Frozen Custard Shop Business Plan

The market we will engage in is the Eugene-Springfield metropolitan area.  The specific market we will serve consists of a 25 square block radius around our scoop shop and includes the university student population and those primarily within walking distance of the shop in downtown Eugene. The overall age demographics of the population break down as follows:

• 13% over 65
• 25% between 45 and 64
• 28% between 25 and 44
• 12% between 18 and 24
• 23% of the population is under 18

The total population of the Eugene-Springfield metropolitan area is 316,000 people, of which 157,000 are female and 159,000 are male.  Married-couple families make up close to 50% of the population, while people living alone make up an additional 33%. 

Our local market has a mixed educational background – about half have a college degree or higher. While most people (72%) drive to work, the high concentration of downtown business and parking garages ensures steady foot traffic past our location. Median annual household income (including single people) is roughly $33,000, and 63% of the population lives in single unit structures (houses). These numbers tell us that we are situated in a relatively educated, affluent area of the state, in a destination area of town.

Within this population, we are focusing on two separate groups with different needs: 18-24 year olds, including students at the local university, and “first families” – young adults (25-35) with children under 13.

18-24 year olds have disposable incomes which they tend to spend on immediate gratification items, especially when those products have a prestige or individuality value. The population around the downtown area is highly populated by the 18-24 age demographic. We will also target “first families” (see above). They have limited entertainment dollars to spend each year, and our company can offer them some family bonding time for approximately $15, versus $30 to $40 for dinner or a movie. In both of these groups, we will aggressively target young women, who tend to brand loyalty in food choices, and often turn to indulgence foods in times of stress or celebration.

4.1 Market Segmentation

The potential customer groups for Bauman’s Frozen Custard and Italian Ice are:

18-24 Year Olds

Our market research indicates about 38,000 potential customers in the Eugene-Springfield area who are within this age range. The target customer is going to be a part of the “town and gown” niche: half college students and half local residents. They have a tendency to spend more than they can afford on prestige products.

First Families

These are the grown children of the baby boomer population having children of their own. Most of their children are not yet teens. By targeting this group, we can not only generate a large volume of immediate business, but also create long term customers in the children.  We also have found that families are eating out at ice cream and frozen yogurt shops more, because such places are often cheaper than other restaurants, allowing a parent to feed the family for under $15. We are conservatively estimating the population size as half of the local household population with children under 18. Because the average family size is 2.92 people per household, we estimate that population of all potential people in the household population to be 55,852. We do expect some overlap between 18-24 year olds and the first families population.

Other

Our downtown location and increasing customer base will probably draw in customers outside of our targeted groups, including those attending the Saturday market, coming downtown to shop, or attending plays or musical events. We conservatively estimate this third market segment at about 3,160 people (1% of the total local population).

4.2 Target Market Segment Strategy

The 18-24 year olds go out for ice cream more than any other age group. Within the 18-24 year old group, the “town and gown” niche is very important, because they heavily populate the area surrounding the store’s location.  They are reachable through music, specifically R&B, and they prefer prestige products, which matches our choice of product offering.

The “first families” were chosen because they are a growing population, both numerically and in their choice to go out for ice cream more often.  They are an easy group to market to because their lifestyle is very specific.  They all have young children, so tactics that are geared towards markets that relate to children or to the children themselves may prove highly effective in generating trial and sales. 

We plan to reach the first families through their children.  Bauman’s Frozen Custard and Italian Ice will sponsor a little league ball team and offer the players a free Frozen Custard on days they win a game.  This will draw them and their families into the store.

We will also invite local elementary schools to come and tour our facilities.  We will teach the children how we make frozen custard and Italian ice.  We will let each child make their own creation and hope they enjoy their time at our scoop shop so much, that they convince their parents to bring them back.

4.3 Industry Analysis

The frozen dessert industry experienced sales of more than $20.7 billion last year, with $13 billion of that on “away from home desserts.”

