Culture wars: yogurt biz fights competition inside and out

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Credit: Illustration by Tam Nguyen/Ad Age

Stroll through the dairy aisle of your local grocery store and you'll likely see plenty of yogurt deals and promotions. Last week, for example, Chicago-area chain Jewel had a buy-five, get-one-free offer on all Chobani, Dannon Light & Fit, Dannon Oikos, Siggi's and private-label brand Lucerne cups.

Yes, it's a great time if you're a yogurt fan. If you're a yogurt marketer, not so much.

The category is staring down what could be its third consecutive year of declining sales. To fight back, brands have been deeply discounting prices and, to fund those discounts, cutting ad budgets. And it doesn't end there. In hopes of finding the next big thing (think Greek yogurt), these same brands have been launching new products, which tightens already scarce shelf space—and triggers new rounds of discounting.

This nasty cycle is causing staggering ad budget shifts among category titans including Chobani, Dannon, Yoplait and Fage. Major yogurt advertisers collectively cut measured media spending by
39.5 percent in 2017, with double-digit declines at each of the major players, according to an Ad Age Datacenter analysis of Kantar Media measured media data. While those figures exclude the digital space, where marketers say they're moving much of their dollars, it's clear these brands are rethinking how and where they spend their money.

With spending changes, yogurt-makers are hoping to reinforce brand loyalty and avoid a meltdown like the one a decade ago when Chobani rocked the category with Greek yogurt, taking shoppers away from brands that sold steadily for decades.

"This should be a growth category. Americans still consume a fraction of the yogurt of other developed Western countries," says Gary Stibel, founder and CEO of the New England Consulting Group. "[Now] the industry is unfortunately training people to buy on deal. Good marketing is not discretionary."

Protein probems

Not long ago, Americans were spooning up yogurt with relative gusto. Per capita consumption of yogurt, just 2 pounds per person in 1975, largely climbed steadily for years, peaking at 14.9 pounds per person in both 2013 and 2014, according to data from the U.S. Department of Agriculture Economic Research Service. But per capita consumption fell to 14.4 pounds per person in 2015 and 13.7 pounds in 2016, the last year for which data was available.

Total U.S. dollar sales tracked by IRI show yogurt sales fell 0.8 percent in 2016 and 1.6 percent in 2017 to $7.44 billion. (Several experts put total annual industry sales at around $9 billion when including channels IRI doesn't track, such as e-commerce and natural food stores.) Through May 20, 2018, IRI says sales were down 4.1 percent year to date.

A big challenge for the yogurt industry is the bevy of other convenient foods that, like yogurt, are packed with protein. Jerky and protein bars have been trendy for years, and there are numerous prepackaged snack packs featuring mixes of nuts, fruits, cheese and meats available on store shelves.

"This shift toward high-protein snacks is ramping up ... so yogurt is having a little bit of trouble figuring out how to compete with that," says Jared Koerten, food industry manager at Euromonitor International.

Another challenge: The growing interest in dairy-free alternatives, thanks to "clean eating" enthusiasts and a proliferation of other dairy-free diet plans. While dairy-free yogurts are increasingly available, they still account for less than 3 percent of industry dollar sales, according to Koerten.

The big yogurt brands are trying to keep up, and the numbers show why. Over at General Mills—whose Yoplait brand lost the top category slot in 2016 to Chobani, according to Euromonitor—U.S. yogurt sales fell 18 percent in the fiscal year ended in May 2017, according to the company. Measured media spending for Yoplait, still its top seller, fell 43.2 percent in 2017, according to Ad Age Datacenter analysis. Estimated spending figures from iSpot suggest an even steeper decline in TV commercial airings, with spending down 55 percent to nearly $35.3 million.

