FRANKFURT, Germany SEmD Chobani Inc. got Americans hooked on Greek yogurt. Now Paris-based Danone wants to slip the stuff into products from dips to dessert in a bid to unseat the market leader.
After being blindsided by the upstart SEmD Chobani became the biggest U.S. seller of Greek yogurt two years after releasing its first product SEmD the world's largest yogurt maker aims to take back the dairy aisle with its Dannon Oikos brand.
With pictures of an ancient building on every package and following a Superbowl ad starring Greek-American actor John Stamos to boost its Hellenic bonafides, Oikos grew 165 percent in the year through May, according to researcher Mintel. Though Chobani's sales rose more than 20 percent, Mintel estimates, it has lost share for 18 straight four-weeks periods, investment research firm Sanford C. Bernstein says.
Winning in the $7.6 billion American yogurt market means winning in Greek: The product will account for more than half of all U.S. yogurt sales within six months, Bernstein estimates. To get ahead, Danone is selling dips in flavors such as cucumber dill and French onion, and is running a trial of Oikos frozen yogurt to extend the brand.
"It's a two-horse race," said Joe Pawlak, vice president at food-industry researcher Technomic Inc. in Chicago. "Chobani is the leader and Danone has the marketing muscle."
The turnaround has investors taking a new look at Danone, which just a year ago issued a profit warning amid European woes. The stock is on track for its best annual performance since 2006, and it trades at a premium to larger rivals Unilever and Nestle, whose sales growth it outpaced in the first half.
"What has happened in the U.S. is an indication of Danone's perseverance," said Jon Cox, head of European consumer equities at Kepler Cheuvreux in Zurich. After missing the beginning of the Greek yogurt trend, "they've shown that when they see the problem, they move very quickly."
Danone's troubles started in 2007 when Chobani mixed fruit and other goodies into Greek yogurt and has since won over customers by offering flavors like coffee with dark chocolate and fig with orange zest. Greek yogurt's high protein content makes it more filling and it contains little or no fat SEmD though it can cost about twice what regular yogurt does.
Despite that price differential, by 2011 Chobani had 15 percent of the overall yogurt market, according to researcher Euromonitor International, and almost half of sales of the Greek variety, Bernstein says. Danone's share of the yogurt market dropped from 40 percent in 2010 to 35 percent a year later, Euromonitor estimates.
Enter Sergio Fuster, who became Dannon's chief marketing officer in June, 2011. By September, the company had relaunched Dannon Greek as Oikos and shifted ad money from other brands to support the push. Danone also introduced supermarket samplings and promotions and advertised in men's magazines because its high protein content appeals to men, Danone says.
"We were not playing in Greek when the whole Greek phenomenon happened," Fuster said by phone. After what Fuster called "substantial" capital investment in equipment required to make Greek yogurt, Danone introduced Oikos. "That's when the success started," said Fuster, 38.
Chobani's share of the Greek yogurt market has since fallen from almost half to 39 percent, while Danone's has jumped from 18 percent to 29 percent, according to Bernstein.
Since Chobani is almost synonymous with Greek yogurt in the United States, moving the Oikos brand into new product categories makes sense, according to Bill Chidley, senior vice president of Interbrand Design Forum.
"Chobani is the Nike of the Greek yogurt category, so they are likely get a major share of the trial when shoppers trade up to Greek," Chidley said. Danone's new dips might help Oikos "drive interest in their core brand back in the dairy case."
Chobani, by contrast, doesn't plan any immediate move beyond its main product line. "The success that we've found in yogurt, we feel it transfers to other categories," said spokeswoman Nicki Briggs. "But right now our major focus is on yogurt."
That means winning back customers by cutting prices. Bernstein estimates that 43 percent of Chobani's sales this year were made at a discount, versus a third for Danone. Price is the most important factor, ahead of flavor, when purchasing Greek yogurt, according to Mintel.
A Dannon Oikos 5.3-ounce cup of Greek yogurt with fruit is $1.39 at online grocer FreshDirect. A Chobani 6-oz. cup is $1.79, though FreshDirect offers a special on three Chobani cups for $4.80, or $1.60 apiece. A six-oz. cup of Dannon lowfat fruit yogurt is $0.89.
"Danone's investment in Greek yogurt is a threat for Chobani because it is taking market share," said Gauthier Boche, a lecturer at Celsa, the information and communication sciences department of Paris Sorbonne university. "But at the same time, it's helping the whole category grow."
Danone is also trying to expand the category by finding new venues to sell its yogurt. Starbucks, the world's largest coffee-shop operator, will offer Greek yogurt branded "Evolution Fresh, Inspired by Dannon" in its cafes next year.
"Yogurt has the healthy halo that everyone is looking for these days," said Mintel researcher John Frank. "The competition for Greek yogurt right now is fruits and vegetables. And it's more fun than eating vegetables."