Industry News | July 9, 2012

Report: With Frozen Desserts, Customization is Key

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Frozen yogurt and coffee shops have experienced the most growth in the frozen dessert sector, while ice cream and juice and smoothie bars have struggled, according to a special report from market research company IBISWorld Inc.

Purveyors of frozen yogurt and coffee recognize consumers’ desires for healthy, customizable treats, says Nikoleta Panteva, senior analyst at IBISWorld, contributing heavily to their economical success.

“There are a few key things that drive those that do better,” Panteva says. “One of them is the ability for consumers to customize their treats, which allows them to choose their own flavors and also allows them to spend as much money as they’re ready to spend, particularly with the self-serve option in frozen yogurt.”

Coffee shops, meanwhile, remain attractive because guests have options between cup sizes, low-fat or dairy-free milk, and low-calorie or full-flavor syrups.

The strong presence of frozen yogurt and coffee shops in the past five years led the ice cream industry to decline 11.4 percent and 8 percent in 2008 and 2009, respectively, according to the report. Ice cream sales suffered most not at the hand of frozen yogurt start-ups, the report says, but rather due to a drop-off in demand from food establishments.

“One of the largest markets for ice cream production is actually restaurants and sit-down establishments,” Panteva says. “When income was low during the recession, consumers opted away from that and they bought at home instead, and while that offset some of the declines, it didn’t really make up for the losses within the restaurant sector.”

Panteva says foodservice industry establishments account for 48.1 percent of industry revenue, while retail stores account for 41.5 percent. “So you can see that food establishments are still the major source of demand for the industry,” she says.

She says ice cream stores can ensnare more of the frozen dessert consumers by working a self-serve format into their operations.

The juice and smoothie bars industry also suffered over the past few years. A 2.4 percent decline in 2009 and a 4.8 percent drop in 2011 pushed revenue into a 0.4 percent average annual decline.

While frozen yogurt, ice cream, coffee, and smoothie companies compete with one another regularly, the industry as a whole faces fierce competition from fast food establishments, Panteva says, particularly as restaurants such as McDonald’s and Subway add ice cream and yogurt to their menus.

“McDonald’s is a great example—they have quite a few options on their menu that are low-priced and are readily available wherever you go,” she says. “Those are some things to look out for.”

By Sonya Chudgar

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.