Wednesday, August 01, 2007

Pinkberry makes the Financial Times

I think this means that Pinkberry is big-doin' Watch for the IPO.

By Jonathan Birchall
Published: August 1 2007 03:00 Last updated: August 1 2007 03:00

Just after 11 o'clock at night at the Pinkberry frozen yoghurt store on Manhattan's Eighth Avenue, a young woman was pleading unsuccessfully to be let in as staff members prepared to shut for the night. "It's for my friend," she begged. "He's never had one."
Earlier that evening, the line of customers had stretched outside the store, with a cross section of the young and hip who populate the Chelsea neighbourhood waiting to order one of the two available flavours of tart yoghurt - plain or green tea - with a range of toppings both healthy and indulgent.
Frozen yoghurt is not new to the US where it emerged as a supposedly more healthy alternative to ice-cream in the 1980s. But with 40 outlets around Los Angeles and three so far in New York, the rapid growth of Pinkberry is leading a yoghurt revival that is rooted in an unusual blend of cross-cultural exchange and entrepreneurship.
In southern California, Pinkberry's ability to attract crowds since it was founded there in 2005 has spawned a host of imitators, such as Snowberry, IceBerry,Berri Good and Kiwiberri. In Manhattan, Zabar's, the gourmet supermarket, has launched a "Za-berry" yoghurt bar.
The Pinkberry chain was launched by Shelly Hwang, a Korean who came to the US to study business at the University of Southern California, and her partner Young Lee, a Korean-American who moved to the US with hisfamily as a child.
Ms Hwang's first venture was aimed at opening a small restaurant serving a "high tea" concept in West Hollywood and it failed. She says she was given the idea of frozen yoghurt - using a newer, more tart recipe and fresh fruit toppings - by Mr Lee, a former student of the Parsons school of design in New York.
Mr Lee had the idea of making store design central to the brand's identity. To achieve a higher, premium price, the "old idea repackaged in a new way", as he calls it, had to undergo a Starbucks-like transformation. The sales counter of traditional plain frozen yoghurt outlets was out. The approach emulates the attention to design detail that took the Seattle coffee-store chain worldwide.
"I wanted people to have a department store experience rather than a grocery store experience," he says. "It's a chore to go the grocery but a luxury to go to a department store."
The stores have an acrylic glass and stainless steel retro look, with a heavy Phillippe Starck influence. The mood, which deliberately refers back to the frozen yoghurt heyday of the 1980s, is reinforced by the use as background music of remixed hits by bands of the period such as Spandau Ballet.
To create Pinkberry's stylish brand identity they also brought in Yolanda Santosa, a Hollywood designer responsible for credit sequences for the feature film 300 and the Desperate Housewives television series. And in a tribute to the 1980s, they commissioned a song, "Sorry Ice Cream, I'm going to Pinkberry", from Lady Tigra, who as a member of pop group L'Trimm had a hit with "Cars that Go Boom" in 1988.
"I hate to use the word hip," Mr Lee says. "But for $5 you getsomething which is very unique . . . you get 15 minutes of feeling cool and hip."
Pinkberry's founders insist that the idea grew out of Mr Lee's own experiences - that he had the idea after visiting Vienna in 1985 and tasting gelato-style frozen yoghurt, followed by a trip to Hawaii where he sampled fresh pineapple and soft-serve ice-cream.
But Pinkberry's growth in the US also follows the expansion of frozen yoghurt outlets during the past five years in South Korea.
There, the growth in popularity of frozen yoghurt does not have traditional roots. Instead it has been fuelled by a national interest in wellness and "functional" food choices that mirrors consumer sentiments in the US. Heinz, after all, stresses the presence in its tomato ketchup of lycopene (a red pigment said to help prevent cancer) and Twinings boasts of the antioxidant powers of its teas.
Red Mango, one of Korea's largest frozen yoghurt chains, this summer opened its first store in Los Angeles, pointedly calling itself "the original healthy frozen yoghurt". The company, founded by a Korean entrepreneur, Roni Kim, opened its first store in Korea in 2003, and has expanded to 130 locations. It has also spawned a host of imitators, including Yoguteria and Babyyogurt.
Mr Lee and Ms Hwang say the fact that they are part of the -Korean-American community has not been a significant factor in the chain's expansion, except perhaps indirectly. Their area developerfor the New York area is Dai Hwan Choi, a college friend of Mr Lee.
"The Korean community has helped us in a very ironic way," says Mr Lee. "They copied us and used the word 'berry' a lot - Iceberry, Snowberry and so on."
Pinkberry so far has been entirely self-funded. Mr Lee will not give overall sales figures but the business has an operating margin of 4.8 per cent and a gross profit margin of 20 per cent, he says. Each store serves at least 1,600 customers a day.
Pinkberry's path to success has not been without its hurdles. Recently it fell foul of California's stringent laws when it was discovered that the product did not meet the state's definition of what constitutes yoghurt, as set down by the department of food and agriculture. In response Pinkberry removed all references to frozen yoghurt from its website.
So far most of the stores are operated by the owners, who are wary of franchising before they have established the chain's reputation. But after being deluged by about 3,000 franchising applications, Mr Lee and Ms Hwang have selected eight for future national expansion. New stores are planned in Las Vegas, Florida and Arizona. A first UK outlet is planned for London's Canary Wharf. They are not interested in selling the chain.
Mr Lee insists that this willnot prove to be a short-lived craze. "To me it's not a fad, because our first store opened two-and-a-half years ago and people are still going back for more."
And while the frozen yoghurt craze of the 1980s faded, its main protagonists survived. TCBY frozen yoghurt, founded in 1981 and owned by Mrs Fields Famous Brands, has more than 1,000locations across the US. ICBY, founded in 1978, has more than 1,000 outlets and is owned by Canada's Yogen Fruz.
And Tasti D-Lite, a New York chain of 60 stores launched in 1987, was sold by its founders to a private equity firm in February. Its new chief executive says he "intends to make Tasti D-Lite the number-one 'good-for-you' frozen dessert in the world".
Those walking Manhattan's streets in search of a late-night fix of frozen yoghurt may soon have more options.
Pinkberry's green tea flavour is not the only Asian-influenced fast food dessert concept tickling US taste buds.
Having originated in Japan, the Beard Papa chain is making waves with its European-style cream puffs (right), which began life in a bakery in Osaka. Beard Papa already has more than 200 stores in Asia, 20 in Hawaii and California, and six on the US east coast, with locations in prime shopping malls. The company's global expansion plans include the UK and Brazil.
However, past examples suggest that crazes of this kind do not always stay in vogue. In the late 1990s, Los Angelenos started drinking sweet "bubble tea" with tapioca balls, a drink that had originated earlier in the decade in Taiwan. Demand for the drink led to the creation of three small US chains - Lollicup, Q-Cups and Tapioca Express - all founded by west coast-based Chinese-American entrepreneurs.
Today bubble tea can be found in Chinatowns in many parts of the world, including London, Paris and Sydney, but the taste for "boba" tapioca balls has not spread far beyond Asian communities.
Copyright The Financial Times Limited 2007

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