Danone has hinted that Kraft’s withdrawal from the booming Greek yogurt category in the US is proof of how hard it is to penetrate the sector within a refrigerated yogurt market Mintel estimates was worth almost six billion dollars in 2011.
French firm Danone reported Q1 sales of €5.1bn (€4.7bn: Q1 2011) today with growth in all business sectors, but particularly in waters (+16.4%) and baby nutrition (+9%), while fresh dairy grew 3.8%.
Discussing the results with analysts this morning, Danone chief financial officer (CFO) Pierre-André Térisse tacitly alluded to Kraft’s surprise US Greek yogurt retreat when discussing his firm’s fresh dairy performance: “I note with interest that one of the players on the Greek [yogurt] side has chosen to withdraw,” he said.
“Not a big player in this segment – very big in other things – but this shows that it’s not a market that anyone can go and tap very easily.”
Kraft launched Athenos Greek yogurt onto the US market (where Danone has 31.8% of overall fresh dairy value sales) in November 2010, upon the basis that it was the only brand that offered a dual-compartment non-fat product, with yogurt on one side and fruit/honey on the other.
Mintel data indicates that the US market for refrigerated yogurt was worth $5.734bn in 2011 ($4.727bn: 2009) and cited Greek-style yogurt (around as a key growth driver, "one of the fastest-growing foods ever to hit the US market".
'Extremely difficult decision': Kraft
But Kraft spokeswoman Angela Wiggins told DairyReporter.com yesterday that the firm had taken the “extremely difficult decision” to discontinue its Greek yogurt line to focus on new Athenos branded products, including spreadable cheese, feta, pita chips and hummus.
She refused to be drawn on whether Kraft had made the move due to disappointing yogurt sales, or whether tough US competition – Chobani, General Mills (Yoplait) and Danone – had forced its hand.
Kraft’s market share was around 2% in mid 2011 (Symphony IRI) but since then General Mills has relaunched its Yoplait brand, while Danone (Dannon/Stonyfield Farm) relaunched its own Greek yogurt offering under the Oikos brand last July.
The French multinational has since lacked capacity to service runaway demand, and Térisse confirmed to analysts that the firm was building new capacity in the US.
Danone plans capacity increases
He told Warren Ackerman, an analyst at Société Générale: “The Greek category is now one third of the total dairy category in the US. Oikos continues growing and is close to 20% on [Symphony] IRI only, which means it is now above 20% if you take into account all channels, so it keeps taking market share in this segment.”
Ackerman asked whether it was true that two capacity increases were planned, one in June and one in October? “There are several capacity increases, but I am not going to discuss that," Térisse said.
Pablo Zuanic, a partner at Liberum Capital asked Térisse whether rapid US growth in Greek yogurt – up from 25% to 30% of total dairy sales during the quarter – meant there was a risk of market overcapacity?
“On capacity in the US – I do not feel that Danone has a risk of overcapacity. I cannot comment on whether this is an issue for others, but we don’t see this as a risk,” Térisse said.
“We have struck a balance between being able to catch the Greek opportunity, and at the same time making sure we will not be building too much risk.”
Catching 'Greek opportunity'
Glossing this "Greek opportunity", Mintel noted that despite a 100% price premium, consumers saw the yogurt as an "indulgent tasting yet healthy treat and because its protein content is high".
Despite noting that the major yogurt manufacturers were slow to tap the Greek trend, the research firm added that "the sub-segment still holds room for growth and new products, including Greek-style frozen yogurt, dips/sauces and desserts".
Fresh dairy performance improved in Q1 2012 (volumes stabilised) due to the success of Oikos and Russian sales, Térisse said. “We have been growing volume and value sales in the CIS, in particular we are activating key brands and Prostokvashino – the key asset of our Danone-Unimilk business – grew 12% and was the main growth driver.”
One recent US fresh dairy launch from Danone was Dannon Pure, a multipack-only yogurt made from 7-9 ingredients that Térisse said had “natural, family and simple” positioning.
“We believe that that innovation, in addition to Greek can be useful to develop the [fresh dairy] category," Térisse said.