Yogen Fruz' Chief Serruya on Acquisitions, Expansion of Frozen Novelties Business

Yogen Fruz Worldwide Inc. has repeatedly made the news in recent months due to its role as top shareholder in Eskimo Pie Corp., and its role as prime instigator of a boardroom battle to divest Eskimo's arguably scattered brand portfolio. (Links to related Dairy Network articles are provided below.)

The latest analysis related to Yogen Fruz comes from Dairy Network editorial content ally, The Wall Street Transcript (TWST), a financial analysis and reporting firm.

In late October, TWST interviewed Michael Serruya, chairman, president and CEO of Yogen Fruz Worldwide, to uncover insight of value to owners of both stock portfolios and brand portfolios in the frozen desserts/novelties arena.

Yogen Fruz is reportedly the world's largest franchiser of frozen yogurt and ice cream outlets and is also making its move as a manufacturer, marketer and distributor in the supermarket and convenience store sectors. Listed on the Toronto Stock Exchange under the all-too-appropriate trading symbol of "YFA.T," the company was recently named number-one on the Franchise 500 listing, put out annually by 'Entrepreneur Magazine.'

Serruya and brother Aaron started with one store at the Promenade Mall in Toronto in 1986 and today have approximately 4,900 outlets in over 80 countries. The company's brand portfolio includes Yogen Fruz, Bresler's, I Can't Believe It's Yogurt, Golden Swirl, Swensen's Ice Cream, Honey Hill Farms, Paradise and Java Coast Fine Coffees.

One of the most significant developments for the frozen desserts manufacturer-marketer is U.S. expansion, largely due to the acquisition of U.S. companies including Bresler's Ice Cream, a strong regional player in the Midwest; ICBY (I Can't Believe It's Yogurt) based in Dallas, which included a manufacturing facility; and, about a year-and-a-half ago, New York-based Integrated Brands.

The Integrated Brands acquisition resulted in exclusive long-term agreements "with some of the strongest and most significant household brands known to consumers across North America" including R&D, manufacturing, marketing and distribution agreement with Tropicana in North America and other markets. Yogen Fruz has similar deals with General Mills' entire brand portfolio, which includes Yoplait, Colombo Frozen Yogurt, Betty Crocker, Trix and Yoo-hoo.

Additional excerpts from the interview follow…

TWST: Do you feel that you are classified as the right type of entity or enterprise when [investors and analysts] look at the parts of the business and try to value them?

Mr. Serruya: Our diversity is one of our major strengths. Our customers can purchase our products by visiting one of our retail outlets, or by visiting their local supermarkets or convenience stores…it's a very broad and diverse business model in the frozen dessert sector, and we truly have diversified ourselves to try to touch all the bases.

TWST: What should they understand about the margins that the various aspects of this business throw off?

Mr. Serruya: The margins on the consumer products business are as strong as the franchising side and that was certainly one of the big pluses and one of the things that caught our eye when we looked at doing the Integrated Brands acquisition…. So the gross margins on the consumer products are as strong and as healthy as those on the franchising side, while along the way it's allowed us to really synergize distribution efficiencies.

TWST: At this point, how could the investment community better understand the company? As you speak with your analysts from this industry and the investors from your company, what are the misperceptions that you still have to address?

Mr. Serruya: They are not quite sure whether to classify us under the retail sector or as a consumer products business. Both are completely different business models…. So that's been the biggest challenge, helping analysts really understand the business model going forward, the opportunities going forward and then having them break it out as to whether or not that should fall under a consumer products sector or a retail/franchising model.

TWST: What's the essential message then for an investor, the list of items that recommend and distinguish this company as an investment today, the reasons to buy in?

Mr. Serruya: Stocks tend to go up and down on a cyclical basis…. Studies have shown time and time again that consumers will buy those products that they are most familiar with, and that is where we have positioned this company today. If you had to sum up this company, we are a frozen dessert manufacturer, licensor, marketer and distributor of strong consumer brands. So from an investor's point of view, our vast portfolio of strong recognizable brands offers them a piece of a very large global pie.

Related articles from the Dairy Network news archive:

• Eskimo Pie to Liquidate Under Pressure from Yogen Fruz

• Battle of the Ice Cream Novelties

• Will Phantom Bid Phoil Yogun Fruz' Eskimo Pie Plans?

The Wall Street Transcript's Consumer Focus service is available on a for-pay basis, as a quarterly subscription or an annual subscription. Edited by Bob Sperber