|US: Greek yoghurt's booming success|
|Tuesday, 24 January 2012|
Chobani is making Greek yoghurt as fast as Americans are eating it. Its plant in upstate New York already pumps out 1.5 million cases of the thick yoghurt every week, and its sales have rocketed to an estimated $700 million annually, only four years after it was launched. Greek yoghurt now accounts for a quarter of the total US yoghurt market after a dizzying growth spurt.
The nation's No. 1 and No. 2 Greek yoghurt brands — Chobani and Fage, respectively — are both expanding plants within 60 miles of each other, and another company is building a plant in western New York. The expansions come as the big US yoghurt makers are focusing on Greek products, too.
Greek yoghurt is made a bit differently than the thinner, more watery product that dominated US supermarket shelves for decades. The whey is strained off, leaving a creamier yoghurt high in protein and low in fat.
While the quick growth has some hallmarks of a food fad — think cupcakes or bubble tea — the long-term investments point to a widespread industry belief that many Americans will continue to like their yoghurt a bit richer.
"I personally do not believe that the yoghurt story has started yet. I believe the yoghurt story in this country is about to start," Chobani's founder, Hamdi Ulukaya (pictured above), said during an interview with The Wall Street Journal. "The magnitude hasn't started yet."
Ulukaya has harnessed the Greek yoghurt boom more successfully than anyone. In 2005, he bought an old Kraft Foods plant southeast of Syracuse with plans to make the kind of yoghurt common in his home country of Turkey. He believed the standard yoghurt found on many supermarket shelves "wasn't made right."
His company, Agro-Farma, started by making yoghurt for Stonyfield Farm other companies before launching Chobani in 2007 with limited runs to stores in the New York City area.
The Chobani plant today bustles with 14 production lines mechanically squirting yoghurt into plastic cups that zip down conveyor belts.
The company said production will increase from 1.5 million cases a week to more than two million when the current $134 million expansion is completed this year. Another $128 million Chobani plant being built 2 000 miles west in Twins Falls, Idaho, will add still more.
Meanwhile, the Greek company Fage (pronounced FA'-yeh) is in the early stages of doubling the capacity of its three-year-old plant in Johnstown, NY, to about 160 000 tons of yoghurt annually.
By multiple accounts, the seeds of the Greek yoghurt boom were planted years ago through Fage imports to New York City. Fage opened its US plant in 2008 to keep up with growing demand. Russell Evans, Fage's marketing director, said sales have grown on average of 50 percent a year for a decade.
Though often pricier, Greek yoghurt is increasingly becoming a refrigerator staple as consumers seek healthy, "authentic" foods. The NPD Group, a consumer marketing research firm, reports that Greek yoghurt appeals most to adult females and that it's more popular in smaller and higher-income households.
The Chobani and Fage two plants are a boon to upstate New York's ailing economy, not only for the more than 1 240 full-time jobs combined, but because of their voracious demand for milk from New York's dairy farmers (it takes roughly four gallons of milk to make one gallon of Greek yoghurt). Fifty or more tanker trucks make daily deliveries to the Chobani plant alone.
Little wonder Gov Andrew Cuomo's administration chipped in $16 million in state incentives for the Chobani expansion, and the governor became personally involved in ironing out a local intra-community dispute that was holding up the Fage expansion.
"It's been very good for the dairy industry," said Greg Wickham, chief executive officer of Dairylea Cooperative, which supplies milk for Chobani.
Another manufacturer, Alpina, plans to open a plant to the west in Batavia, NY, this summer that will make both Greek and Swiss-style for a yoghurt and granola product.
At least initially, Greek yoghurt zoomed to popularity without a lot of attention from the major yoghurt makers. Citigroup Global Markets in an analyst report last month said its growth to $1 billion in annual sales — out of total yoghurt sales of $4.1 billion — caught the major US yoghurt makers "flat-footed." The result: Chobani had 53 percent of the Greek yoghurt market, followed by Fage with 17 percent, France's Danone (its subsidiary Dannon makes Oikos) with 14 percent and General Mills (Yoplait Greek) with 5 percent, according to Citigroup.
The big players have clearly taken steps to grab some of the market back. General Mills added capacity and Dannon is in the process now, according to representatives of the two companies. General Mills this winter will introduce Yoplait Greek Parfaits with granola and new flavours of Yoplait Greek yoghurt in multi-packs.
"I think that you're going to see a very high level of innovation in the yoghurt category generally and in Greek yoghurt specifically over the next 6 to 12 months," General Mills CEO, Kendall Powell, said last month.
Still unclear is where the Greek market will top out, or whether it will crash back to earth like the old low-carb craze. Few expect a drop off anytime soon.
"We believe it is not a fad but rather a part of the market that is here to stay," said Dannon spokesman Michael Neuwirth said. "At what level, I can't predict."
New Nutrition Business on Greek yoghurt:
Chobani’s success comes from many factors – one of them being its natural message. “Some foods are processed so much. Lost nutrients must be added back in. We just use the nutrients nature provides,” says advertising for Chobani, which carries the tagline “Nothing but good” on its products.
The success of Greek yoghurt in the US is an illustration of how much cross-over there is between trends. Dairy has a strong “naturally healthy” image in many countries and the dairy industry has been at the forefront of bringing health benefits to the consumer market.
Together these have helped make dairy a credible category for health messages. The health opportunity for dairy is still huge, particularly in the many markets – such as the US, Latin America, India and parts of Asia – where per capita consumption is low compared to Europe.
Greek yoghurt enjoys a price premium of at least 25% and in some cases up to 50% – a fact that makes its explosive growth against the background of a fl at economy all the more remarkable.
“Consumers are still willing to spend if they perceive value, but they’re being a heck of a lot more judicious,” Gary Hirshberg, CEO and founder of Stonyfield Farm, America’s biggest organic dairy brand, told New Nutrition Business.
“Greek is a premium category that has emerged during a recession. Why? Because there are authentic health benefits. You’ve got higher protein, lower carbs, better mouthfeel and taste than regular yoghurt – there is perceived value.”
Sources: The Wall Street Journal & New Nutrition Business's 10 Key Trends 2012