NEW YORK (MainStreet) -- Amaretto pumpkin pie, cheesecake chocolate chip, limoncello and sweet potato organic maple syrup are just a few of the flavors you'll see on the gelato menu at Paciugo Gelato & Caffe.
Gelato represents just 1% of the frozen dessert market, according to the National Ice Cream Retailers Association, which makes the potential to expand essentially limitless. Given the popularity of frozen yogurt stores, especially with new-age giants such as Red Mango and
dominating the scene, consumers have developed an appetite for food that is more natural and perceived as better for you, experts say.
Some expect gelato to become as big as frozen yogurt, but there are some hurdles the frozen dessert must overcome first.
Gelato is denser than ice cream, which lacks the air sometimes pumped into ice creams, and despite having less butterfat tends to have an equally (or, some would say, more) rich, creamy taste. Gelato is served at lower temperatures than ice cream, which -- along with the lower levels of butterfat -- means it melts in the mouth faster.
Howard Waxman, editor and publisher of the monthly newsletter
Ice Cream Reporter
, says he's predicting gelato will be the next big thing -- as he has been for the past five years.
"There has been definite growth over at least a half a decade in some key locations like New York and Florida," Waxman says. "Gelato is a great product if they can get some traction. The fro-yo
market will beat itself up eventually" because there are too many names in the market.
Torrance Kopfer is owner of Cold Fusion Gelato in Newport, R.I., a retail store that opened in 2004 and does wholesale distribution in New England.
"The primary reason that fro-yo has taken off is that some major players from overseas came into the U.S. market with a lot of money," Kopfer says. "I think gelato could do that, but there is an education hurdle to overcome with a lot of customers. Everybody knows what yogurt is. Not everybody knows what gelato is. Once they realize how the Italian style is different, they get very excited about it."
Education aside, the running of a gelato business is more complex than an ice cream store, mainly because the product does not have as long a shelf life as ice cream.
"If you don't have a high-turnover store, you have to get rid of your product every other day. That can be costly," says Lynda Utterback, executive director of the National Ice Cream Retailers Association. She notes there have been gelato stores that have been forced to close because they didn't have the volume to support a profit.
Ice Cream Reporter's
Waxman says yet another potential problem for a gelato revolution is that it doesn't really work as self-serve.
"The fro-yo segment has taken the lead in self-serve. You really can't self-serve gelato. Somebody has to scoop it for you. That's going to be a challenge," Waxman says.
Still, Cold Fusion is looking at expansion of its wholesale business and retail stores. The company is looking to open retail stores in Florida, Kopfer says.
"When we get a little more critical mass, then we will actively solicit venture capital to take the next big step," he says. "For a company our size the next big step would be distribution beyond New England to the mid-Atlantic and then Midwest."
The Ginatta family founded Paciugo Gelato in 2000 and started franchising in 2004. The company now has with 41 franchised units in Texas and 11 other states. Vincent Ginatta, Paciugo Gelato's executive vice president and son to founders Ugo and Cristiana Ginatta, says the company plans to open an additional five stores by the end of this year and another 10 to 12 stores next year.
A major reason why Paciugo Gelato is able to franchise so successfully is because its Dallas headquarters also serves as a commissary kitchen, where the gelato ingredients and food toppings are prepared for shipping, he says.
"We want to control everything that goes to the stores, from the candy cherries we purchase from a certain region in Italy to the cocoa we use to the hazelnuts from Italy and Oregon. There is a lot that goes into producing a high-quality ingredient," Ginatta says.
"We are taking the complexity of the supply chain and we are dealing with the most complex part here centrally so at the store level they have a reliable, consistent product and can concentrate on the customer experience, which is very important," he says. "Our production model is really dependent on this central kitchen preparing all the ingredients, distributing them in a way where the
franchises can easily make fresh product without having to do pasteurization in the stores or without having to candy the fruit in the store."
Ginatta says the commissary can support up to 500 stores, but Paciugo Gelato is dreaming even bigger, hoping to one day reach a U.S. store count in the several thousands and a footprint that reaches overseas.
"Today the U.S. remains the best market in the world," he says, "and we have plenty of work to do here."
-- Written by Laurie Kulikowski in New York.
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