Just two years after releasing its first product in 2007, Chobani became the biggest U.S. seller of Greek-style yogurt, which has more milk solids and a sharper taste than the conventional variety. This is not the kind of success that goes unnoticed by Danone (DANOY), the world’s largest yogurt maker. After being blindsided by the upstart, the French food giant has fought to take back the dairy section with Greek-style products from its own Dannon Oikos brand. A marketing blitz included a pricey Super Bowl ad, and it’s given out samples at store promotions. The success of Danone’s belated push to slow Chobani’s momentum and narrow its lead in Greek yogurt is a testament to how an established player’s marketing heft can trump a newcomer’s first-mover advantage.
Danone put a picture of an ancient Greek colonnade on every package and cast Greek-American actor John Stamos in its Super Bowl ad to boost its Hellenic bona fides. Oikos sales increased 165 percent in the 12 months through May 2013, according to researcher Mintel Group. Although Mintel estimates that Chobani’s sales rose more than 20 percent in the same period—it still leads the segment—Sanford C. Bernstein (AB) says it has lost share for 18 straight four-week periods.
Since the Oikos expansion began in 2011, Chobani’s share of the Greek yogurt market has fallen from almost half to 39 percent, while Danone’s has jumped from 18 percent to 29 percent, according to Bernstein. Athens-based Fage Dairy Industry’s brand is far behind at 8.5 percent. “It’s a two-horse race,” says Joe Pawlak, vice president at food industry researcher Technomic. “Chobani is the leader, and Danone has the marketing muscle.”
Winning in the $7.6 billion American yogurt market requires winning in the Greek segment, which will account for more than half of U.S. yogurt sales within six months, Bernstein estimates. To extend its brand’s reach, Danone has rolled out Oikos yogurt dips in flavors such as cucumber dill and French onion and is launching a trial of Oikos frozen yogurt. “What has happened in the U.S. is an indication of Danone’s perseverance,” says Jon Cox, head of European consumer equities at Kepler Cheuvreux in Zurich. After missing the beginning of the Greek yogurt trend, “they’ve shown that when they see the problem, they move very quickly.”
Danone’s troubles started in 2007 when Chobani mixed fruit and other goodies into Greek yogurt. The interloper has since won over customers by offering flavors such as coffee with dark chocolate and fig with orange zest. Among the draws: The Greek variety contains more protein than regular yogurt, which makes it more filling, but has little or no fat.
Greek can cost about twice as much as regular yogurt, in part because it requires three times the amount of milk to make the more dense concoction; nonetheless, by 2011 Chobani had 15 percent of the overall U.S. yogurt market, according to researcher Euromonitor International. More important, the upstart won almost half of sales of the faster-growing Greek variety, Bernstein says. One result: Danone’s share of the U.S. yogurt market dropped from 40 percent in 2010 to 35 percent a year later, Euromonitor estimates.
Enter Sergio Fuster, who in June 2011 became chief marketing officer of Dannon, Danone’s U.S. unit. By September, Fuster had relaunched Dannon Greek as Oikos and shifted ad money from other brands to support the push. Danone gave out supermarket samples and advertised in men’s fitness magazines, whose readers might be drawn to the product’s higher protein.
Danone will begin selling a new brand of Greek yogurt parfaits at Starbucks (SBUX) cafes next year before selling in supermarkets in 2015. Quickly taking Danone’s Greek yogurt into new product categories makes sense as a way to limit Chobani’s expansion, according to Bill Chidley, senior vice president of Interbrand Design Forum. Plus, Danone’s new dips might help Oikos “drive interest in their core brand back in the dairy case,” he says.
Chobani, by contrast, isn’t moving beyond its main product line. “The success that we’ve found in yogurt, we feel it transfers to other categories,” says spokeswoman Nicki Briggs. “But right now our major focus is on yogurt.” That’s meant cutting prices to help hold on to customers. Bernstein estimates that 43 percent of Chobani’s sales this year were made at a discount, vs. a third for Danone.