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Red Mango Marketing Strategy

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RED MANGO

Current Marketing Strategy

As a private company, Red Mango's current strategy can only be ascertained by analyzing its corporate communications, its past and current business moves, and media reports.

The company appears poised to become the next "hot franchise." There has been open speculation about an eventual initial public offering of stock, with The New York Times describing a stock offering as "seemingly inevitable."

Red Mango continues to expand in greater Los Angeles and New York City. Not incidentally, these are the two largest media markets in the United States. Los Angeles and New York are populated with many upscale, media-centric trendsetters who relish being on the cutting edge of retail, cultural and fashion concepts and who tend to generate publicity. Both markets also have high concentrations of celebrities whose patronage can drive brand awareness.

Clearly, Red Mango has intentionally and successfully drummed up a lot of free publicity and leveraged it into increased sales. According to Fast Company, Red Mango plans to open stores in 2008 in two other media-friendly and promotion-driven markets: London and Las Vegas.

Given the hype surrounding Red Mango and the inevitable calls for the company to capitalize on the fast-moving frozen yogurt trend, Red Mango has been fairly cautious in expanding. The company reportedly rejected over 3,000 potential franchisees and accepted only 12. Some speculate the company may try to become the "Starbucks of soft-serve," ignoring short-term considerations and using the venture capital and retail acumen of Howard Schultz and Dan Levitan to conquer important urban markets step-by-step and build long-term brand value - just as Starbucks has done over the last 25 years.

Global Competitors

According to market research firm Packaged Facts, ice cream sales accounted for about 57 percent of frozen dessert sales in the United States in 2007, down .3 percent from 2006. During the same period, frozen yogurt's share of frozen dessert sales went up by .4 percent. Much larger market share gains for frozen yogurt are anticipated: Total frozen yogurt sales (in-home and out-of-home) are expected to climb from $1.7 billion to nearly $2.7 billion by 2012. That is still no more than 10 percent of total frozen dessert sales; however, it represents growth. Red Mango's rise coincides with (and is a driver of) a market trend toward lighter and healthier desserts.

In a general sense, Red Mango competes with dessert shops of all types. Many frozen dessert shops are conveniently located near "upscale casual" restaurants such as P.F. Chang's and Cheesecake Factory or more mid-market "family night out" restaurants such as California Pizza Kitchen and Outback Steakhouse.

Therefore, in addition to the direct competition Red Mango also contends with Baskin-Robbins, Ben and Jerry's, and Cold Stone Creamery. In fact, last month Cold Stone began test marketing a low-calorie frozen yogurt dessert called "Tartberry" in 14 Southern California locations. The industry sees huge growth potential in frozen yogurt and is taking a bite.

In the frozen yogurt category, competition for Red Mango is robust with copycat stores popping up every few months. Food blogs frequently debate the company's squabbles with smaller competitors. Due to its first-mover advantage and strong brand position in the U.S., Red Mango has been able to maintain its nascent market share lead over up-and-coming "mom and pop" stores while positioning itself for head-to-head competition with its largest competitor Pinkberry.

Red Mango originally started in South Korea in 2002, where it currently operates in 130 locations. The product popularity has made the country a lead market of sorts in the frozen yogurt category.

Founded by Roni Choo, a former banker with Credit Suisse First Boston, Red Mango claims to have been the inspiration for Red Mango. It now has (or is about to open) 23 locations in California, Illinois, Nevada, New York, Oregon, Utah and Washington State. There are also indications that it plans expansion in other countries as well.

Due to its strong brand and its solid financial backing - not to mention its substantial market expertise in the high-end frozen dessert segment gained through its experience in South Korea - Red Mango is Red Mango's most significant global competitor.

Kiwiberri recently opened a location in Beverly Hills with a design identical to Red Mango's. When the owner was asked about similarities to Red Mango, he remained vague. After Red Mango threatened to take legal action the original Kiwiberri logo was revised.

Kiwiberri's plan is to differentiate itself partly by building attractive stores, spending about $500,000 on each build-out. Of course, it maintains its product tastes better than Red Mango.

Snowberry has nine locations in California, New York, Washington State and Georgia. This competitor features low-fat frozen yogurt in three flavors (instead of Red Mango's two): Original, Green Tea and Peach with multiple toppings.

Cefiore serves "Italian nonfat yogurt" at 17 stores - 11 in Southern California and the remaining stores in Nevada, Washington, Hawaii and Kentucky. The company has announced plans to open franchises elsewhere in the U.S.

TCBY (The Country's Best Yogurt) has been selling frozen treats since 1981. Historically, it has been one of the largest marketers of frozen yogurt in the United States. At its height in the early- and mid-1990s, TCBY had over 2,700 locations. It now has 750 to 800 U.S. locations and approximately 250 international locations, with a heavy presence in Canada and Latin America and a growing presence in China and South Korea. It has a relatively small footprint in Japan (16 stores) and no outlets in Europe.

In 2000, Salt Lake City-based Mrs. Fields Famous Brands acquired TCBY. Although a competitor, it occupies a lower price-point and pursues a broad-based marketing approach with smaller stores.

Strengths, Weaknesses, Opportunities, Threats (SWOT Analysis)

Strengths:

* Strong customer loyalty

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