With per capita consumption of yogurt in the US still way behind western Europe, a major new market entrant such as PepsiCo could breathe fresh life into the fixture and generate incremental sales rather than merely stealing market share off the top two players, according to one analyst.
Euromonitor International senior research analyst Virginia Lee was speaking to FoodNavigator-USA following last week’s report in the Wall Street Journal (WSJ) claiming that PepsiCo is working with German dairy giant Müller to enter the US yogurt market.
She added: “If PepsiCo wants to get into this market there is a real opportunity to drive growth by expanding the number of eating occasions for yogurt so it moves beyond something you would just have at breakfast into a post workout snack or an evening snack as well.”
According to Euromonitor International data supplied to FoodNavigator-USA, Dannon led the market in 2010 with a 32.3% market share ahead of General Mills (Yoplait) at 27.8%, Agro Farma (Chobani) at 6.3%, Stonyfield Farm (owned by Danone) at 6.1% and Fage USA (Total) at 2.8%.
2011 US yogurt category sales are predicted to top $7.606bn, up 50.9% from $5.041bn in 2006. By 2016, it predicts sales will top $8.521bn.
Active men and women
Given that neither the Pepsi nor Müller brand had any cache with US shoppers in the yogurt fixture, a new brand was probably the best route into the market, predicted Lee.
“They could go in with a Greek yogurt, but there is also the opportunity to focus on active men and women as they have with Gatorade and really leverage their marketing capabilities, particularly with women through things like the Blogher [women’s publishing network] website and annual conference [at which PepsiCo boss Indra Nooyi spoke in August].
“I’m thinking more in terms of healthy active lifestyles than weight management. They could take a female empowerment angle, a bit like the old Nike ads. But there are also opportunities to attract men with protein.
“While the market is quite consolidated, with Dannon/Danone and General Mills together accounting for around 66% of sales in 2010, there is still room for a new player, as long as they can secure the shelf-space, which for a company like PepsiCo should not be a problem, at least to start with.”
Beware ‘functional’ yogurt?
While there were opportunities to talk about protein and fiber and their associated health benefits within Greek or other yogurt formulations, more overtly ‘functional’ yogurts had had mixed fortunes in recent years, with probiotics performing well but products with omega-3s and plant sterols proving less appealing, she said.
“The market is growing strongly, but in terms of what’s driving that growth, it pretty much is Greek yogurt right now, and I’d predict that for the next two to three years most of the action will be in Greek.
“But US consumers do like trying new things and there is still a lot of potential to grow because per capita consumption of yogurt here is far lower than it is in the UK and France.
“Our projection is that the US yogurt market will be up $9.4% to $7.61bn in 2011. When you compare that with where things were in 2006 – around $5.04bn - that’s more than 50% growth in five years, which in a mature market like the US is very impressive.”
The rise and rise of Greek yogurt
Demand for thick, high-protein Greek-style yogurt has soared in popularity over the past couple of years, with Dannon and General Mills (Yoplait) recently upping production capacity.
But Greek was not the only iron in General Mills’ fire, insisted General Mills’ US retail chief Ian Friendly in a conference call last month: “There is further innovation to be done beyond the Greek segment.
“I am enthused about the yogurt category, but we have some work to do. We think we’ve got a solid plan to get our yogurt business growing again in 2012.”
Speaking to analysts in April, Pierre-Andre Terisse - chief finance officer at rival Dannon’s parent company Danone - said: “What’s driving the [US yogurt] category today is Greek.”
PepsiCo nutrition segment
PepsiCo entered the dairy category in early 2009 via a joint venture with Almarai, the largest juice and dairy company in the Middle East. More recently it coughed up a cool $3.8bn for a controlling stake in Russia’s largest dairy firm Wimm-Bill-Dann.
Sales of nutritional products (Gatorade, Quaker, Tropicana) now account for more than a fifth of PepsiCo’s revenues compared with 11% in 2000.
A PepsiCo spokesman declined to comment on the WSJ article, but added: "Since forming the Global Nutrition Group to accelerate the growth of our nutrition portfolio, we constantly look at product innovation and partner offerings to help us achieve this mission.”
With 2010 sales of 2.2bn euro ($3.02bn) Germany’s largest privately-owned dairy producer Theo Müller has built up a sizeable market share in the UK yogurt category in recent years with Müller Light, Müller fruit corners, Müller Rice, Müller Vitality (with pre- and probiotics), kids’ brand Müller Little Stars (pictured) and new luxury dessert yogurt range Amoré.
It has also established a strong presence in several other European markets and entered the Israeli market in 2008.