Pinkberry Struggles to Please State

LOS ANGELES—Call it a delicacy. Call it a phenomenon. Just don’t call it yogurt.

Pinkberry attorneys are working to find an avenue for manufacturing their sour frozen dessert while following state standards, according to e-mail exchanges with officials from the California Department of Food and Agriculture that were obtained by the Daily Journal.

To market their product legally as frozen yogurt, Pinkberry has been working with a dairy science expert from California Polytechnic State University, San Luis Obispo, potentially to change their original dry mix formula and the manner in which it is manufactured.

The main issue of contention for Pinkberrry and its lawyers is a provision in the California Food and Agricultural Code statutes that requires the product to be pasteurized at the plant where it is processed and packaged.

In May, lawyers from the company issued a letter from their expert to the department stating the pasteurization process compromises the product quality—its signature tart taste.

Pinkberry had billed itself as a frozen-yogurt retailer but dropped that claim after questions were raised about the product. On May 8, a legal recruiter filed suit in Los Angeles County, saying Pinkberry’s product does not meet state standards
for yogurt.

Los Angeles attorney Michael Amir is representing the recruiter, Bryan Williams.

“They are stringing the Department of Food and Agriculture along,” Mary Glarum, another lawyer at Amir’s firm, Doll Amir & Eley, said of the negotiations that have been going on for eight months between Pinkberry and the department. “It is cheaper for them if they don’t follow the guidelines and gives them a competitive advantage.”

News of the lawsuit surprised some of the toniest neighborhoods in Los Angeles, where people lined up around the block to buy the tasty dessert.

Pinkberry product is made from a dry mix reconstituted with milk and small amounts of yogurt. Based on state requirements, Pinkberry does not quality as frozen yogurt.

The company has removed all references to frozen yogurt from its marketing materials, and its Web site describes the product as “chilly bliss, honest food and dessert reinvented.” The site also posts a message to consumers: “As some of you are aware, claims have been made recently about the nature of our products…We are, of course, investigating these claims and look forward to being able to demonstrate the quality of our product.”

“Companies have learned to develop crisis management strategies to get the word out to consumers and calm their anxiety about products,” said Rochelle B. Spendorf, a franchise lawyer in the Los Angeles office of Sonnenschein Nath & Rosenthal.

The frozen-dessert manufacturer, based in Los Angeles, has 21 franchises throughout California and New York, including West Hollywood, Westwood and Los Feliz, and has been dubbed by Fortune the “Pokemon of yogurt.” Its popularity has skyrocketed as a low-fat, low-calorie alternative to ice cream.

As Pinkberry started gaining momentum in California, the state launched an investigation in October 2006 testing the ingredients of the product.

Following the investigation, the department issued a cease-and-desist letter to co-founder Shelly Hwang.

“We have been working with Pinkberry and similar types of business that are utilizing the tart yogurt,” said Nancy Lungren, deputy secretary for public affairs for the Department of Food and Agriculture.

Lungren added that other chains producing a Pinkberry-type product have gone through the same process and were inspected for purity and sanity.

In the letter, officials warn Hwang that Pinkberry’s frozen product is in violation of department codes, which require frozen yogurt to be pasteurized, fermented and sealed at a dairy certified by the department.

In response, Pinkberry lawyers have been working with department officials and legal counsel over the past eight months to develop a yogurt mix that does not have to be reconstituted post-pasteurization.

In the e-mails, Pinkberry lawyer Gary N. Lento questions the department’s prohibition of adding a dry mix to pasteurized yogurt on-site at store locations.

Lento, of Fresno-based Baker, Manock & Jensen, was unavailable for comment.

Lento also expresses concern over the renewal of Pinkberry’s soft-serve licenses for all of its franchises that, according to e-mails, ended Jan. 31, 2007.

“They were warned that they can’t advertise as frozen yogurt until they come into compliance,” Lungren said.

Lungren acknowledged Pinkberry‘s license could be revoked for not complying with standards, but said the department makes an effort to work with businesses before shutting them down.

During Pinkberry’s struggle to meet industry standards, competitors were made aware of the state’s statutes.

In November 2006, officials in the milk and dairy food safety branch sent out a letter to soft-serve frozen yogurt manufacturers clarifying California laws.

The letter, sent to Los Angeles outposts such as Kiwiberri, IceBerry and Fiore Italian Yogurt, warns about a misunderstanding in the industry about soft serve that dry preparations and products containing soy do not meet California standards.

Taylor Freezer, a major soft-serve machine distributor in California, is also getting pulled into the mix. In e-mails between a department dairy program coordinator and dairy food specialist, concern is expressed over the Illinois-based company promoting the sale of their machines and a dry powder product that is marketed as soft serve to individuals unaware of California’s laws.

Lungren reiterated the department’s concern about the production of frozen yogurt, especially as Pinkberry and the like continue their high-speed expansion.

“The fact is that by generically calling it frozen yogurt and not manufacturing it under the code companies are in violation of the law,” she said.