By Rieva Lesonsky

Frozen yogurt has been on a growth curve for the past few years, but now Crain’s New York Business reports that the industry is slowing down—at least in New York City, where a combination of high rents and oversaturation has chains including Red Mango and Yogurberry closing up shops.

High prices for yogurt in a recession didn’t help matters, but location may be a factor as well. With long, cold winters, New York City yogurt shops faced an uphill battle to stretch their seasonal product’s profits over an entire year.

Clearly, fro-yo is a product that has more potential in some places (think warm Western states) than others. Here in Southern California, where I live, new yogurt shops keep opening up—to the degree that oversaturation will likely soon be a problem.

Crain’s reports frozen yogurt is slowing nationally: Frozen yogurt production in the U.S. fell more than 5 percent in 2009 compared to 2008, according to the U.S. Department of Agriculture; and November 2010 production was down nearly 14 percent from November 2009.

Looks like the industry is heading for a shakeout, just like frozen yogurt faced the last time it was hot back in the early 1980s. What’s the future of fro-yo? The hottest trend now is self-serve shops, which cut overhead costs by letting customers pick their own yogurt and toppings, and generally charge less than premium fro-yo chains like Pinkberry.