Consumers continue to seek innovation and value in yogurt, which is outpacing many other dairy categories in sales and profit.

 

Yogurt dollars rose 1.3% to $893.3 million and units were up 0.7% to 919.5 million in supermarkets in the 12 weeks ended March 22, according to Information Resources, Inc., the Chicago-based market research firm.

 

Dollars were ahead 5.8% to $3.672 billion for the 52 weeks ended March 22 and units were up a scant 0.2% due to increased sales of multi-packs and larger-size cups.

Yogurt has been one of the biggest contributors of growth to the dairy department, according to Michael Neuwirth, senior director of public relations of The Dannon Company (914-872-8400), White Plains, N.Y. Gains are driven by consumer desires for better health and weight control, he says.

Neuwirth points out that in the past six years, yogurt dollars have grown by 28%, versus 20% on average for other dairy categories. On a poundage basis the comparison is even greater, with yogurt up 13% versus an 11% contraction for the others.

 

The growth is due in part to the unique benefits consumers are choosing within the proactive health segment of the yogurt category, which will again be the major growth area in 2009, according to Neuwirth. With the economy slow, he also sees growth for 24- and 32-ounce containers, preferred by value-conscious shoppers and those who use yogurt in meal preparations.

 

Chuck Marcy, CEO of Breyers Yogurt Company (303-848-6000), Boulder, Colo., believes that multi-packs will lead category growth because they are easier to merchandise and handle on the shelf. He says consumers are looking for yogurts that offer benefits beyond just low price. “We’ve just changed our Breyers cup yogurts to have 10% more fruit in our Fruit on the Bottom product to make it a much better value,” he notes.

 

Innovation is key to further category growth, according to Kyle O’Brien, vp of sales for AgroFarma, Inc. (607-847-6181), New Berlin, N.Y. His company produces and markets Chobani Greek Style yogurt, focusing on non-fat, fruit-on-the-bottom product that is kosher certified.

 

But newer Chobani products coming on line now include low-fat versions, and O’Brien says drinkable yogurts and a children’s line are on the drawing boards. The company is coming out with a pomegranate flavor, after strong favorable feedback at Expo West, he notes.

With twice the protein of traditional American yogurts, and an all-natural profile without artificial ingredients and fillers, Chobani has live active cultures and is high in calcium, O’Brien says. The taste and texture is a pleasant surprise to many, he adds.

 

“We’re pretty unique. I think consumers are just realizing there are products like Chobani on the shelf versus what they’ve been used to. We’ve spent a lot of time on grassroots sampling around the country, but we’ve only touched the tip of the iceberg,” he notes.

 

Another marketer of Greek yogurt, Fage USA Dairy Industry, Inc. (518-762-5912), Johnstown, N.Y., is also bullish on the segment. Ioannis Papageorgiou, the company’s president and COO, notes that Fage, whose parent company is in Greece, last year opened a $100-million, state-of-the-art production facility in Johnstown.

 

He says that in the U.S. grocery market, Greek yogurt has a dollar share of 2.7%, but contributes about 20% of category growth. In the New York market, he says, Greek yogurt is close to 9% of category sales and contributes 56% of category growth.

 

Erik Drake, senior marketing director of Stonyfield Farm (603-437-4040), Londonderry, N.H., says “Shoppers want yogurt that benefits their health, provides the different benefits their family needs, is pure and tastes great.”

Dannon’s Neuwirth notes that “Trading down is happening a lot less frequently in yogurt when compared with other dairy categories that are less innovation-driven. More commoditized dairy categories, such as butter or milk, are more likely being traded down. Because it is innovation driven, yogurt is a category in which we counsel retailers to be cautious to prevent price erosion.”

 He says that as prices for milk and oil-derived commodities have returned to a more normal trading range, Dannon is investing savings back into promotions and other marketing vehicles. “We’re seeing more aggressive pricing on more commodity products, particularly single-serve yogurt cups,” he notes.
Stonyfield’s Drake feels that retailers need to reduce their reliance on aggressive promotional activity. “Retailers do not need to promote to these deep price points,” he says.

 

Manufacturers agree yogurt needs more space, since it is one of the most profitable categories in the store. Drake recommends that retailers reduce the space given to labor-intensive single-serve items. “Focus the segment on core and differentiated offerings, such as organic, while eliminating lower volume, me-too products,” he says. He also points out that there has been a proliferation of non-yogurt items that are being merchandised in the yogurt set. “In a category that is so tight on space, this is a large concern,” he says.

 

Dannon’s Neuwirth urges retailers to maintain sufficient facings to stay in stock, and to support products that help grow the category via innovation. Proper shelf organization is critical to help shoppers as they seek out products for kids, digestive health or weight management or other “need states,” he says.

Yoplait continues to use the brand block strategy, which best aligns the section with consumers’ purchasing behavior, according to Stephanie Clawson, trade director for Yoplait of Minneapolis-based General Mills (800-248-7310).

 

In addition to brand blocking and expanding yogurt space, Clawson believes retailers need to optimize distribution, set the right everyday price and execute a strong promotional plan to support the products. She has seen about a 5% increase in the number of SKUs in the yogurt section over the past year.

 

In the short term, says Breyers’ Marcy, the only way to add space is to provide more secondary displays. He notes that spot merchandisers at checkouts and in the dairy section provide more space for the category and build impulse sales. These displays can also help protect retailers from out-of-stocks during promotions, Marcy says.