Dannon Goes Greek, Takes on (Former) Little Guy
It was a classic David vs. Goliath battle, fought at grocery dairy cases across America. Two little-known companies, Chobani and Fage, introduced U.S. consumers to Greek yogurt, creating the trend from scratch and riding it to massive sales gains. All the while, big boys Dannon Co. and General Mills' Yoplait sat idly by as their yogurt dominance eroded.
The knock-out blow came earlier this year when Chobani -- founded by a Turkish immigrant and run by marketers with no big corporate experience -- became the No. 1 selling brand in all of yogurt, where it still sits with more than a 10% share, according to SymphonyIRI Group. Now Dannon and Yoplait are fighting back. Both have launched their own Greek versions backed by aggressive marketing, setting up round two in this closely watched grocery battle.
One of the key players in the battle is Sergio Fuster, the newly installed senior VP-marketing for Dannon, the U.S. subsidiary of French dairy giant Danone. Mr. Fuster, 36 , who grew up in a small town in Spain, took over Dannon marketing in August after running marketing for Danone in Mexico. His resume is impressive, with stints at Procter & Gamble and Kraft Foods. But his new challenge is a big one: returning the Dannon brand to No. 1, even as Chobani builds on its grass-roots success with more aggressive marketing.
Ad Age recently caught up with Mr. Fuster to get his take on why Dannon missed the Greek trend and how it plans to stage a comeback, as well as how it's dealing with fallout from the recent settlement related to alleged improper marketing of the digestive benefits of its Activia brand.
The first thing to know about Mr. Fuster is that he initially experienced yogurt the way most Europeans do -- by eating a ton of it. "I was raised with yogurt, I think it was the first solid food that I ate," he said, noting that he still enjoys three to four servings a day. In the U.S., by contrast, yogurt is still considered a developing category, with per capita consumption averaging 12 pounds per year, compared with up to 70 pounds in Europe, Mr. Fuster said.
It was Dannon that introduced Americans to yogurt on a mass scale in 1942, fueling growth with innovations such as "fruit on the bottom" and later, Activia, which touts the digestive benefits of probiotic cultures. But curiously, Dannon missed the Greek trend. How? Mr. Fuster says Dannon underestimated the speed and size of the phenomenon: "You decide to invest in factories only when you see something huge coming. I think we all saw this thing coming, but the doubt on the size that it would take probably is what created the difference in the speed of the different companies in approaching the markets."
The trend did come out of nowhere. Overseas, Greek yogurt is marketed as an indulgent treat, with fattier blends that are considered a niche, commanding less than 10% of the market, Mr. Fuster said. But here, Chobani and Fage marketed varieties as healthy, yet also thick and creamy. In the states, "the guys who created the segment managed to do it in a way that put together the best things of two worlds -- health and indulgence," Mr. Fuster said. Greek now accounts for about one-fourth of all yogurt sales.
That leaves Dannon playing catch-up in a big way. The company retooled a plant in Ohio to produce mass quantities and recently rebranded its "Dannon Greek" yogurt as "Dannon Oikos Greek," taking the name previously reserved for its Stonyfield Farm organic yogurts. (Danone owns about 85% of Stonyfield.) Oikos is Greek for "house," and it's not coincidental that Dannon paired its Greek style with a Greek brand name it controlled. Still, Dannon is careful not to overemphasize Greece in marketing because research indicates consumers gravitate to the yogurt for its taste, not necessarily the origin. Mr. Fuster said 90% of the appeal is product-based. The risk of overplaying "Greek" is that some consumers perceive Greece as "too old, so it's not modern," he said. Indeed, competitor Yoplait is avoiding all Greek imagery in ads for its new Greek blend. Ads feature a man breaking out of a vending machine and offering the yogurt to women as a "more satisfying" snack.
Dannon's ads use Greek American actor John Stamos to tempt women with the yogurt. But the eye-opener comes at the end when Dannon Oikos claims it "beat Chobani two-to-one in a national taste test ." Yes, the big guy calls out the one-time little guy. Asked why, Mr. Fuster said: "The first source of business for our Greek business has to be people who are already in the segment and they happen to be mostly in Chobani."
He added, "We felt that that in a market where we are not No. 1, which is kind of strange for Dannon because we are typically No.1, we wanted to introduce the [taste test ] to make it more competitive." Dannon's ad agency is Y&R, New York.
At the same time, Dannon is pushing a second Greek version under its new Activia "Selects" lineup, positioned to combine digestive benefits with the taste of Greek yogurt. The lineup also includes a fruit-filled French-style yogurt, which Mr. Fuster described as "silkier and softer" than Greek. "We want to continue exploring what there is outside Greek," he said. "If there is any trend coming we want to lead that one." Ads feature longtime spokeswoman Jamie Lee Curtis.
But it was only nine months ago that Dannon agreed to pay $21 million to settle state and federal investigations into charges regarding alleged exaggerated health claims that Activia helps with digestive irregularity. Under the terms, Dannon must note that the yogurt has to be eaten three times a day to help with irregularity. The brand's momentum has slowed. While dollar sales grew at an 18.3% clip in the year ending Feb. 20, sales increased by just 4.9% in the year ending Sept. 4, according to SymphonyIRI Group, which excludes Walmart.
Dannon says it can still tout digestive health generally and must only include the three-servings footnote when speaking about irregularity. While ads might have touted digestive benefits by "focusing on the problem-solution approach," now "we are figuring out if there is a way to approach it more [on] the solution," Mr. Fuster said, "without necessarily having to speak about irregularity."