They seemed to pop up almost overnight. In strip malls and on street corners across the country, frozen-yogurt shops suddenly offered an exciting new option for America’s collective sweet tooth, teasing at healthfulness and innovating with self service and customization. Once concentrated mostly in warm coastal cities or urban centers, fro-yo concepts spread to countless towns, suburbs, and neighborhoods across the country, with names like Pinkberry, Red Mango, and Menchie’s.

Fro-yo’s sudden hot streak appeared to threaten a mass melting of one of America’s tried-and-true dessert darlings: ice cream. Indeed, some of the nation’s top ice cream concepts took a beating with fro-yo’s arrival. Between 2009 and 2011, Cold Stone Creamery’s annual sales dropped to $366 million from $430 million, and its store count dropped to 1,086 from 1,198. Baskin-Robbins, meanwhile, saw sales drop to $496 million from $570 million and store counts tumble to 2,457 from 2,597 in that same time period.

But ice cream brands say they’re nowhere near ready to surrender.

“Ice cream is so entrenched in the American culture that it’s not really even close at all to being transplanted as being what people want, whether it’s after dinner or after seeing movies,” says David Wild, director of franchising for South Florida–based Sloan’s Ice Cream. “I don’t think that it really stands a chance of being overthrown, just because it has so many roots in American culture.”

With the frozen-dessert market more crowded than ever, ice cream brands are finding new ways to stay competitive. Classic concepts are leaning on their popular product lines and loyal customer bases while rolling out new offerings. Many have learned from frozen yogurt’s use of novelty and are making their products more customizable than ever.

Ice cream newcomers, in the meantime, are adding their own unique twists to the dessert by tapping into the local-foods movement, handpicking artisan-quality ingredients, promoting healthier options, and innovating with new techniques and flavors.

Insiders say these shifts within the ice cream industry have poised it for a bounce back; many believe frozen yogurt has reached its saturation point.

“They come and go. But Americans will eat ice cream until the end of time,” says Michael Branigan, vice president of marketing for Pennsylvania-based Bruster’s Real Ice Cream.

Executives with Sloan’s say the brand is not just setting itself apart from frozen yogurt, but also from others in the broader, congested dessert arena. The sensory-overload stores are billed as a dreamland for kids and adults. Whimsically decorated shops are covered in bright colors and lit with twinkling chandeliers, and offer a variety of ice creams, candy, toys, chocolates, and baked goods.

“We are so unique and different that we really almost don’t have any competition,” says founder and owner Sloan Kamenstein, a classically trained chef turned ice cream proprietor. “Because there’s nobody that does everything all together in one space the way that we do it, with the fun atmosphere and all the excitement of coming to our stores.”

Kamenstein says the company will pursue an aggressive growth plan in the next few years. So far, 17 franchises are signed and the company hopes to open 200 stores within five years.

Some ice cream operators are taking a page right out of fro-yo’s playbook. Whereas that category has thrived on the self-serve model, in which customers can choose their precise portion preferences and toppings and be charged by weight, nearly all ice cream shops have relied on a model that set standards for portions and toppings.

But not anymore.

“One of the things the yogurt shops offer is control,” says Dave Guido, senior vice president of operations and franchise sales at Bruster’s. “So we promote the fact that you can customize your product at Bruster’s, the point of distinction being that we’ll do that for you.”

There’s no question that frozen-yogurt shops have encroached upon 200-unit Bruster’s territory. But executives don’t see fro-yo as a direct threat. In fact, the brand thinks its biggest competition comes from quick-service giants like Wendy’s, McDonald’s, and Burger King, which continue to experiment with dessert options. While those companies may not offer the same intense focus on dessert, they do offer a convenience and affordability that’s hard to match.

That’s what ice cream chain Dairy Queen sees as one of its key advantages. Most Dairy Queen stores have drive thrus, so customers can get popular items like Blizzards quickly in the size they want, while still choosing from countless combinations of flavors and add-ins.

“There’s no question that just the sheer number of outlets offering frozen sweets has grown,” says Dairy Queen’s executive vice president of marketing Barry Westrum. “But if you look at the trends in the ice cream industry—consumer demand for convenient single-serve options, their desires for eating on the go, portion size, customization, unique flavors—all of those trends really play into our favor.”

