Can something overpriced, lowfat and "healthy" sell as well as something overpriced, addictive and caffeinated? Probably not. Replicating the success of Starbucks seems next to impossible.
But Howard Schultz the chairman of Starbucks and partner Dan Levitan are betting $27.5 million that they can use their knowledge of successful retail strategy to expand frozen yogurt company Pinkberry. Maveron, the venture capital firm that they run, just invested in this frozen yogurt franchise--which already has 21 stores in LA and NY.
If you haven't had it yet, Pinkberry sells yogurt tasting fro-yo (not the sweet stuff that TCBY sells) topped off with fresh fruit, cereal or nuts and other toppings. They sell for between $5.50-10 per cup. Personally, I like the concept and the taste but was disappointed to find out that the fro-yo isn't actual live yogurt. (Don't ask me to explain the concoction.)
Here's the challenge to Pinkberry's expansion: frozen yogurt isa $126 million business but frozen yogurt consumption is down nationwide. Consumption dropped from 3.5 lbs per person in 2005 to just 1.3 today according to the USDA.
Whether TCBY (remember them from the 1980s?) expanded too quickly and hurt itself or whether the company just succumbed to the fickle fluctuation of trends, the point is that their business has declined. TCBY's sales dropped 10% on the year, according to techtronic.
Still Pinkberry's backers believe that the stores' boutique aesthetic and the popularity of food marketed as health conscious will help the franchise expand to 50 stores nationwide by yearend.
The question is whether the brand can weather a potentially passing trend. While popular in the taste making cities of LA and NYC, ubiquity in those metropolises does not translate to acceptance in middle American markets.
Still, with Maveron backing the expansion off the Pinkberry franchise, and Howard Schultz on the fro-yo company board the hope is that they'll strengthen the Pinkberry brand and in store experience. Those two elements have been key to success at Starbucks.
It will be interesting to see if the company maintains its franchise structure given the challenge that independent ownership would give to maintaining control over the brand and image. Could Pinkberry be the next IPO?
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