The company set a goal for fiscal 2018: Reshape its U.S. yogurt portfolio. Yoplait is rolling out a lower-sugar line, and the company has introduced products including Oui by Yoplait, a French-style brand sold in glass jars. Oui is the largest launch in the yogurt category this year, General Mills CEO Jeff Harmening said in March. YQ by Yoplait, a low-sugar line announced in June, is made with ultra-filtered milk to help concentrate the amount of protein in the yogurt and reduce the amount of lactose, or sugar, the company says. (Both are priced about twice as high as regular Yoplait.) General Mills is also promoting Annie's organic yogurt pouches and has improved packaging on Go-Gurt, two lines for kids.

The company won't discuss fiscal 2018 results until June 27. But its panic-level declines in yogurt have been narrowing, with the company's U.S. yogurt sales down 22 percent in the first quarter, 11 percent in the second quarter and 8 percent in the third quarter, which ended in late February.

Over at Chobani, measured media spending fell 16.5 percent in 2017 to nearly $31.7 million, according to Ad Age Datacenter analysis, but what there is seems to be migrating to TV, where its spending was up 47.7 percent, according to iSpot.

"Maintaining price and the specialness of naturally crafted, authentic yogurt continues to be a big focus for us. [We're] acting as a category champion at a time when other brands have been highly irrational and short-term focused," says Michael Gonda, Chobani's senior VP of corporate affairs. He added that Chobani is investing in targeted channels.

Still, Chobani does its share of discounting. Earlier this year, it offered millions of cups of yogurt for free, and had deals such as buy one, get one free on larger tubs at Costco. Chobani's main line of 5.3-ounce cups can often be found in grocery stores at 10 for $10. This month, dispensers affixed to shelves at Jewel, placed near Dannon, Chobani, Yoplait and the Chicago-area chain's own products, offered coupons for $1 off two Chobani products.

Fage, a competitor to Chobani in Greek yogurt, slashed media spending by 23 percent in 2017, to $45.1 million, Ad Age Datacenter analysis shows. Even smaller players with dedicated fan bases like Noosa (private-equity backed) and Siggi's (which French company Lactalis is set to buy) reduced their measured spending by high double-
digit percentages.

Getting ahead of the trends

And what about the largest yogurt seller in the U.S.? Danone North America, with a product stable including Dannon, Activia, Dannon Light & Fit, Dannon Oikos and Danimals, reduced its measured spending by 52.2 percent to just over $48.3 million in 2017, according to Ad Age Datacenter analysis. Looking just at ads for its Activia line, estimated TV spending fell 40.5 percent last year to roughly
$13.5 million, according to iSpot data.

Such figures don't paint the full picture, maintains Sergio Fuster, Danone North America's president of U.S. yogurt. "Overall, we're not reducing our investment. There's a big, big shift toward unmeasured channels," he says. "Precision marketing is a better way of targeting our consumers." Danone, which chose Wavemaker as its media agency this year with an eye on digital improvements, says it's looking at how it can match its brands with people and "their passion points," says Fuster. For example, it's working with IBM Watson and influencer marketing company Influential for its Light & Fit brand.

The company is also striving to get ahead of current food trends, including the rise of dairy-free yogurts, and Icelandic and Australian yogurts. It bought nondairy lines Silk and So Delicious (along with Horizon Organic) in 2017, and the company says the yogurts are catching on.

"What we're seeing right now is not very different from what happened a few years ago when consumers transitioned from regular yogurts toward Greek yogurts," Fuster says, ticking off the various options out today, including low-sugar, plant-based and organic yogurts and a renewed interest in probiotics and kids' options. Danone introduced the Happy Family brand of organic yogurt for young kids, which is doing "really well," says Fuster.

The question, then, is whether the new, flashier options coming from marketers will shake up the yogurt industry the way the Greek craze did years ago.

Fuster shared a metaphor he uses within the company: "It's starting to look a lot like 2010," referring to the time when Greek yogurt sales really took off in the United States during Chobani's rapid ascent.

"At the time, we didn't know how far Greek was going to go. I believe that premium yogurts, low-sugar options, natural, organic and plant-based combined could easily take 20 to 25 percent of the market," he says. "I believe the shift [will be] very big. As big as Greek or not? I think time will say."

Contributing: Kevin Brown

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