Muller Quaker Dairy JV ends in disappointment, but what went wrong?

The move does not come as a complete surprise given that many retailers have delisted Muller Quaker Dairy products in recent months (Müller Corner: yogurt with a side compartment of toppings; Müller FrutUp: yogurt and fruit mousse; and Müller ice cream inspired yogurts), and the brand has also struggled to compete with Chobani Flip, a mix-in concept that has gained a dominant position in the market since its 2013 launch.

While PepsiCo was confident the JV could capture a sizeable share of the US yogurt market when it first announced the JV in 2012, and told us in 2014 that it was on track “to achieve $100 million in annual retail sales in the U.S​​​” owing to a “passionate​” and "loyal​" fan base, a spokeswoman told FoodNavigator-USA on Thursday afternoon that sales had not met internal goals.

The business was not meeting expectations in a competitive and dynamic marketplace​

She added: "We can confirm that on December 10, Dairy Farmers of America (DFA) agreed to purchase the Batavia manufacturing facility owned by Muller Quaker Dairy LLC ​[DFA is a leading manufacturer of cheese, butter, and dairy ingredients, and a contract manufacturer of several consumer products].

“After determining that the business was not meeting expectations in a competitive and dynamic marketplace, it was mutually agreed by PepsiCo and the Theo Muller Group to be in our best interests to exit the joint venture. ​

“We are immensely appreciative of the support we’ve received over the years from the community, our customers and the consumers who purchased our products. We are also pleased to know that DFA, the nation’s leading milk marketing cooperative, with nearly 1,400 member farms in New York alone, intends to continue to invest in the community and further expand their production and agricultural presence in the state." ​
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Asked about job losses, she said: “We value the contributions of all employees and are working hard to minimize job losses as best we can. We are encouraged to know that Dairy Farmers of America, who have agreed to purchase the facility, have expressed interest in hiring several MQD employees. ​

"While this decision was difficult, we are committed to be as sensitive and supportive as we can be to help those affected. As is our practice, we will be offering transition assistance to all impacted employees.”  ​

Asked for his thoughts on the demise of the JV, one dairy industry CEO told FoodNavigator-USA: "What I did see lacked innovation, branding and flavor.  I never saw it as a viable contender - just another me-too product and it was just a matter of time until something like this happened."​

There wasn’t any brand identity or connection to their name and I didn’t get a sense of a personality for it either​

Winston Lee, founder and CEO of Tarte Foods​​, a recent entrant to the yogurt market, told FoodNavigator-USA: "I don’t think their brand resonated with US consumers.  It wasn’t about the product because I thought the quality was as good as the other major commoditized brands like Yoplait and Dannon, but the way Mueller - a German name - was introduced to US consumers was poor. ​

"There wasn’t any brand identity or connection to their name and I didn’t get a sense of a personality for it either.   Their packaging was very traditional and stale and I don’t think it stood out on the shelf.   I also think Chobani’s flip product was superior in quality and since they were selling for essentially the same price points, Chobani always won and is clearly winning."​

He added: "Th​e category is moving very fast and is extremely dynamic, not only in product innovation but also how brands are marketed.  Traditional media marketing is dead.  ​

"I don’t think you can buy your way into a national brand with consumers anymore. You have to build it organically and it requires time and patience and a real authenticity of where the brand comes from and how it started.  I would say that Millennials are the biggest driver of this consumer trend and I don’t think it’s ever going back."   ​

Tom Vierhile: The brand just didn’t achieve critical mass​

Tom Vierhile, innovation insights director at Canadean Consumer, meanwhile, told FoodNavigator-USA that the brand never really took off in the US: "The brand just didn’t achieve critical mass. I think the market was just way more competitive than they anticipated.  ​

"In our area, at least, the brand never had much shelf space and if you can’t get the shelf space, you’re not going to go anywhere in the category.  Chobani’s continued ascent had to hurt, and General Mills’ revitalization effort for Yoplait was another development that helped raise the cost of competing in this market.  ​

"I noticed recently that the brand was down to maybe two or three facings at the local Wegmans I shop at and that just isn’t enough to make a dent when you consider that yogurt is a heavily flavor driven category where you need an assortment of flavors to complete – even for Greek yogurt. I did go to our local Wegmans tonight and they had three facings of Muller Quaker on shelf so it looks like they are selling through whatever production they have left."​

He added: "​Undoubtedly, the Greek yogurt frenzy has cooled, and that has played a part.  But what has also happened in yogurt is that innovation is spreading to other types of yogurt including Aussie style yogurt with fast-growing Noosa yogurt (supposedly on-track to hit $100 million in sales this year) as well as Wallaby yogurt, Swiss-style yogurt, Icelandic-style skyr and more.  ​

"The market is fragmenting with consumers gravitating to newer styles of yogurt, and this is also changing the market dynamic and posing a challenge to Greek yogurt brands."​

I think the yogurt category is pretty saturated now and getting something new to catch on is tough unless there is a true product differentiation which I don’t see here.  Claims on the website are kind of lame and looks like this brand is practically a dessert. The few reviews I read had issues with ingredients, high sugar levels and that the package labeled “Greek” is actually  “Greek-like” (in small print) which makes people mistrust the brand and cheapens the perception.  Add in unattractive packaging and there you go.​ Lori Colman, founder of branding and marketing agency CBD Marketing​

Chobani Flip: The next billion dollar brand in yogurt?​

Rival Chobani has not commented on the news, but speaking​​ at our Food Vision USA conference in Chicago in late October, chief marketing and brand officer Peter McGuinness said Chobani’s Flip ‘mix-in’ platform was operating at a run rate of $300-$350m and could be the next one billion dollar brand in yogurt.

McGuinness, who is planning to take the brand into savory territory next year with the launch of novel sweet and spicy variants, said Flip - launched in 2013 - was delivering incremental growth both to Chobani and to the yogurt category overall by attracting new consumers to the yogurt aisle, and encouraging existing consumers to buy more yogurt by opening up new day parts in which to enjoy it.

“We’re now number one in the mix in segment which is growing at around 30% year on year in yogurt. The really interesting thing about this​ [Flip’s sales] is that it’s 42% incremental, and half of that 42% is people that never had a yogurt, and the other half is people that are buyin​g a second or third yogurt incrementally - so they are eating yogurt for breakfast and now they are eating one as an afternoon snack as well.”

He added: “80% of yogurt in America is still consumed in the morning, so we set out to develop a new platform - a highly thoughtful, highly-curated highly delicious afternoon snack. We wanted to create a 3pm yogurt ritual, when you’re bored at work, or coming home from school or soccer practice, something that bridges the gap between lunch and dinner.​

 “It’s called Chobani Flip, and we think it’s the future of snacking, and the next billion-dollar brand in yogurt.”​