In a US packaged food market that has struggled for growth for much of the last decade, the yogurt category has been a success story, driven by the rise of Greek-style products, itself a segment propelled by one business – Chobani. However, 2016 saw the growth of the category – as well as of Greek specifically – grind to a halt. just-food’s US columnist Victor Martino argues Greek will remain the dominant force in US yogurt but he observes a jostling for position as yogurt makers look for the next wave of growth.
Over the last decade, the story of yogurt in the US has centred on one business – and on one man in particular.
To some, Hamdi Ulukaya, the Turkish-born Kurdish founder of US-based yogurt maker Chobani, has been the Greek God of yogurt in the States.
In the ten years since founding Chobani, Ulukaya has not only been able to sell Americans on Greek-style yogurt but that segment has driven the growth of the overall category, leading his company to unseat Yoplait, owned by packaged foods giant General Mills, as the top-selling spoonable yogurt in the nation.
Chobani was not the first Greek yogurt in America but the first to successfully market it to a mainstream audience. As the saying goes, the yogurt named after the Mediterranean country was frankly “Greek” to General Mills and the rest of the established yogurt makers in the US until Ulukaya came along.
The major players appeared not to take Chobani seriously at first but, as the brand’s distribution and sales started to take off, they jumped on the bandwagon, cloning Chobani and creating their own Greek yogurt brands.
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Nevertheless, first-mover advantage, combined with high likeability ratings and clever marketing, has kept Chobani at the top of the Greek heap. Chobani today is a US$1bn dollar yogurt brand.
However, the future direction of the US yogurt category is far from set in stone.
After years of rapid growth, the sector ran out of steam last year. According to data issued in March by analysts at Sanford Bernstein, sales of yogurt – in measured channels – fell 0.7% in 2016.
Some players have suffered; Sanford Bernstein said General Mills yogurt sales in the US had fallen by around 15% year-on-year.
Even the buoyant sub-segment of Greek saw its growth stall in 2016. According to Sanford Bernstein, sales of Greek yogurt in the US dipped 0.3% last year. However, Greek’s long run of growth means it now on its own accounts for 47% of all US yogurt sales, Sanford Bernstein says.
The likes of General Mills and Danone have internally largely conceded Greek yogurt leadership to Chobani – but they far from ready to give up overall category dominance. Instead, these players are launching what looks like the “Create the New Greek” strategy. They still plan on playing moderately-hard in Greek. But Big Yogurt is betting Americans are ready for the next new thing in yogurt. Therefore, the plan is to be first, like Chobani was with Greek, with whatever new style – even if created out of thin air – of yogurt might captivate the tastes of Americans.
Could French be the new Greek? The most touted new attempt to outflank Chobani and Greek is General Mills’ new “French-style” yogurt, Oui by Yoplait, which is being launched into retail stores.
General Mills unveiled the new product in late June, just a short time after Chobani announced it would launch a line of lower-fat smooth-style yogurt, which is the sub-category Yoplait and Danone dominate. Yoplait is slightly thicker than Danone’s US brand Dannon and the other smooth brands.
General Mills describes Oui by Yoplait as “a thick, French-style yogurt made by pouring ingredients into small glass pots, and allowing the contents of each to set and culture for eight hours”.
Oui by Yoplait is a whole-milk yogurt that plays on the return to favour of full-fat dairy products over low-fat and non-fat products, which have been popular over the last two decades due in large part to US federal government’s nutritional guidelines that recommend both over full-fat dairy. Those guidelines are increasingly coming into question from science and many nutritionists and others are calling for changes to the advice.
Will French-style and Oui by Yoplait become the new Greek? It’s doubtful. Rather, Oui by Yoplait is a potentially strong leader in the indulgent spoonable yogurt segment. Think Haagen-Dazs and Ben & Jerry’s as analogous in the ice cream category, for example.
Other members of Big Yogurt are playing around the edges in trying to blunt Chobani. Danone, for example, is focusing on a multi-segment strategy with its Danone and Activia brands (smooth and lower-fat yogurt varieties with a lower retail price-point focus) and with its speciality brands, a range bolstered by the recent acquisition of WhiteWave Foods: Oikos (Greek), Silk (plant-based) and Horizon (organic).
Organic commands a minuscule share in the spoonable yogurt category and only moderate growth is likely here over the next five years. Instead, the big growth is going to be in plant-based yogurts overall, many of (if not most) of which are not and will not be organic.
Having sold Stonyfield, the US organic dairy yogurt brand, to Lactalis, one should expect Danone to make a major push starting next year in the plant-based yogurt segment, along with its dairy-based offerings. Look for big marketing money to be out behind the key brands.
So, is the new Greek Yogurt coming soon? The answer is no. Instead, Greek will likely remain dominant.
However, there will likely be a chipping away of that percentage by the proliferation of yogurt styles and varieties on store shelves – Icelandic, Australian, plant-based, triple cream and more – along with the spate of new styles and varieties hitting the market from existing and new start-up brands. New item and brand launches in the spoonable yogurt category are coming fast and furiously.
Spoonable yogurt will continue to grow slightly over the next five years, at a 1-2% rate, led largely by the growing popularity of plant-based yogurts, which are beginning to find increased favour with mainstream consumers.
However, the drinkable yogurt sub-category is booming. According to research firm Mintel, drinkable yogurt sales in the US grew a whopping 62% between 2011 and 2016 to $893m annually. Mintel estimates sales growth of around 11% for 2016 to 2017 and double-digit sales growth through 2020. Drinkable yogurt has plenty of room for growth too. According to Mintel, 66% of US adults purchase spoonable yogurt but just three in ten buy yogurt drinks. Drinkable yogurt will push growth in the overall yogurt category forward for some time.