Pinkberry Looks Abroad to Keep Its Cool

The hip frozen yogurt chain, still tiny at home, is heading

By Leslie Patton
     April 28 (Bloomberg BusinessWeek) -- When Pinkberry opened
its first store in 2005 among the glitterati of West Hollywood,
Chief Executive Officer Ron Graves recalls people lining up for
hours to get their hands on the frosty yogurt dessert. (A small
cup can cost up to $4.95.) The city issued $175,000 in parking
tickets during a single month to Pinkberry customers, he says.
Now a host of copycats has emerged just as the American frozen
yogurt craze may be melting. Graves's solution? Expand the
119-store, Los Angeles-based Pinkberry chain overseas, with new
shops scheduled to open this year in Britain, Turkey, Morocco,
and the Philippines.
     "Consumer brands have to look at the landscape through a
global lens, as opposed to the domestic lens that Starbucks
(SBUX) started from 40 years ago," says Starbucks CEO Howard
Schultz, who joined the Pinkberry board in 2007. Currently, more
than half of Pinkberry's shops are in Southern California or
Manhattan. By yearend, however, about one-fourth of the chain's
stores will be outside the U.S., says Graves. That's more than
twice the proportion now.
     The push may help Pinkberry because there's less competition
abroad, says Ron Paul, president of restaurant tracker Technomic.
In the U.S., pricey ice cream shop operator Cold Stone Creamery
will add frozen yogurt to its menu this spring. Red Mango, a
rival yogurt chain, this year plans to almost double its U.S.
store count, to 200. Meanwhile, the number of frozen yogurt
servings in U.S. restaurants fell 11 percent last year, according
to researcher NPD Group.
     It's a different story in foreign markets. Pinkberry's
highest-volume store is in Kuwait, and its three stores in Peru
handle more than 50 percent more transactions, on average, than
its U.S. shops.
     While Graves won't disclose sales figures, Technomic
estimates Pinkberry pulled in $109 million in revenue last year
in the U.S. That's less than one-third the sales of Cold Stone
and a sliver of the $6 billion U.S. frozen dessert market. Yet
neither Cold Stone nor Red Mango has demonstrated the star power
of Pinkberry, which counts rocker Bret Michaels, designer Isaac
Mizrahi, and New Orleans Saints quarterback Drew Brees among its
celebrity devotees. That's one of the things that attracted
Schultz, whose private equity firm, Maveron, plugged $27.5
million into the chain in 2007.
     Ted Philip, a Pinkberry board member whose Highland Consumer
Fund invested in the company in 2009, says the yogurt chain has
sidestepped some common errors, such as being too rigid with
flavors, as it expands abroad. In Asia, Pinkberry will dish up
green-tea-flavored yogurt. It also caters to local tastes via the
toppings bar, with dates and pistachios at Middle Eastern stores
and the chocolate hazelnut spread Nutella in Russia.
     Fast-food restaurants could pose a threat to Pinkberry, says
Technomic's Paul, since chains such as McDonald's can easily add
frozen yogurt to their menus. "You have to ask yourself: Is this
a strong enough concept that people will make it a destination?"
he says.
     Graves is betting Pinkberry will keep its hot spot status
because of the customization its large number of toppings allows
and its store personnel, who eagerly chat up customers.
"Pinkberry has created an emotional connection between our people
and our customers," he says.
      The bottom line: As growth cools at upscale frozen yogurt
shops in the U.S., still-tiny Pinkberry is heading overseas in
search of new revenue.
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