With 2012’s sales topping $2 billion, Dairy Queen’s 4,600 U.S. stores swallow about 40 percent of the frozen-dessert market, according to Technomic.

Westrum thinks frozen-yogurt customers will start to find the self-service model expensive and inconvenient. Brands like Dairy Queen, he says, can still develop fresh offerings mixed with a high level of customization. The brand continues to roll out new Blizzard flavors, including Chocolate-Covered Pretzel, Lemon Meringue Pie, S’mores, and Peanut Butter Brownie, as customers increasingly come to expect new-and-improved products.

“As you look at consumer trends in all forms of how they eat today, consumers love what they love,” Westrum says, “but they’re always looking for what we call ‘safe adventures’ in those popular items.”

That sense of adventure is being scooped into cones and dishes in many new ways across the ice cream industry. As customers develop more sophisticated palates, higher-end ice cream stores have started offering bolder flavors previously unheard of in ice cream, like bacon, avocado, and tomato. Others, like Utah-based Sub Zero Ice Cream, are experimenting with liquid-nitrogen freezing, hoping to spark a new frozen fad through science.

Ben & Jerry’s has integrated a swath of fair-trade ingredients, while Baskin-Robbins resurrected its flavor-of-the-month promotion. And Carvel joined forces with sister brand Schlotzsky’s to open up new daypart and demographic opportunities.

The competition with frozen yogurt isn’t necessarily new to these ice cream companies. Many outlasted the 1980s fro-yo boom, when brands like TCBY enjoyed explosive growth. But insiders believe today’s fro-yo success is stronger—and actually tastes different.

“It’s not frozen yogurt trying to be an ice cream alternative,” says Mary Chapman, director of product innovation at Chicago-based foodservice consultancy Technomic. “It’s frozen yogurt trying to be its own tart, yummy flavor.”

And while some fro-yo shops have closed in more saturated markets, the segment doesn’t seem to be going anywhere. New brands and stores are still opening up, especially in small and mid-sized markets.

“We’re still getting calls from smaller markets saying, ‘Who are all these frozen-yogurt chains coming into our city?’” Chapman says. “So the wave is still coming.”

Chapman adds that gelato concepts are also starting to pop up, which could spark even more competition for frozen-dessert business. Considering all this, she says, it’s vital for ice cream brands to think outside the box.

“I think consumers are always looking for something new and different,” she says. “The ice cream stores and the ice cream specialists that have maintained their sales have been the ones that continue to innovate, to promote and offer new treats. I think they’ll continue to stay competitive.”

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Ohio-based Jeni’s Splendid Ice Creams is one upstart ice cream brand pushing the limits of what kind of innovation is available in the category. The company hand-makes or hand-picks nearly every component of its ice creams, from Ugandan-imported vanilla beans to cream from grass-fed cows to salted caramel that’s made in-house over an open flame. The high-quality ingredients are used for flavors like Whiskey & Pecans, Wildberry Lavender, and Juniper & Lemon Curd.

Jeni’s executives say frozen yogurt’s recent success isn’t even on their radar.

“We don’t think we are competing in any way with the frozen-yogurt shops that have sprung up everywhere,” says John Lowe, CEO of Jeni’s Splendid Ice Creams. “We’ve done absolutely nothing to change what we’re doing. We don’t focus on what others are doing. We are simply trying to make the best ice cream as possible and serve it with an unparalleled customer-service experience.”

It seems to be working; Jeni’s has grown to 10 units in Ohio and Tennessee, with online distribution as well as wholesale partnerships with grocery stores across the U.S. And Lowe says the brand’s steady climb won’t detract from its innovative flavor development.

“At the end of the day, it’s what’s in the cone or in the [bowl] that matters,” Lowe says. “And that’s where others can’t match.”

Some ice cream brands are finding that sticking to the classics still has its draw among consumers. After experimenting with new product add-ons, San Francisco’s Mitchell’s Ice Cream found that its history and tradition were the main draw. Owner Larry Mitchell says he’s seeing more premium ice cream brands popping up offering higher-quality products like his ice cream blend made with 16 percent butterfat.

“We brought in coffee and yogurt and dropped them both. We don’t need it,” he says. “Ice cream is so much better. It’s such a nicer dessert to eat. People like this kind of ice cream and they don’t mind paying more for it.”

