General Mills' Yoplait yogurt business looking healthier

After a few sickly years, Yoplait is looking healthier.

Sales are growing again. Yoplait, one of General Mills Inc.'s core U.S. businesses, is making strides in Greek yogurt. And Yoplait's "original" yogurt line has blossomed with a new marketing campaign.

Now, General Mills is betting that a big ingredient change — a 25 percent-plus sugar reduction in Yoplait Original — will further boost the brand's momentum.

"The business has turned, " said David Clark, president of Yoplait's U.S. operation. "This is the first time we have seen [growth] metrics in three years."

General Mills posted a 1 percent sales gain for Yoplait in each of its first two quarters of fiscal 2015. Third quarter results are due out Wednesday, and some recent trends have been positive.

Nielsen data provided by General Mills shows that Yoplait Original sales for the year ended Feb. 21 were up 12.4 percent over the previous year, while Yoplait Greek recorded a 39 percent gain. Those results were tempered by the continuing erosion of Yoplait Light, which had a 12.1 percent drop.

Compare recent numbers to the preceding bloodbath: In General Mills' fiscal year that ended in May 2014, Yoplait's sales fell 3 percent to $1.31 billion, and plummeted 5 percent in the two fiscal years before that.

"In general, consumers are focused on convenient offerings that they perceive to be healthy," said Erin Lash, a packaged food analyst at Morningstar Inc.

A health focus has been part of General Mills' efforts to recharge its Yoplait Original business.

The company removed high-fructose corn syrup in 2012 from Yoplait Original — seen by some as unhealthy. Now comes the sugar slash.

"We have been working on this for three years," said Clark, a veteran General Mills executive who took the reins of Yoplait's U.S. business last April. "It's really challenging to do."

General Mills must cut sugar without sacrificing taste, the bottom line in the food industry.

General Mills acknowledges the reformulated product has a taste and mouthfeel that's different from the former version. It's a bit thicker, with more of a dairy flavor.

New packaging for Yoplait Original will proclaim the sugar reduction, which goes against industry convention. Stealth sugar and salt cuts are much more common.

Under pressure from health advocates and consumers, packaged food companies have been cutting sugar and salt across their portfolios in recent years. But they often don't trumpet the changes because they are afraid that consumers — despite their health worries — will view such cuts as damaging to flavor.

"Consumers could see a product being touted as having less sugar as having a less desirable taste," Lash said. But General Mills is betting that consumers' values about sugar are significantly changing, she said, outweighing their fears of taste changes.

General Mills also has overhauled its marketing approach to Yoplait Original, including increasing its ad spending on the product by double digit percentages since June 2014.

And the snack business is a highlight in a food industry that's otherwise been in a torpor. "We have really changed our messaging," Clark said. "It's a lot more about snacking."

General Mills started manufacturing the reformulated Yoplait Original last week, and it will roll out in stores nationally between the end of March and June.

The attempt to reinvigorate Yoplait Original comes at a good time. The Greek yogurt market — while still the industry's hot spot — is starting to mature. Overall U.S. yogurt sales, led by Greek, grew 3.4 percent in 2014, down from 7.8 percent a year earlier, according to a report from market researcher Packaged Facts.

Yoplait's business has been shaped over the past four years — mostly for the worse — by the dramatic rise of Greek, a tangier, more protein-rich style of yogurt.

Chobani, the upstart New York state company that drove the Greek market, was unheard of a decade ago. Now, it has a 29 percent share of the overall U.S. yogurt market, according to a report by market researcher IBISWorld. Traditional yogurt heavyweights Yoplait and Dannon respectively posted shares of 29 percent and 28 percent.

Yoplait is still a distant third in Greek yogurt behind Chobani and Dannon. But it's making progress. During General Mills' most recent quarter, Yoplait's share of the Greek market rose from 10 to 12 percent, its high-water mark.

"We've had a real focus on Greek," Clark said. "Obviously, we've had a lot of ground to make up."

Sales have been driven by Yoplait Greek 100, the first low-calorie Greek yogurt from a major food manufacturer. Greek 100 accounts for two-thirds of Yoplait's Greek sales.

Recently, Yoplait launched a mousse version of Greek 100 under its "Whips" banner. Yoplait Original and Yoplait Light both come in Whips versions, and Whips make up about 15 percent of Yoplait's U.S. sales.

In July, Yoplait plans to debut a new Greek yogurt called "Plenti," which features oatmeal, flaxseeds and pumpkin seeds. While it looks to be the first mass-market Greek version with multiple grains or seeds, Chobani premiered an oatmeal yogurt last year.

The continued drop in Yoplait Light — surpassed in sales by Yoplait Original in 2013 — is part of an industrywide slump in many products with weight loss connotations. It's not that consumers don't want to lose weight, they just don't want to be reminded of it.

"A number of products labeled 'light' or 'low fat' or 'low calories' have been challenged from a growth perspective as consumers don't want to feel they are on a diet, but instead want to be feel like they are eating healthier overall, " said Morningstar's Lash.

In other words, General Mills still has a lot of work ahead to revive its Yoplait franchise.

Mike Hughlett • 612-673-7003