PepsiCo and Muller this week opened their US yoghurt plant with much fanfare. Demand for yoghurt has increased in recent years, per capita consumption is relatively low and the companies believe they can benefit. However, the new facility has added to the already increasing capacity in the sector, which is now seeing only sales of Greek yoghurt grow and an intensification in promotional activity.

New York state saw the opening of another yoghurt plant this week – the much-flagged factory set up by PepsiCo and German dairy Unternehmensgruppe Theo Müller, which are looking to muscle in on the booming demand for the product in the US.

The venture between the two companies, Muller Quaker Dairy, unveiled the facility in Batavia on Monday (3 June), a move that marked a plan to launch yoghurt across the US. PepsiCo and Muller rolled out some SKUs in selected markets last year; the plant will, the companies said, act as “a national and distribution centre” for the venture.

Demand for yoghurt in the US has jumped in recent years, buoyed by increased interest in healthier products and the success of manufacturers to convince consumers of the health attributes of the dairy product. And per capita consumption of yoghurt in the US is below that seen in Europe or the UK. Danone CEO Franck Riboud often calls the US an “emerging market” for yoghurt.

That emerging market now includes some formidable competitors. Growth in US yoghurt has been driven by Greek yoghurt. Greek accounts for 43% of the total US yoghurt market, data from Nielsen shows, compared to just 2% in 2007. And, notably, it is Greek yoghurt that is maintaining the growth of the whole category. Sales of non-Greek yoghurt have been declining since 2011.

So far, Muller Quaker Dairy is selling both standard and Greek lines in the US. Early data on how well the SKUs have performed in their selected markets is hard to come by but there is little doubt the venture will face stiff competition.

Chobani, a privately-owned producer, leads the Greek yoghurt segment and late last year opened a new plant in Idaho. Danone has invested heavily in the US in recent years, increasing production capacity, boosting advertising and rolling out new products. It has seen its share of the US yoghurt market and of the Greek segment increase.

And General Mills, the owner of the Yoplait brand, is planning more innovation and marketing in the next 12 months in a bid to boost its sales and to catch up with Chobani and Danone, particularly in the Greek segment, which the US food giant only entered in 2010.

The interest in Greek yoghurt has led all players to increase capacity – and added to that is now the plant in Batavia. As a consequence, analysts at Sanford Bernstein say they have seen more promotions from Chobani in recent weeks and expect the sector as a whole to see more activity in the weeks ahead.

“The increased capacity makes the category ripe for heightened competitive pressures through increased promotional activity, at least in the short term: We expect the incremental volume to be met with increased promotional activity as Chobani attempts to protect share, General Mills tries to gain share with higher promotions and new product launches, and Danone likely to respond in kind,” Alexia Howard, an analyst at Sanford Bernstein, wrote late last month. “Indeed, even before the extra capacity, we were seeing the percentage of Greek yogurt sold on promotions rise throughout 2011 and into 2012.”

Howard acknowledges such activity could attract new consumers but says there are “concerns” over the “profitability” in the US yoghurt category.

Now, PepsiCo and Muller are hardly industry minnows. They both have the clout to invest heaviliy behind marketing and promotions to try to gain a foothold in the US yoghurt sector. The likes of Chobani, Danone and General Mills will have watched the early consumer reaction to the Muller brand closely and will be prepared for PepsiCo and Muller to vigorously support its products. For Muller, moving into the US was an ambition of its founder Theo Muller. PepsiCo CEO Indra Nooyi is trying to extend the soda and crisp giant’s presence into healthier categories.

Looking at the forecasts for the US yoghurt category, the sector is set for growth, especially in Greek so is a ripe market for Muller Quaker Dairy. However, PepsiCo and Muller are entering a competitive sector and one where that rivalry is intensifying as more capacity comes on board.