) The self-serve aspect allows customers the flexibility to consume as much as they want, appealing to price buyers and those that will spend more. 2.) The coffee house industry has proven that store design is as important in creating the image of the brand as is the product itself. The successful entrants into this space will not only capitalize on these two aspects but also execute better than their competitors.

Analysis: The shakeout of this category will occur not because consumer demand will wane but because some of the competitors in this category will fail to build the proper infrastructure to support either a franchised or company-owned system.  Selling franchises, opening new stores and supporting ongoing needs is difficult and so is building a company-owned system. (Just ask Starbucks) The failure to do so results in poor execution at the store level and customers who gravitate to the brands that execute best. Many mistake the shakeout of a new industry to a softening of consumer demand, but don't look further into why the demand softened. True, fads come and go but the frozen treats market has been around a long time, in that regard it isn't really a fad, just resurrected in another format. So those that find a real niche in frozen treats and have the staying power to build a credible brand supported with hundreds of stores will find longevity long after the fad-like appeal of this product fades. Bet on the brand that executes best, not the one with Paris or Perez licking their favorite flavor.