Comment: PepsiCo, Muller face US yoghurt fight
By Dean Best | 10 July 2012
PepsiCo says the Muller Quaker Dairy line-up provides consumers with something new
PepsiCo and Unternehmensgruppe Theo Müller have at last showed their hand as they join the fray to win over US consumers, who have found a love for yoghurt.
The cola and crisps giant has teamed up with the German yoghurt manufacturer to launch a range of products in the booming yoghurt market in the US. The companies outlined their plans in February, when they announced they would open a yoghurt facility in New York state. This week came news of the brand and products they would market.
In days, the first products from the companies' venture, Müller Quaker Dairy, will go on sale. All use the Müller brand. Müller Corner, a product that has enjoyed success in the UK, will, through its "dual-chamber" packaging, give US consumers fruit portions they can "flip, stir or dip" - a new type of yoghurt for American yoghurt lovers.
Other yoghurt on sale on the US is sold in two chambers but PepsiCo says it is now offering consumers the chance to "flip" the mix-ins directly into the yoghurt. Some had complained the inability to flip made the process a bit "messy", the company says.
PepsiCo and Müller are (unsurprisingly given the explosion in Greek yoghurt sales) offering a Greek Müller Corner line, while a third product Müller FrutUp, which is a yoghurt with fruit on top, will also hit the shelves.
"We will be able to offer US consumers an amazing range of products that taste delicious and are unlike anything on the market currently," Mehmood Khan, PepsiCo's chief scientific officer for global research & development, said yesterday.
Now, the sharp growth in US yoghurt sales, particularly in Greek yoghurt sales, is not news. just-food has written at length about the success the likes of independent yoghurt player Chobani has had, about the investment Danone is putting into the US and about the concerns in Wall Street that General Mills has been slow to capitalise on the boom in the market with global brand Yoplait. The key question now is: can PepsiCo and Muller muscle in on a market that looks, at least in the short term, to continue to grow?
Despite the success of Chobani and Danone, as well as the recognition Yoplait has among consumers (even if some analysts have been frustrated at General Mills' strategy for Yoplait), analysts cautiously believe PepsiCo and Müller can gain traction in the sector.
"I'm intrigued by the Müller Corner and FruitUp packaging since I have never tried Muller's yoghurt. The unique packaging should help it gain the inital attention of journalists and bloggers," Euromonitor senior packaged food analyst Virginia Lee argues.
Speaking to just-food yesterday, PepsiCo and Muller were keen to talk of the "opportunity" they saw in the US yoghurt sector. Danone CEO Franck Riboud has called the US an "emerging market" for dairy products like yoghurt and his new rivals in the country echoed his view, albeit in a more prosaic way.
"We see a good opportunity to expand in the US," a spokesperson for Müller said. According to information from Mintel, provided by the companies, US spoonable yoghurt sales increased to $5.7bn in 2011, up from $4.5bn in 2008 and are expected to grow to a value of $9bn by 2016.
The category is being driven by an increased spend on yoghurt from those that already make the purchase - dollars spent on yoghurt per buyer has increased from $49 to $60 per year, PepsiCo revealed. However, in this economic climate, the price of the companies' yoghurt will be a criticall factor in its success.
"Yoplait has ten for $5, they are 50 cents for the container, which is chump change, so Pepsi's going to have to compete at that price level," Nikoleta Panteva, senior analyst at analysts IBISWorld, says.
According to PepsiCo, the suggested retail price is $0.99 for Müller FrütUp and $1.19 to $1.39 for Müller Corner and Müller Greek Corner. Reflecting on the importance of price, a PepsiCo spokesperson said: "Muller Quaker Dairy is introducing yogurt with a totally new taste and eating experience to America for the first time. It's a unique product offering, which is also important."
Companies the size of PepsiCo and Müller no doubt have the resources to invest in price, promotions and marketing, which will be key if their products are to compete effectively with the likes of Chobani, Danone and General Mills.
"That's going to be a big part of their marketing strategy, getting the name out there, sending out coupons or whatever else they can do to highlight their competitive price point against brands like Yoplait and highlight they are bringing something new to the category," Panteva says. "They do have a lot of capital and investment on their side."
It is important to note the particular characteristic of the US yoghurt market; the popularity of Greek products. Chobani and Danone dominate the category. In a note published last month, Sanford Bernstein analyst Andrew Wood argued Greek yoghurt in the US had become a "two horse race" between Chobani and Danone, ahead of the "struggling" General Mills and the first-mover Fage, the yoghurt firm from Greece.
PepsiCo and Muller, then, with their Muller Greek line are entering a category that some already see has being a straight fight between two other companies. Looking at the numbers, it is an understandable conclusion to draw. According to Wood, the two companies account for two-thirds of the Greek yoghurt category. However, others believe there is an opportunity for PepsiCo and Muller.
"Right now due to the explosion in the Greek yoghurt many yoghurt consumers are open to exploring new brands so if the Müller yoghurts are truly delicious and different from the competition, they will get repeat purchases," Lee says.
However, she does have a cautionary warning for the companies, pointing to the failure of Kraft Foods' foray into Greek yoghurt. The company pulled its Athenos Greek yoghurt line last year.
"Success will be dependent on a number of factors - taste, advertising, price, sampling. The taste of the Muller by Quaker yoghurts needs to be truly superior to the other yoghurts on the US market in order for the JV to have a shot at success and avoid failures like Kraft's Athenos brand," Lee says.
PepsiCo's marketing nous and Muller's pedigree in yoghurt hint suggest the companies could find success in the US yoghurt sector. What's more, per capita of consumption of yoghurt remains low and the category is forecast to continue to grow.
However, the recent growth in the industry and its potential has attracted investment and companies have carved out strong positions in the market, particularly in the Greek category, which by some estimates accounts for a quarter of yoghurt sales in the US.
PepsiCo's venture with Muller is its latest foray into healthier products, a sound long-term strategy but one that has attracted criticism from investors concerned the US company has taken its eye off its core cola and crisps.
The group will have a battle on its hands to ensure yoghurt does not also attract the anger of shareholders.
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