Yogurt Culture WarsDuane Stanford and Matthew Boyle
There's a Greek uprising taking place along the dairy aisle. A specialty item just a few years ago, creamy Greek-style yogurt has turned into a supermarket staple. The trend has food giants such as Kraft Foods (KFT) and General Mills (GIS) trying to topple a pair of tiny dairy makers who until recently had the market mostly to themselves.
Kraft Foods, which abandoned yogurt entirely in 2004, began selling its new Athenos brand Greek yogurt at Wal-Mart Stores in September and plans to expand to other major grocers nationally by early next year. General Mills introduced Yoplait Greek yogurt in March. Both are chasing a massive market share lead enjoyed by Greek yogurt brands Chobani and Fage.
Greek yogurt—made by straining out whey and water from traditional yogurt—has been around for centuries. With a thick consistency and a sour flavor often balanced with fruit or honey, the Greek variety has won plaudits from nutritionists for its high protein and low fat content. That combination has caught fire with health-conscious consumers: Greek yogurt sales have doubled every year since 2006, according to Marshall Hyzdu, brand manager for Kraft's Athenos line, a leading maker of feta cheese and hummus. "Our consumers were begging us to launch it," he says.
For market leader Chobani, a dairy maker that has seen its U.S. sales more than triple in the past year, to $196 million, success came almost by chance. In 2005, founder Hamdi Ulukaya, 38, was smoking a cigarette and thumbing through a pile of mail at his Euphrates feta cheese plant in Johnstown, N.Y., when he came across a postcard advertising a yogurt plant for sale in a nearby county. He tossed it.
Then Ulukaya's thoughts turned to the strained yogurt the native Turk had enjoyed in his youth. So he fished the tea-stained card out of the garbage. The plant, he saw, had just been closed by Kraft. "The yogurt aisle had been so boring," says Ulukaya. "Everything else is the sugary, same base that it's been for a long time." Now his products can be found at Kroger (KR), Whole Foods (WFMI), and Target (TGT), alongside old standbys like Dannon and Yoplait.
Greek yogurt's popularity has been driven in part by a change in American eating habits. More people are switching to yogurt for breakfast instead of cereal, according to UBS (UBS) analyst David Palmer, with sales overall up 7.8 percent over the past year. There's still room to grow: U.S. consumers eat less yogurt per person than their counterparts in the U.K., Australia, and Canada, says Kendall J. Powell, chief executive officer of Yoplait-maker General Mills.
Kraft sold its yogurt business, including the Breyers and Light'n Lively brands, six years ago to focus on faster-growing products like Oreo cookies. Now it's back with Athenos, which comes in five flavors including honey, strawberry, and blueberry. The packaging is similar to Fage's, with separate compartments for the yogurt and the fruit flavor. General Mills' Yoplait Greek package puts the biggest emphasis on letting shoppers know that it has two times the protein of regular yogurt. Flavors include strawberry, blueberry, honey vanilla, and plain. Stonyfield Farm dominates the organic market with its three-year-old Oikos brand. The Londonderry (N.H.)-based company also recently added a "natural" Greek version under its Brown Cow brand.
For pure pedigree, the one to beat is Fage (pronounced fa-yeh), which is No. 2 in the market. The family-run Fage's roots reach back half a century to a small dairy shop in Athens. The company began exporting its yogurt to the U.S. in the late 1990s—and then built a production facility in New York State. To win over more health converts and reach yogurt's main demographic—women—Fage has run ads in fashion magazines such as Vogue and Elle. It also advertises online, with banner ads on The New York Times website, and at the Huffington Post and Food & Wine sites. Fage's yogurt sales totalled nearly $123 million in the 52 weeks ending Oct. 3, a more than 50 percent increase on the same period a year ago, according to SymphonyIRI Group data from supermarkets, drugstores, and mass merchandisers, excluding Wal-Mart.
Chobani's Ulukaya says he now regularly fields buyout offers for his company: "I've said 'no' in so many different languages." And though he knows that sales cannot keep growing at their current clip, he's doing his best to keep up the momentum. Chobani recently added a Champions line for kids with flavors such as Verryberry and Chocolate.
The bottom line: Small companies won early fans for Greek-style yogurt. Now food giants Kraft and General Mills have launched their own brands.