Baskin-Robbins is attempting to bridge the gap between innovative and classic ice cream products. Bill Mitchell, senior vice president and chief brand officer of Baskin-Robbins U.S., says the company is bouncing back with the help of a wide array of products that provide something for all customers. In addition to traditional ice creams, stores offer low-fat and no-fat ice creams, as well as a live cultured yogurt.

Baskin-Robbins also gives nostalgia a nod with the re-entry of flavors like Lunar Cheesecake, which first debuted in the 1960s and made another landing in 2012 with the release of the movie “Men in Black 3.”

The array of flavor options, along with Baskin-Robbins’ new store designs, have helped the brand enjoy six consecutive quarters of growth, Bill Mitchell says.

One leg up frozen yogurt has on ice cream is its nutritional value. With lower-fat and lower-calorie options, the yogurt market earns a reputation as a lighter dessert. But experts believe that ice cream can make a run with healthfulness, too. Consumers continue to rewrite their own definitions of healthy, and some may view ice cream shops that offer all-natural products or locally sourced ingredients as being in line with what they desire health-wise.

“Every consumer is viewing health in their own way,” says Eric Stangarone, creative director at The Culinary Edge, a San Francisco–based consultancy that works with both ice cream and frozen-yogurt brands. “People will make their concessions in all kinds of ways.”

And those shifting attitudes are allowing both ice cream and frozen yogurt to carve out their own niches in the customer base, Stangarone says. “The two in my opinion are really living in harmony,” he says. “They’re competing for different consumers and different needs of those consumers.”

Further, frozen yogurt’s success might ultimately be beneficial for ice cream, Stangarone says. “Because of the popularity of one or both of them, I think people are becoming more interested in them as a whole,” he says. “And consumers are willing to trade between the two pretty seamlessly.”

Stangarone believes the future of frozen desserts will be built on the backs of more specialty and artisan concepts that specialize in very specific items instead of multiple menu options.

Everyone has a place in the frozen-dessert category, Mitchell says, especially ice cream.

“I don’t think the landscape is crowded yet,” he says. “Just look at the burger industry or the pizza industry and see how crowded they are.”

The Rise of Fro-Yo

Ice cream may still reign as the top frozen dessert, but frozen- yogurt shops are eating into that market share.

	Sales (thousands)				Units
Top Frozen Dessert Chains	2012	2011	% change		2012	2011	% change
Dairy Queen	2,440,000*	2,450,000*	-0.4		4,465	4,488	-0.5
Baskin-Robbins	509,967	502,200	1.5		2,463	2,457	0.2
Cold Stone Creamery	354,296	365,520	-3.1		1,031	1,086	-5.1
Braum's Ice Cream & Dairy Store	312,000*	312,000*	0		278	278	0
Rita's Ice	132,000*	122,500*	7.8		624	579	7.8
Yogurtland	126,000*	100,000*	26		185	152	21.7
Pinkberry	125,000*	115,000*	8.7		145	113	28.3
Freshens	123,000*	130,500*	-5.7		850*	850*	0
Carvel Ice Cream	121,000*	122,500*	-1.2		409	414	-1.2
Menchie's Frozen Yogurt	119,000	89,700	32.7		236	138	71
Red Mango	99,500*	76,000*	30.9		211	151	39.7
Ben & Jerry's	96,500*	103,000*	-6.3		297	298	-0.3
Häagen-Dazs	95,000*	100,000*	-5		227	233	-2.6
Tastee Freez	92,000*	93,000*	-1.1		357	365	-2.2
TCBY	84,000*	98,000*	-14.3		359	405	-11.4
Orange Leaf Frozen Yogurt	76,500*	49,000*	56.1		217	123	76.4
Marble Slab Creamery	57,214	66,500*	-14		231	250	-7.6
Bruster's Real Ice Cream	56,000*	59,000*	-5.1		210	214	-1.9
Golden Spoon Frozen Yogurt	50,000*	62,000*	-19.4		93	96	-3.1
Tutti Frutti	45,000*	22,500*	100		275	100*	175
Fosters Freeze	44,000*	43,500*	1.1		91	91	0
sweetFrog	42,000*	15,000*	180		180*	100*	80
Total	5,199,977	5,097,420	2.0		13,434	12,981	3.5

*Technomic estimate / Source: 2013 Technomic Top 500 Chain Restaurant Report