Dannon Blazes New Marketing Trail With ProBiotic Yogurts

Company Plans Dramatic Increase in Advertising Budget

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NEW YORK (AdAge.com) -- Finns eat 50 pounds of yogurt a year on average, Americans just seven, but Dannon Co. plans to change that by pushing through a series of innovations in yogurt (yes, you read that right) and some big advertising bucks too.
If Finns can consumer 50 pounds of yogurt per year on average, why do Americans average just seven pounds? Dannon's latest market strategy is aimed at closing that quantity gap by pushing new yogurt products featuring special kinds of live bacteria cultures. | ALSO: Comment on this article in the 'Your Opinion' box below.
If Finns can consumer 50 pounds of yogurt per year on average, why do Americans average just seven pounds? Dannon's latest market strategy is aimed at closing that quantity gap by pushing new yogurt products featuring special kinds of live bacteria cultures. | ALSO: Comment on this article in the 'Your Opinion' box below.

Light & Fit Crave Control
Not satisfied simply with Activia, a brand promoting digestive regularity that is set to crack the $100 million sales barrier in year one, Dannon Co. has its eyes on a larger prize. It's testing Light & Fit Crave Control yogurt and immunity-boosting DanActive, just the beginning of benefit-based yogurts that do everything from manage weight to fuel metabolism.

These so-called probiotic yogurts, defined as containing live and active bacteria that exerts demonstrated benefits when consumed in adequate amounts, have been a raging success in other countries, especially Switzerland and France, but a relatively untapped opportunity here. "The U.S. market is ready for innovations in yogurt beyond just basic taste," said Andreas Ostermayr, Dannon senior VP-marketing. "For us, this is just the starting point."

Goal: Finnish levels
But to get Americans' consumption up to Finnish levels, Dannon is aware it will have to spend big. "We will have huge marketing campaigns against each of our launches in an effort to explain the benefits to consumers," Mr. Ostermayr said. This will result in a "dramatic budget increase." Dannon spent $55 million in measured media last year and $40 million in the first half of 2006 -- some $31 million of that on Activia alone. Most of that is on TV, because, Mr. Ostermayr said, "it is still the fastest media to build awareness for the product in the first couple of months." Dannon's advertising is handled by Y&R, New York.

For Dannon, the launches not only could provide a boon for margins, since probiotic varieties are priced 20%-25% more than regular yogurt, but it could also help the company regain leadership in the $3 billion category commanded by General Mills' Yoplait.

According to Morgan Stanley research, probiotics have driven Group Danone's recent growth in the dairy category worldwide. Sales of Activia, introduced in France in the late 1980s and now sold in 20 countries, totaled $1 billion last year, while sales of immune-building Actimel, introduced in 1994 and now sold in 30 countries, totaled $1.1 billion. Dannon began testing Actimel in 2004 under the DanActive name in mainstream outlets after marketing under the Actimel name in natural-food stores here.

Culture shock
Dannon, however, should be prepared for a bit of a culture shock in the U.S. Mary Ellen Sanders, a consultant and president of the International Scientific Association for Probiotics and Prebiotics, said while Northern Europeans are comfortable with live cultures, the idea is a "harder sell here because people think of bacteria as bad and something to stay away from." Dannon's success with Activia, though, has stirred up excitement over the potential of probiotics in the U.S., she said, and is expected to spark a further increase in "very targeted products with specific documented benefits."
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