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The Decline of an All-American Treat

Daily Ticker

By Rick Newman

If a hot dog can be made out of turkey and a burger pounded out of beans, then it should be no surprise that another all-American treat is vulnerable to trendier, more virtuous food.

Traditional ice cream sales have been slowly declining and seem poised to hit their lowest levels this year since the mid 1990s. Production of regular ice cream peaked in 2002 at about 14 quarts per person each year, according to government figures. That has fallen to 11.6 quarts per person, a 13% drop. Seven of the 10 biggest ice cream chains had fewer stores in 2012 than they had in 2011, according to research firm Technomic. Cold Stone Creamery has shuttered more than 100 stores since 2009. At Baskin-Robbins, revenue and store count have fallen every year since 2008.

Health concerns are one obvious reason why Americans are consuming less full-fat ice cream. But the ice cream man has also fallen behind on innovation, or at least on gimmicky offerings that keep customers lining up at the counter. As dessert outlets have evolved from traditional parlors into buzzier chains constantly seeking a marketing edge, ice cream somehow became a bit stodgy, while frozen yogurt and other types of dessert did a better job of capturing the foodie vibe.

Related: The Cupcake Craze Is Not Over

Ice cream was America’s dominant frozen dessert for decades because—well, it tastes great—but also because new products consistently offered diners new types of experiences. The Dairy Queen Blizzard and Baskin-Robbins’ 31 flavors (one for every day of the month) were early ice-cream improvements on the two or three standard flavors offered at a typical mom-and-pop ice cream counter. In the 1980s, superpremium ice cream such as Haagen-Dazs and Ben & Jerry’s turned everyday dessert into a luxuriant nosh. In the ‘90s, new arrivals such as Cold Stone Creamery added a customized touch by blending your chosen flavor and your add-ins right in front of you.

Around the same time, of course, frozen yogurt arrived on the scene, with TCBY and others grabbing a healthy share of the frozen dessert market. Yogurt cooled off for a while, but it’s heating up again, thanks to new chains such as Pinkberry and Red Mango. These chains offer topping bars, a clubby atmosphere and the perception that their food is good for you -- though that may be dubious if it’s topped with brownie chunks or M&Ms.

The number of "froyo" shops soared by 24% between 2011 and 2012, according to Technomic, while the number of ice-cream outlets declined slightly.

“Ice cream isn’t likely to go away, but it’s been struggling,” says Darren Tristano, executive vice president at Technomic. “We’re seeing a lot more novelties at the retail level.” The same trends are evident in grocery stores, where ice cream has been losing shelf space to lower-fat alternatives.

As in other industries, there’s also been a fragmentation of offerings in the frozen dessert business, with competitors trying to carve out fresh niches or get in early on a new craze. In addition to froyo, dessert seekers can readily find gelato, Italian ice, custard, smoothies, juice concoctions and other frosty creations to try. McDonald’s (MCD) and Burger King (BKW) have also cut into traditional ice-cream sales with soft-serve products that often cost less than a buck and are available at the drive-through window.

To regain the cool factor, ice-cream chains are enriching their own offerings. Jeni’s Splendid Ice Creams, a small Ohio-based chain, has helped establish a new gourmet segment with flavors such as goat cheese with red cherries and Riesling poached pear. Traditionalists may balk, but foodies are raving.

Cold Stone now offers ice cream cupcakes, to cash in on another hot dessert trend. At Haagen-Dazs, the latest menu addition is gelato. Dairy Queen recently introduced fruit smoothies, including a “light” version. The latest delicacy at Ben & Jerry’s isn’t ice cream, but a lineup of Greek frozen yogurt in flavors such as vanilla honey and pineapple passion fruit. The dessert wars are turning out to be a bonanza for diners.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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