Diving into the Fro-yo Business?

May 5th, 2013 by under Internationals at Smith, Say What MBAs Say. 2 Comments.

Imitation is the highest form of flattery. From TV series to fast food chains, people come to the United States and borrow business ideas home to make a fortune. So when I came to the States, besides study, I’m also on the hunt of successes that are yet copied and I recently found frozen yogurt might be a viable one.

This low fat creamy dessert is a guilty-free indulgence and a good alternative to ice cream. The self-serve model that allows customers to select from a variety of flavors and toppings has proved successful across the east and west coasts. In fact, in the midst of rising concerns of healthier snacking choices, frozen yogurt has grown to a $2 billion business in the US. However, it looks like the industry needs some consolidation: right outside the place I live, we have Yogi-berry and Yolove and a FroZenYo not too far away and they basically look and taste the same!

Okay, the business school taught me before diving into any business, we need to look at its five forces. So let’s see if frozen yogurt is an attractive industry to enter.

FrozenYogurt 021

  • Suppliers: It’s not rocket science to make frozen yogurt machines and its recipe is not a trade secret. So the bargaining power of suppliers is low.
  • Consumers: Consumers have a strong bargaining power and they are as likely lured away by new flavor choices as cheaper prices.
  • Competitors: This is a highly competitive industry, with chain stores such as Pinkberry and Red Mango leading the game, followed by hundreds of smaller brands and some 22,000 stores nationwide!
  • Threat of substitutes: Frozen yogurt is already a niche market and itself is a substitute for ice cream. Hence, the threat of a new substitute is low.
  • Threat of new entrants: The cost of entry is quick and cheap. According to sources, it can cost less than $10,000 to open a frozen yogurt shop.

Frozen yogurt is definitely an attractive yet competitive industry. Firms are ramping up with artistic interior design, more selections of toppings, and even designer swirls to differentiate themselves from the already crowded marketplace.  So think about how to stand out before getting immersed in a sea of fro-yo!


Sources: http://www.marketplace.org/topics/life/food-and-drink/frozen-yogurt-trend-far-cold

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Fang  on May 27th, 2013

There is a chain store named “hey-yo”, established 3 yrs ago in Shenzhen. I am a big fan of it from its start. The food is good, with reasonable price; the store offers wifi access. All branch stores are located in big shopping malls, where serve only one such store at least for now. Better be quick before the competition gets heated. Registering in a big shopping mall before any other suppliers is a big step to your success.

Bella Drawhorn  on August 24th, 2013

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