Colombo Frozen Yogurt Case
Colombo Soft-Serve Frozen Yogurt
In 1994, General Mills Incorporated, a $6 billion consumer goods company, acquired Colombo Frozen Yogurt. General Mills Inc. (GMI) believed they could add Colombo frozen yogurt to their existing product lineup to increase net sales with little addition in marketing cost.
Frozen yogurt is sold through two distinct segments – independent shops and impulse locations such as cafeterias, colleges, and buffets. Frozen yogurt is the main business for the shops whereas yogurt is incremental to the impulse locations’ main business. GMI’s large sales force already served the impulse market.
The financial results in the first couple of years were mixed. Earnings increased slightly and then dropped each year even though sales volume was relatively flat. In total, merchandising costs dropped, while pricing promotion rates escalated. The GMI sales force focused on the impulse segments and pricing promotions were believed to be driving volume increases. However, volume in the shop segment declined at alarming rates and there was widespread dissatisfaction in the sales organization. While GMI knew sales by segment, they didn’t track costs by segment. Instead costs were allocated based on sales dollars. The situation was ripe for a clearer look using ABC methods.
Today’s Frozen Yogurt Market Structure:
When Colombo Yogurt Company began marketing soft-serve frozen yogurt in the early 1980’s, their main distribution was through independent yogurt shops. In the early 90’s, they faced competition from franchise operations such as TCBY and Freshens that replaced many of the independent yogurt shops. And the market changed as Foodservice operators such as cafeterias, colleges, and buffets started to add soft-serve yogurt to their business. By the late 90’s, these Impulse locations accounted for 2/3 of the soft-serve market.
In the late 90’s, Shop sales began to increase with the addition of distinctive new products such as
In 1994, General Mills Incorporated, a $6 billion consumer goods company, acquired Colombo Frozen Yogurt. General Mills Inc. (GMI) believed they could add Colombo frozen yogurt to their existing product lineup to increase net sales with little addition in marketing cost.
Frozen yogurt is sold through two distinct segments – independent shops and impulse locations such as cafeterias, colleges, and buffets. Frozen yogurt is the main business for the shops whereas yogurt is incremental to the impulse locations’ main business. GMI’s large sales force already served the impulse market.
The financial results in the first couple of years were mixed. Earnings increased slightly and then dropped each year even though sales volume was relatively flat. In total, merchandising costs dropped, while pricing promotion rates escalated. The GMI sales force focused on the impulse segments and pricing promotions were believed to be driving volume increases. However, volume in the shop segment declined at alarming rates and there was widespread dissatisfaction in the sales organization. While GMI knew sales by segment, they didn’t track costs by segment. Instead costs were allocated based on sales dollars. The situation was ripe for a clearer look using ABC methods.
Today’s Frozen Yogurt Market Structure:
When Colombo Yogurt Company began marketing soft-serve frozen yogurt in the early 1980’s, their main distribution was through independent yogurt shops. In the early 90’s, they faced competition from franchise operations such as TCBY and Freshens that replaced many of the independent yogurt shops. And the market changed as Foodservice operators such as cafeterias, colleges, and buffets started to add soft-serve yogurt to their business. By the late 90’s, these Impulse locations accounted for 2/3 of the soft-serve market.
In the late 90’s, Shop sales began to increase with the addition of distinctive new products such as