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Spoon Boom: Why PepsiCo is Dipping Into US Yogurt Craze

Posted by Dale Buss on July 9, 2012 03:01 PM

It may be too early to say the cola wars are over, although it's clear that PepsiCo is ready and willing to take on another archrival. Following years of competing with Coca-Cola with its array of beverage and snack food brands in the U.S., PepsiCo is now getting into the red-hot yogurt market and adding Dannon to its competitive set.

Faced with a U.S. yogurt market that is more crowded than ever with brands, and demonstrating almost no growth except in the Greek yogurt category, PepsiCo announced Monday that it's introducing a fresh brand to yogurt-loving Americans — and one that isn't focusing on Greek — via a new partnership with the Theo Muller Group, Germany's largest privately held dairy

That's the prospect for Muller Quaker Dairy when it finally enters stores in northeastern and mid-Atlantic states with three lines of yogurt products birthed by the joint venture. Muller Quaker promises "innovative premium" products that aim to create differentiation and taste excitement in a U.S. yogurt category that PepsiCo executives believe is lacking both.

"It's been an 'I gotta have it because it's good for me' kind of a product," Dr. Mehmood Khan, who oversees PepsiCo's global research and development, commented to the New York Times. "The 'wanna have it' was missing."

The new yogurt products coming to the U.S. as a result of the Quaker/Muller U.S. joint venture: Muller Corner and Muller Greek Corner, squared packages that incorporate bendable corners with "add-ins" that consumers can "flip, stir or dip," plus Muller FrutUp, which puts the fruit on top of the yogurt so that it can be scooped, swirled or mixed into the yogurt. "We will be able to offer U.S. consumers an amazing range of products that taste delicious and are unlike anything on the market currently," Khan stated. 

Sam Lteif, CEO of Muller Quaker Dairy, added that the goal is to not only add fun to yogurt, but also create "mainstream premium" yogurt products to fill the gap between, as the NY Times puts it, "mass brands like Dannon and Yoplait and niche Greek yogurts like Fage and Chobani." Or as Stefan Muller, great-grandson of Muller's founder, commented, "Here in America, yogurt is so boring."

That market opportunity is why PepsiCo is so bullish on the growth prospects for the U.S. spoonable-yogurt business, which some analysts say could double by 2016 from its $4.5-billion level of 2008 (see its infographic below). Quaker Muller is off to a good start with at least one customer — Alan Faust, dairy buyer for the Kroger grocery chain, told the Times he finds the new Muller by Quaker products a "really high quality, flavorful product with good body texture." (The "dry and chalky" texture of Greek yogurt vs. the "watery and tasteless" nature of traditional yogurt is an American consumer complaint the PepsiCo/Muller joint venture is eager to take on.)

Muller by Quaker products will be imported from Europe until production shifts to a co-funded $206-million yogurt plant in Batavia, N.Y., for a projected output of five billion cups of yogurt a year. (Batavia is becoming Yogurtown, USA, with another yogurt plant now in the works, while New York State may come to be known as New Yogurt, given a yogurt boom that includes Chobani and Fage manufacturing plants.)

Are American consumers really ready to consume all that much more yogurt than they're already eating, and also embrace yet another major brand in the market? PepsiCo executives told the Times that the rampant success of Chobani in grabbing a huge share of the yogurt market, from non-existence about five years ago, encouraged them.

Chobani seemingly sprang out of nowhere with its pioneering Greek-style products, creating an entire new segment. At least two other big companies have been tripped up lately by the vagaries of the U.S. yogurt market, which is now growing almost exclusively in Greek-style sales while growth stagnates in other once-hot major segments of the business, such as products for kids, and "light" varieties: General Mills, which hasn't hit its stride yet with slow-growing Yoplait Greek, and Kraft, which pulled out of the Greek-style market last year after a brief stay.

PepsiCo executives, however, are confident that Muller Quaker Dairy offers the right mix. "There is no better partner PepsiCo could have in order to meet historic U.S. consumer demand for premium yogurt," Khan said. Also, as the NY Times quoted PepsiCo CEO Indra Nooyi, the company is eager to expand its "fun for you, better for you, good for you" portfolio, which has spurred lower sodium Lays potato chips and alternative sweeteners to reduce calories in juice products including Trop 50 and sodas including Pepsi Next.

Below, PepsiCo's infographic released to the press describes what it sees as the Yogurt Nation that America has become:

Comments

seshagiri India says:

since time immemorial yoghurt is used regularly in Indian house hold for its goodness. Interesting to see that in a cola nation yoghart is gaining popularity and its only for the good of the Americans. A well researched move by PEPSICO I guess.

July 10, 2012 02:48 AM #

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