General Mills' Yoplait has lost market share after a surprising takeoff by "Greek-style" yogurt in recent years.
Not long ago, many yogurt buyers weren't aware of "Greek-style" as an option.
Most of the yogurt in U.S. grocery stores came from two giant companies that have long dominated the category -- General Mills and France-based Group Danone.
But in just a few years, the tangier, thicker and more protein-rich alternative to conventional yogurt has gone from a footnote to capturing 20 to 25 percent of the U.S. business.
Greek's growth, driven primarily by an upstart New York company, has caught the industry leaders by surprise. Now they are playing catch-up in a fast-growing segment that appears to be transforming the yogurt business, a $4 billion retail market in the United States.
"We've got work to do here for sure," Ian Friendly, head of General Mills' U.S. retail operations, told analysts recently at the company's annual investor conference. "But we see no reason why we cannot capture our fair share of the Greek yogurt segment."
Both Golden Valley-based General Mills and Danone are mounting new offensives, repackaging or rebranding their Greek yogurts and planning promotional blitzkriegs. General Mills even reformulated its Greek offering earlier this year.
General Mills has owned the U.S. rights to the Yoplait brand since 1977, and recently closed a $1.2 billion deal for controlling interest in France-based Yoplait S.A.S., which is co-owned by a French dairy cooperative. The deal allows General Mills to capitalize on Yoplait's growth overseas.
In this country, yogurt is General Mills' second-biggest business after cereal, and the firm rung up $1.5 billion in Yoplait retail sales in its most recent fiscal year, up 1 percent from a year earlier. But during the same time, the U.S. yogurt category grew 10 percent -- mostly due to the Greek phenomenon.
"It's been a very fast developing trend, one of the fastest in the food industry in many years," said Christopher Growe, a stock analyst at Stifel Nicolaus. "It's happened very abruptly."
Chobani, the leading Greek yogurt, is the fruit of a privately held upstate New York company, Agro Farma, founded by a Turkish native about four years ago.
During 2009, Chobani had a 2.05 percent market share, and didn't even rank among the top 10 U.S. yogurt brands, according to SymphonyIRI Group, which tracks sales at conventional food retailers. Yoplait's Original yogurt was the leading brand in 2009 with a 11.1 percent share,
For the 52 weeks ended June 12, Yoplait Light led the market with a 9.1 percent share, while Chobani was the second-largest branded seller with an 8.7 percent share.
Yoplait has myriad offerings, but the rise of Chobani -- an all-Greek brand -- has hurt Yoplait's overall market share. Between January 2010 and May 2011, Yoplait lost 7 percentage points of share, down to 32 percent, according to Nielsen Co. data cited in a report by David Palmer, a stock analyst at UBS.
Yoplait's "rapidly eroding" share was one of several reasons for Palmer's downgrade of General Mills stock last month from "buy" to "neutral." Concerns that the yogurt market is undergoing a "seemingly structural shift" to Greek also contributed to Goldman Sachs' decision to downgrade General Mills last month from buy to neutral.
While Yoplait has been particularly hard hit by the Greek boom, both General Mills and Group Danone, maker of the popular Dannon brand, "were sort of caught by surprise" by Greek yogurt's rapid rise, said Bill Patterson, a senior analyst at market researcher Mintel International.
Greek's mass appeal came from a grassroots "consumer movement," he said. "We can't find any evidence of any major push or campaign in a traditional sense."
There was no big marketing campaign, and no "Oprah kind of moment," Patterson said, referring to products that got a boost after appearing on Oprah Winfrey's show or popular cooking programs.
Michael Harad, Yoplait's marketing director, said Greek-style yogurt took off because of its unique taste and its health attributes -- for instance, Yoplait's Greek offering has twice as much protein as its regular yogurt. "It's very different than what previously existed in the market," Harad said.
General Mills and Dannon both launched their own Greek yogurts in 2010. But both are regrouping this year, as their initial efforts don't appear to have gotten much traction.
Dannon recently rechristened its Greek product "Dannon Oikos," borrowing from Stonyfield's "Oikos" brand of organic Greek yogurt. Group Danone has a majority stake in Stonyfield, and Oikos appears to be the third best biggest-selling Greek yogurt in the U.S. Dannon plans a major marketing campaign for the Greek yogurt later this year.
General Mills last winter reformulated its Greek variation, moving from a fruit-and-yogurt blend -- the traditional Yoplait approach -- to fruit-on-the-bottom and yogurt-on-top, the way Greek yogurt is usually sold. A repackaging came shortly after the reformulation.
Yoplait Greek's share of the overall U.S. yogurt market hit 1.4 percent in the most recent quarter, still small, but a nice improvement over 0.9 percent just one quarter earlier.
General Mills is adding yogurt-making capacity that will allow it to significantly boost Yoplait Greek production later this summer. And on Aug. 1, General Mills will put its substantial marketing muscle to work in a new Greek ad campaign.
"The new [Greek] version is a very competitive product," said Stifel Nicolaus' Growe. "It will get [Yoplait] back into the game."
Mike Hughlett 612-673-7003