The frozen dessert market is expected to grow by seven percent each year through 2008.  There are several existing competitors in the community, including: Pearl Street Ice Cream Parlour, Dairy Queen, Ben and Jerry’s Homemade, Cold Stone Creamery, and Prince Pückler’s. The competitors consist of both national franchises and locally owned stores. Each store has a unique product that allows it to differentiate itself from others within the marketplace. Bauman’s Frozen Custard and Italian Ice will also feature several unique products that will allow us to differentiate our product from those currently available in the market. The following is a breakdown of the ice cream industry on a national basis:

Consumption

• Total U.S. production of ice cream and related frozen desserts in 2001 amounted to more than 1.6 billion gallons, which translates to about 23 quarts per person. Source: USDA
• In 2001, total U.S. sales of ice cream and frozen desserts reached $20.7 billion. Of that total, $13 billion was spent on “away from home” frozen dessert purchases (scoop shops, food service and other retail sales outlets). Source: 2002 Latest Scoop
• Ice cream and related frozen desserts are consumed by more than 90% of households in the United States. Source: ACNielsen
• According to 2001 supermarket volume sales, regular ice cream accounts for the largest share of the frozen dessert market, with 80% of purchases. Reduced-fat, light, low fat and nonfat ice cream account for 11% of the market, followed by sherbet (4.5%), frozen yogurt (4%), and sorbet (0.5%). Source: Information Resources Inc. (IRI)
• Based on 2001 supermarket sales of ice cream, the top five individual flavors in the United States are: vanilla (28%), chocolate (8%), neapolitan (7%), butter pecan (4.5%), and chocolate chip (3.5%). Source: Information Resources Inc. (IRI)

Production

• The United States leads the world in annual production of ice cream and related frozen desserts, at more than 1.6 billion gallons in 2001. Source: USDA

Sales

• Based on supermarket statistics in 2001, ice cream volume sales by quality segment were: super premium (3.5%), premium (51.5%) and regular (45%). Source: IRI

Trends

• In recent years, the ice cream and frozen dessert industry has seen significant growth.  Much of this growth has come in the premium and super-premium ice cream category. Bauman’s Frozen Custard and Italian Ice will serve products that fall into the premium ice cream category. Premium and super-premium products are typically found at scoop shops similar to Cold Stone Creamery, Ben and Jerry’s and Prince Pücklers.
• Many ice cream manufacturers have opened specialty scoop shops in recent years as a way to increase profits. These shops allow businesses to charge more for their product then selling wholesale to grocery stores.
• Manufacturers have developed lines of premium and super-premium products that have significantly higher profit margins than standard ice cream products. 
• In recent years, there has been a significant move towards allowing customers to create their own product combinations.  Customization allows customers to make the product more personal, and tailored to their specific desires.

4.3.1 Competition and Buying Patterns

In the frozen dessert industry, consumers make purchasing choices for a number of reasons. Perceived quality of product is essential for consumers going out to eat, because of the price premium they must pay. A gallon of generic (or even name-brand) ice cream in the grocery store will cost about as much as servings for one or two people at a scoop shop. Most of our competitors have emphasized the high quality of their products to justify their prices. Others, like Dairy Queen, tout convenience and low price, but they are able to do this because they offer many other products, as well.

Consumers going out for a frozen dessert want consistent quality, a particular ambience (which varies by market segment), and, recently, a statement about their individuality through their food choices. Ben and Jerry’s has responded to these needs with appeals to socially and environmentally conscious production; Cold Stone Creamery offers unparalleled “just for you” customization and service; Baskin Robbins’ famous “31 flavors” comes from the vast array of choice consumers demand.

Among the Eugene/Springfield population, many consumers have consistently shown a committment to local brands and locally-made products over national brands and chains. In the local frozen dessert market, Prince Pückler’s has benefited from this preference by making its ice cream in the store from high-quality local ingredients. We will play up the “made-daily-in-our-shop” aspects of both of our products, as well as the fact that we are locally owned and operated by people invested in the community.

