Colombo Soft-

Serve Yoghurt
AC2105
Seminar 2 Presentation
Question 3

Team 2: Ferlicia Leow, Fion Lim, Gerald Tan, Kwang Yi Juin, Yeo Khai Sern
 [1] Briefly Summarize

(i) Colombo’s Competitive

Environment using Porter’s
Five Forces Model; and

(ii) General Mills’ Strategy in

response to that Environment.

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 In 1994, General Mills
Incorporated (GMI), acquired
Colombo Frozen Yogurt as
they felt that they could add
Colombo frozen yogurt to their
product line-up.
Colombo’s Industry: Soft-Serve Frozen Yogurt

Sold through 2 Distinct

Case Facts Segments:
(1) Independent Shops
(2) Impulse Locations: Cafeterias,
Colleges, & Buffets

Before acquisition: Colombo’s main distribution

was through independent yogurt shops.

After Acquisition: both segments but impulse

locations accounted for ⅔ of the soft serve
market. 3
Colombo Yogurt

Fun Fact:
- Colombo Yogurt was the first
U.S. yogurt brand

- General Mills stopped

producing Colombo yogurt in
2010 in order to concentrate on
its other yogurt brand, Yoplait

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Porter’s 5
Forces
Competitive
Environment

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 ◦ Industry Growth: High
● “Colombo faced competition from franchise
operations such as TCBY and Freshens that replaced
many of the independent yogurt shops”

Rivalry ● “Foodservice operators..started to add soft-serve

yogurt to their business”
Among
◦ Fixed Costs: Moderate
Existing
Capital invested in machines and technology
Competitors ●

◦ Switching Costs: Moderate

Porter’s Five Forces
◦ Product Differentiation: Low
● Yogurt provided are largely similar and homogeneous
in nature

◦ Barriers to Exit: Low

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 ◦ Economies of Scale: High
● Production in batches

◦ Product Differentiation: Low

Threat of ◦ Brand Identification: Moderate
New ◦ Access to Distribution Channels: High
Entrants ● Can easily set up new yogurt shops or reach out to
plenty impulse locations
Porter’s Five Forces
◦ Capital Requirements: Moderate
● Requires dairy processing machines, sealing
machines etc

“...must innovate or go out of business (as thousands have done

in the last decades)” 7
 ◦ Availability of Close Substitutes: High

Threat of ● eg . ice cream, smoothies, granitas, pudding

Substitutes ◦ User’s Switching Cost: Low

◦ Value of Tradeoff: Low
Porter’s Five Forces

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 of Suppliers of Buyers
◦ Concentration: ◦ Concentration:
High High
◦ Availability of ◦ Availability of
Bargaining Substitutes: Substitutes:
Power High High

Porter’s Five Forces

◦ Switching ◦ Switching
Costs: Low Costs: Low
Main ingredients are milk yogurts are mostly
and sugar and we assume undifferentiated products
that there will be many and there are many yogurt
suppliers of these producers
ingredients and are readily
available
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 ○ Rivalry Among Existing
Competitors: High
○ Threat of New Entrants: High
Overall
○ Threat of Substitutes: High
Assessment
○ Bargaining power of Suppliers: Low
Porter’s Five Forces
○ Bargaining power of Buyers: Low

Colombo’s Competitive Environment is

Highly Competitive

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 Can be either
under Low Cost
depending on
argument but
cost leadership
more suitable
General for this context
as customers are
Mill’s price sensitive.

Strategy
“GMI’s large sales force has already served the impulse
market”

“(GMI) believed they could add Colombo frozen yogurt

to their existing product lineup to increase their net
sales with little addition in marketing cost”
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 ◦ Sales Force
● Merged its salesforce into the Foodservice
salesforce to standardized their marketing
approach with the other products under
GMI Foodservice

General ◦ Merchandising Promotions

Mill’s ● Provided merchandising kits to both the

Shops and Impulse locations (traditionally
Strategy provided to Shops only)

● Did not charge for merchandising

◦ Pricing Promotions
● Targeted more towards the Impulse
Locations than the Shops.

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 [2] Using ABC Analysis,

Determine New Segment

Profitability Statements

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 ◦ Recall, what can ABC be used
ABC for?
Analysis
- Analyse and distinguish
New Segment
Profitability
between low value-added
Statements and high value-added
activities

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[3] Based on the Previous
Analysis of [1] & [2],

What changes would you

suggest to General Mills?

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 Impulse Yogurt Total
Segment Shops

Net Income $4,152,000 $1,038,000 $5,190,000

(Pre-ABC)

Net Income $714,000 $1,761,000 $2,475,000

(ABC)

Summary ◦ Pre-ABC: Impulse Segment more

of Analysis profitable than Yogurt Shops
◦ ABC: Yogurt Shops more profitable than
Impulse Segment

Why is this so?

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 ◦ Due to a much larger activity cost
allocation increase to SG&A in impulse
segment than Yogurt shop.

- Possible reasons:
→ More SG&A and merchandising cost
Summary were allocated to the impulse segments,
of Analysis such that they are able to attract more
consumers and differentiate from other
impulse segments.
→ Shops have unique products and less
costs are allocated to them since they do
not have to worry as much about the
promoting of the product.
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 ◦ Salesforce:
“Many spent a lot of time helping their impulse
customers understand how to use the machinery.”

→ Consider having cost-efficient solutions

such as providing tutorial
videos/manuals/FAQ next to the machine.
Having a technical team is possible but not
Suggested cost efficient.
Changes “Some found shops easier to sell to while others
avoided the shops despite the possible lost
commission”

→ Based on the ABC analysis, the yogurt

shops are more profitable than impulse
locations. Hence, consider having a sales
team in charge of selling to the shops.
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 ◦ Merchandising Promotions:
“...impulse locations didn’t even hang them up.”

Suggested → Don’t deliver merchandising kit to

impulse shops since they do not need
Changes them. Instead, redirect to shops since
most of the impulse locations do not
make use of these kits unlike those of
the shops. This can help to reduce some
costs towards the impulse locations.

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 ◦ Pricing Promotions:
“Shops were aware of the promotions and took
advantage of them.”

Suggested → Currently, discounts are given to both

segments, even though only the impulse
Changes segments are more price sensitive.
Discounts are needed to attract sales.
On the other hand, independent shops
are not price sensitive and discounts are
not necessary. Hence, the management
should not give discounts to the
independent shops.
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 ◦ Individual cases:

◦ Logistics cost is cheaper for full pallets

◦ But why does impulse segments order
individual cases and not full pallets size?
Good to → Impulse segments: the restaurants
know facts sell a variety of products, and does not
have sufficient storage space to do batch
orders → usually order individual cases
◦ On the other hand, independent shops
will buy full pallets as they only sells
yogurt (specialised) → can order by
batches and store
◦ Review costs of handling cases.
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Any Questions?
But before you ask us…

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