Starbucks Partners With Danone to Sell Greek Yogurt at Cafes, Grocery

Product Will Carry 'Evolution Fresh' Brand

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Coming soon to a Starbucks near you: Greek yogurt.

In a partnership with Danone, the world's largest coffee shop operator will start selling the dairy product in its cafes next year and in food retailers in 2015. The plan helps address two of CEO Howard Schultz's key concerns: offering healthier fare and helping Starbucks Corp. colonize the grocery store.

"Starbucks is venturing into becoming a house of brands," similar to Procter & Gamble and Unilever, said Bill Chidley, senior VP at Interbrand Design Forum in Dayton, Ohio. He called the move risky.

"When you start to get too diverse with your portfolio, investors just have a hard time characterizing what you are," he said. "Are they a house of brands or are they about beverage experiences?"

Starbucks has steadily been moving into the grocery business since 1995, when it began selling ice cream in such flavors as java chip frappuccino and caramel macchiato. It has since added packaged coffee, Tazo brand tea and Via instant packets. Since wresting control of Starbucks supermarket business from Kraft Foods in 2011, Schultz has accelerated his rollout of new items into grocery stores with Keurig K-Cup pods, Evolution Fresh juice and Refreshers energy drinks.

Danone, the Paris-based maker of Oikos and Activia brand yogurts, will make the new products for Starbucks, which will be branded "Evolution Fresh, Inspired by Dannon." The financial terms of the partnership weren't disclosed. Starbucks bought juicemaker Evolution Fresh in 2011 for $30 million in cash before snapping up Teavana Holdings Inc., whose products it also plans to sell in grocery stores.

Starbucks's grocery business has been expanding faster than its cafe sales. In the year ended in September, revenue from selling items in supermarkets and other retailers jumped 50% to $1.29 billion, according to a filing with the U.S. Securities and Exchange Commission. Total revenue that same year increased 14% to $13.3 billion.

Starbucks will start selling Greek yogurt parfaits in its company-owned U.S. stores next year. The coffee-shop operator is considering selling the yogurt internationally and may create other foods with Danone, said Jim Olson, a Starbucks spokesman.

"This is really the next big strategic step in our health and wellness evolution," he said.

Sales of yogurt are increasing -- even more so for the Greek variety. Greek-style yogurt sales in the U.S. surged 48% to $2.65 billion in the 52 weeks ended June 8, according to data from Nielsen. Sales of all yogurt increased 6.1% to $6.3 billion during the same time, the data show.

Chobani, General Mills' Yoplait and Fage also sell Greek yogurt.

"It's certainly crowded," Interbrand's Mr. Chidley said. "A new entrant is going to have to have something compelling."

~ Bloomberg News ~

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