Yogurt : Southland’s Cup Runneth Over

Behind a clump of Mid-Wilshire high-rises, squeezed into a gray and pink mini-mall, lies Yogurt Town.

Owner Jessica Kim works six-day weeks at the tiny frozen yogurt parlor, dishing out swirls of creamy yogurt topped with Gummi Bears, chocolate chips and strawberries--among a dozen goodies. “When I first tasted frozen yogurt I thought, ‘This is great. Who would want to eat ice cream after this?’ ”

But after two years in business, Yogurt Town has yet to turn a profit, said Kim, who relies on money from her parents and husband to keep the business afloat. “I had dreams that I would franchise and open other stores,” said Kim, 26. “But there have been lots of yogurt places that have opened and the market is saturated.”

Times are tough at Yogurt Town and at many of the roughly 400 frozen yogurt shops that dot store fronts and shopping malls in the Los Angeles area. The trouble stems from an overbuilding of stores in already saturated markets, industry officials say.

Besides independent shops such as Yogurt Town, chains such as Penguin’s Place, I Can’t Believe It’s Yogurt, and J. Higby’s have opened franchised outlets nationwide that compete for the approximately $1.5 billion in annual frozen yogurt sales nationwide.

And now, established retail giants such as Baskin-Robbins and Arco’s am/pm Mini Markets have entered the fray. Even individual restaurants have taken to adding a yogurt machine to their kitchens.

Tapering Off

In Los Angeles, about a dozen establishments selling frozen yogurt in Westwood Village fight it out with coupons and other promotions to lure college students, theatergoers and restaurant diners. Yogurt shops are adding sandwiches and salads to boost sales. And it seems as if those ubiquitous mini-malls are not complete without the requisite doughnut shop, dry cleaner and yogurt parlor.

“A lot of people got into the business, and they thought they would open up and get rich overnight,” said John Michel, a regional sales manager for Glendale-based Bonjour de France/Colombo, a supplier of frozen yogurt. Now, “it’s starting to taper off,” Michel said. “There are more people trying to get out than getting in.”

Even frozen yogurt suppliers, such as Bonjour de France, are locked in a battle in the Los Angeles area. “This is the most competitive market in the United States,” said Michel, who estimates that eight major frozen yogurt makers serve the region. “There are more people out here trying to get into the yogurt (making) business than anybody else.”

Frozen yogurt pioneers have also been dismayed by the intense competition. In 1976, Alan J. Phillips opened the doors to the Cultured Cow in Beverly Hills, believed to be the first Los Angeles-area frozen yogurt shop. But Phillips sold out five years ago.

“We opened up eight of them, and then the competition got crazy,” said Phillips, who now works in real estate development. “They opened on every corner. The moms-and-pops got killed.”

His advice to those who want to get in the business: “Three or four years ago I would have said, ‘Sure, go ahead.’ Now, I would advise against it. They would be making a big mistake.”

Industry analysts say there are not enough good locations to support the current number of frozen yogurt shops. Like most retail establishments, yogurt parlors thrive on foot traffic. The most coveted locations are near movie theaters, restaurants and college campuses, which provide a steady stream of customers during the entire week.

But most of these locations are already occupied or command sky-high rents that cannot be covered by frozen yogurt sales. With so many shops to choose from, an inconsistent or poorly managed store has a lot to lose. “Customers have many options to choose from--they will just go down the street to the next guy,” Michel said.

Perhaps the only areas left for growth are in Riverside and San Bernardino counties, Michel said. “There is more room out there, it’s growing fast and it’s not as saturated right now.”

Another drawback for frozen yogurt shops is their limited menu, some observers say. The number of flavors a store can offer is linked to the number of frozen yogurt machines. Most machines can produce two flavors and a mixture of both. But the machines do not come cheaply; they cost $7,000 to $22,000 each--and eat up valuable floor space.

To add variety, stores will rotate flavors on a weekly or even daily basis and offer numerous toppings, Michel said. At Penguin’s Place, the chain offers about 40 different flavors on a rotating basis and touts 40 toppings.

Many see frozen yogurt shops having to add additional foods to attract more customers. “If you visited the same store a year ago and came back today you would find fewer people, and more and more products to pick up the slack,” Phillips said.

But the intense competition among the frozen yogurt shops has not discouraged many major retailers. Retailing chains already have staked out the most desirable locations, and adding frozen yogurt is a matter of making room for yogurt machines and additional promotions and advertising.

Ice cream giant Baskin-Robbins began introducing frozen yogurt at its stores early last year. About 550 of its 2,600 franchised outlets now carry yogurt. “It now makes us one of the top yogurt chains in the United States,” said Marilyn Novak, spokeswoman for the Glendale-based chain. “It’s not just trendy,” she said. “We definitely feel that yogurt is here to stay.”

Scott Chalom, manager of a Westwood Village Baskin-Robbins store operated by his family, said sales have increased 25% since frozen yogurt was introduced one year ago. Sales of frozen yogurt account for 20% to 30% of total sales, he said.

“It definitely has brought in new customers,” Chalom said. But competition is stiff in Westwood, where frozen yogurt is sold at about a dozen establishments. Chalom even accepts cents-off coupon issued by his competitors--a standard practice.

“(Becoming a major player is) going to be an uphill battle,” Chalom said of the competition. “But it will be only a matter of time before we see some of these shops drop off.”

Attracts New Customers

Earlier this summer, Arco introduced frozen yogurt at about 90% of its nearly 700 am/pm markets nationwide. Like most yogurt shops, Arco’s convenience stores carry two flavors of yogurt, 10 dry toppings and four wet toppings. Unlike most stores, customers help themselves and the yogurt is priced at 99 cents for an eight-ounce serving, well below traditional prices.

Yogurt has helped the chain attract women customers, who surveys show tend not to shop at convenience stores such as am/pm. “We think it has brought new people into the stores,” said Joseph Tebo, the company’s manager of sales development. “It’s a profitable product line and it’s been received very well.”

Giants such as Arco and Baskin-Robbins will only make life tougher for independent shops such as Yogurt Town.

Yogurt Town is also at the whim of the weather, said Kim, who invested $55,000 to open the shop--$30,000 alone for a pair of frozen yogurt machines. “If it’s sunny, people will come out,” Kim said. “If it’s gloomy, people don’t come. If it’s rainy, forget it.”

To boost business, Kim said she plans to add a line of salads and sandwiches with pita bread and alfalfa sprouts. The additions should give her business a new lease on life, Kim said.