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NAPICS '13: State of the frozen dessert segment

Although the restaurant industry is recovering, it could take until 2020 to reach pre-Recession growth levels.

February 19, 2013 by Alicia Kelso — Editor, QSRWeb.com

The frozen dessert space has gotten increasingly crowded within the past 10 years and competition has flattened sales since 2010.

Darren Tristano, executive vice president of market research firm Technomic, said the segment should continue to be flat for the next two to three years because there are now "so many snacks to choose from, from frozen yogurt and ice cream to other desserts like cupcakes." Tristano provided the keynote address Sunday at the North American Pizza and Ice Cream Show in Columbus, Ohio.

Tristano broke his "State of the Pizza and Ice Cream Industries" presentation into categories including consumer mindset and menu trends.

Consumer mindset

Although the Recession has ended, consumers remain cautious with their spending. However, according to Tristano, they feel better about their own situations and fewer consumers admit they're struggling.

"The better news is consumers are more optimistic about 2013, by about 4 percent more than they were last year at this time," he said.

Consumers' primary concerns are gas prices (27 percent), grocery costs (26 percent), and their own financial health (26 percent).

"Grocery prices are rising faster than restaurant prices, so for consumers, restaurants are now actually a better value," Tristano said.

While consumers are more optimistic for the New Year, operators have the opposite mentality. The big concern is commodity prices.

"Fifty-four percent (of operators) said they will raise their prices this year. They don't want to, but most will have to," Tristano said. He added that all eyes will be on McDonald's. As the chain bumps its value offerings from $1 to $1.29, it makes other brands more comfortable to inch up prices as well.

Tristano also pointed out that while sales are rebounding from the economic fallout, they're still well below pre-Recession levels. For example, the restaurant industry as a whole experienced 13.5 percent growth in 2007 versus 3.6 percent expected for 2013.

"It will likely take until 2020 to achieve 2007 levels," Tristano said. "But we're headed in a positive direction and that is better than a decline."

Concepts and consumer trends

For the dessert segment as a whole, nothing is more popular than frozen yogurt. Pinkberry kicked off a high-end influx of these concepts in 2005, and was eventually joined by self-service and lower price-point brands such as Orange Leaf.

Also on trend and poised to grow are old-fashioned ice cream parlor concepts (such as Oberweis) and Pino Gelato, as well as international concepts finding their way stateside, like Costa Rica's POPS.

"Many of these provide authenticity, which is what people want," Tristano said. Other trends include:

• Broadening menus to add winter weather business; for example Cold Stone Creamery's cupcakes and novelties lineup. Also, adding complementary offerings such as crepes to go with a gelato, provides more chances to sell during any season.
• The acceleration of breakfast offerings, such as Greek yogurt with fruit.
• Smoothies and other specialty beverages. "They offer portability, and they can benefit from the lifestyle-oriented marketing people want now," Tristano said.
• Catering. Ben & Jerry's is now offering catering, as is Cold Stone. "They said, 'if you're not going to come to us, we will come to you,' and it's a great option for business events, charity events, etc.," Tristano said.
• Super premium. "Raising the indulgence factor and playing with flavor innovation adds an element of sophistication," Tristano said, pointing to Columbus-based Jeni's Splendid Ice Cream as an example.
• Healthy promoted as a lifestyle.
• Letting consumers control expenditures; for example, frozen yogurt concepts, like Menchie's, that allow guests to mix, weigh and pay.
• Community outreach. Yogurtland is a good example of providing philanthropic opportunities for its guests. "It won't necessarily build sales, but it builds an emotional connection for guests and that makes them feel good. It also builds brand awareness," Tristano said.

"Ultimately what operators need to keep in mind is consumers indulge when they go out to eat — they can eat healthy at home. But they want to have healthful options when they are out because it gives them more control over their decisions," Tristano concluded. "Frozen dessert concepts need to be broadening their options to serve more occasions and differentiate."

Read more about menu trends.

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