Category crunch: The "emerging market" of US yoghurt - part 2
Chobani has led the growth of Greek yoghurt in the US
In part two of our detailed look at the US yoghurt sector, we focus on the growth of Greek yoghurt - described as "the big story" in the category.
The Greek yoghurt segment is led by Chobani, a brand developed by privately-owned firm Agro Farma. The brand was launched from Agro Farma's base in New York state in 2007 but last year gained nationwide distribution and became the top-selling new food brand in SymphonyIRI's annual poll of the most successful new food and drink products in the US.
Chobani's vice president of marketing, Doron Stern, says the brand accounts for around 57% of Greek yoghurt sales in the US. Taste and health are key reasons for Chobani's success. "You try it and you go 'wow'," Stern claims. "Creamy, deliciously thick yoghurt, which is unlike some of the other things you can find out on the market."
Stern also notes that Chobani is zero per cent fat and has "twice the protein of ordinary yoghurt". However, these are factors that play out across Greek yoghurt. Marshall Hyzdu, brand manager for Kraft Foods' Greek yoghurt brand Athenos, says that Greek yoghurt taps into many of the consumer trends driving the category as a whole but is a healthier alternative.
"Normal yoghurt is convenient, it's a healthy snack and it tastes good. Greek yoghurt is just as convenient, it tastes just as good - some people think it tastes better than normal yoghurt - [but] it's more nutritious, [with] twice the protein and half the sugar," Hyzdu says.
Kraft is targeting its Athenos Greek yoghurt at 20-to-30-year-old women "with active lifestyles", Hyzdu explains. He calls them "young transitionals", those leaving university and moving "from college to adult life". A new marketing campaign was launched in March to drive awareness of the brand.
Over at Euromonitor, senior analyst Virginia Lee concurs that the health credentials of Greek yoghurt is driving sales among women but points to another demographic eating the product - "active men", aged 20-40. "Bodybuilders have long looked to add more protein to their diets - protein powders, protein bars. Greek yoghurt is man fuel, basically a protein supplement," Lee argues.
Whoever the consumer, Greek yoghurt is, according to Lee, "the big story" in US yoghurt. Greek dairy Fage pioneered the product in the US, the Euromonitor analyst says, but Chobani's "word-of-mouth marketing and wider flavour range" has driven the brand, she explains.
"That brand's success caught me off guard," Lee says. "There are a number of Chobani fans in my office and for some reason it's been able to engender a lot of consumer loyalty."
Chobani's Stern claims the brand's consumers feel an "emotional connection" to the product, not just due to the wider characteristics of Greek yoghurt (nutrition, taste) but, he says, because the brand donates 10% of its profits to charity. "There's a very important emotional connection between Chobani and the folks who eat it," Stern says. "People are calling it 'My Chobani', an ownership perspective that we're hearing played back."
Nevertheless, for all the apparent consumer loyalty to Chobani, it is facing formaidable competitors aware of the growth and potential of Greek yoghurt in the US. Alongside Kraft, General Mills has launched a Greek yoghurt line under the Yoplait brand and Danone sells a Dan Greek line.
Stern acknowledges the competition. Chobani, he says, "opened some eyes out there" to the potential of Greek yoghurt but he claims the brand's rivals have not had the success they had expected. "Consumers have been savvy enough to be able to discern between quality Greek yoghurt products and those that are positioned to be Greek yoghurt or that do not deliver the same experience. The other brands have not been able to move forward as successfully as they had anticipated."
Agro Farma and Chobani, however, are not taking it easy. The company spent $12m on a marketing campaign that kicked off in mid-February and lasted for six weeks.
"We took the gloves off. We realised that, if we just let this thing sit there, we're not going to be able to achieve the growth that we feel like this brand deserves. That has also contributed enormously to the share gains that we've seen evidenced," Stern says.
The success of Chobani could make the brand a takeover target for the likes of General Mills or Danone. Stern insists the brand is happy to stay independent. "We are looking to go it alone. "We've had a short but fairly attractive track record and we want to continue to move forward in the way we've done it in the last several years."
Overall, however, the US yoghurt sector has potential. General Mills believes regional and demographic factors could further grow the category. "Geographically, yoghurt household penetration is pretty similar across the US but buy rate is highest in the Northeast and the West," Galler says. "Demographically, Hispanic consumers in key regions represent a terrific opportunity for our brand, as they typically over-index on yoghurt consumption and are growing quickly."
Improving what Galler calls the "buy rate" will be key to unlocking further growth. US yoghurt makers need to increase the number of times consumers buy yoghurt and highlight the different occasions when they could eat their products. "In terms of comparison with European per capita consumption, Americans can definitely consume more yoghurt," Lee says.
And central to that work will be greater co-operation between manufacturers and retailers. Danone chairman and CEO Franck Riboud said the company had made some progress in developing the category in the US with Wal-Mart Stores, which the Activia maker had worked with worldwide.
However, Riboud argued that more competition in the sector was needed to convince US retailers to expand the range of products on offer and he claimed General Mills' plans to buy a controlling stake in Yoplait outright, rather than only hold the US licence - a deal secured today (18 May) - would help.
"It's a global issue when you try to develop a market, you need strong competitors," Riboud said. "To see General Mills really anchor in the fresh dairy business is good news for us."
Riboud may say he sees this as good news but competition will only intensify as the likes of Danone, General Mills, Kraft and Chobani continue to turn the US into a nation of yoghurt eaters.
In the US, economists are growing more pessimistic about the country's growth prospects. In Europe, political disputes over the eurozone, rather than solutions to the crisis, are making the headlines....
Yoghurt is a growing category in a challenging US market and PepsiCo is reportedly looking to enter the sector. However, if PepsiCo is interested in yoghurt, it will need to act quickly....
We had this week that M&A activity in the food industry - at least in the UK - had slowed in the third quarter of the year but the final three months has seen deal-making return to the headlines with ...
- M&A Watch: Why Danone/Lifeway deal could be next
- Shopper trends: Some confidence but promos popular
- just-food's pick: Natural Products Expo top 10
- Sustainability Watch: WhiteWave Foods
- DATA: The just-food international basket - Q2 2014
- Premier Foods revamp creates three divisions
- General Mills Q1 profits tumble
- Unilever to boost presence in Nigeria
- Sales, operating profit up at Quorn Foods
- Burton's "eyeing" United Biscuits merger