We anticipate that our target markets will also be concerned with quality and individuality, but in different ways. The 18-24 year olds are looking for good tasting, prestige products. The price premium, in this case, is an advantage. More particularly, as a former student, I have observed that university students are constantly seeking “new” quaint, high-quality local businesses which offer unique products their peers have not already adopted en masse. Our frozen custards and Italian ices are just different enough from standard premium ice creams that they will be familiar, yet “new.” These consumers want a place where they can socialize comfortably with each other, and can be seen by their peers in a trendy place. They want to maximize product customization to emphasize their sense of individuality, within comfortable parameters; new combinations of familiar flavors work well with this group.

The young families in our targeted market are cost-conscious, and often health conscious. Eugene has an unusually high number of bikers, joggers, runners, and outdoor sports enthusiasts. The lower fat and sugar content of our products will appeal to young parents seeking a “treat” for themselves and their children that doesn’t come with a hefty price tag or unhealthy empty calories. These consumers want a family-friendly place where spills and drips are not a catastrophe, but with a comfortable atmosphere a bit more upscale than most fast food stores. They want comfortable, familiar flavors for their children, who crave predictability, and more adventurous flavor and ingredient options for themselves. 

4.3.2 Competitors

Bauman’s Frozen Custard and Italian Ice faces approximately 15 competitors in the Eugene area.  The top competition comes from several national chain stores that have years of experience and significant brand recognition as well as several locally based competitors. In spite of all the competition, each of these scoop shops remains profitable and open year-round. 

National Competitors in the Local Market

• Ben and Jerry’s
• Cold Stone Creamery
• Dairy Queen
• Baskin-Robbins
• “TCBY” Yogurt
• All American Ice Cream

Many of these national chains have strong brand recognition and their products are known for consistent quality.  Several of these competitors have been in the Eugene area for over 20 years.  In recent years, there has been a trend for the national ice cream manufacturers to open more scoop shops as a way to increase profitability.  Each of these competitors has a unique product that differentiates them from their competition. 

Cold Stone Creamery had only 5 stores in 1995 when they began offering franchises. Today they have over 800 outlets with an additional 500 in the works.  Cold Stone has one retail store in Eugene, Oregon.  Cold Stone Creamery offers customers the opportunity to create their own dessert. Customers select their favorite flavor of ice cream and then choose which toppings they would like mixed in.  The entire process happens right before the customer on a giant slab of frozen marble.  The trend of customizing creations has been a very successful strategy for Cold Stone Creamery.  This allows them to charge a premium for this customization:  their prices range from $3.00-$4.50. 

Dairy Queen is set apart from other competition because they do not focus their business solely on ice cream related products.  They offer a full line of burgers, fries, and other fast food menu items.  The full menu line allows customers the eat dinner and have dessert while at the same location.  This also helps offset the seasonality of ice cream products, during the winter months.

Ben and Jerry’s Homemade has seen average annual growth of 13.3% in recent years.  Begun in 1978 with a $12,000 investment, their 1998 sales exceeded $209 million.  Ben and Jerry’s has two retail stores in Eugene, and they sell their pints via grocery outlets nationwide.

Baskin-Robbins is a retail franchise chain that has over 2,500 domestic retail outlets as well as 2,400 stores internationally.  There are 4 locations in the Eugene/Springfield area.

Local Competitors

• Prince Pückler’s
• Pearl Street Ice Cream Parlour

Both of these local shops have a strong following of local supporters.  The Pearl Street Ice Cream Parlour has been in Eugene since 1968.  It offers customers an old-fashioned ice cream parlour feel. They also have a broad menu of food items.

Prince Pückler’s is a locally owned ice cream manufacturer that sells products at several locations around Eugene/Springfield. Prince Pückler’s and the Pearl Street Parlour offer their customers a nostalgic feel due to their long history in Eugene. Prince Pückler’s prides itself on homemade ice cream and is very popular among Eugene residents, who have a commitment to supporting local businesses.