As the $7.2 billion U.S. yogurt space aims to rediscover the long-term growth that buoyed the dairy treat for much of the last decade, Pedro Silveira, president of yogurt for Danone North America, said he remains "very bullish" on his company's prospects as it rolls out new products addressing trends popular with consumers.
Danone's market share in the North American yogurt category grew from 27% in 2007-2008 when the company was the No. 2 player, to more than 33% in 2019, positioning it as the market leader, according to the company. While its share dipped slightly to 32.9% in the third quarter ending Sept. 30 before rebounding recently to 33.1% at the end of 2019, Silveira expressed optimism that its latest product launches are setting Danone up for future growth in a crowded U.S. yogurt market.
"You might look at one specific date within this kind of long-time frame and then you might not get or see the results that you want, but in the long run we start to see the results coming into the right place," Silveira told Food Dive. "This is exactly because some of the seeds that we planted at the beginning of the year, end of (2018) are now kind of happening and that’s what makes me feel very bullish for 2020."
Danone is unveiling yogurt products this year that address consumer demand for lower sugar or alternative sweetener options, different textures, as well as more plant-based varieties. Unlike other yogurt companies, Danone has focused on having each of its yogurt brands define a specific subcategory, such as probiotics with Activia, Oikos for Greek yogurt and Danimals for kids. Now it's taking those brands and incorporating other popular trends such as plant-based, low sugar and portability into them without losing the defining characteristic.
In 2020, Oikos is tapping into the nut butter trend with almond butter — an offering that uses honey and maple for its sweeteners instead of sugar — and a drinkable energy option high in protein, potassium and calcium and as much caffeine as a cup of coffee. For its Activia brand, it's rolling out versions with less sugar and new flavors, a drinkable smoothie and a dairy-free option made with almond milk. And Two Good, the yogurt with two grams of sugar that posted $68.4 million in sales during its first year on the market in 2019, will debut a Greek low-fat product.
"There is always something new" in yogurt, Silveira said. "You see this kind of portfolio transforming over time and the important thing is to keep this thing moving. You cannot take your eye off the ball."
Danone is not the only company expanding its yogurt offerings into more trendy niches. Greek yogurt giant Chobani recently paired its low-fat Greek yogurt with nut butters, introduced a non-dairy version and rolled out oat-based products. In recent years, General Mills' struggling Yoplait brand has introduced a French-style variety in glass jars called Oui by Yoplait and YQ by Yoplait, made with ultra-filtered milk and less sugar. Last summer, the cereal giant announced plans to work with GoodBelly to distribute a line of lactose-free yogurts and a single probiotic-infused cereal.
The yogurt industry as a whole knows it needs to keep innovating, especially when once hot categories such as traditional and Greek have struggled. Sales have fallen nearly $384 million in traditional yogurt since November 2015 to about $3 billion annually, according to data provided by Nielsen. Greek has faced even sharper declines of about $460 million to almost $3.2 billion.
The bright spots in yogurt are Icelandic and non-dairy varieties, which each posted a compound annual growth rate of about 45% during the last four years. But despite their strong growth, Nielsen said Icelandic only commands 2.4% of total yogurt sales while plant-based varieties control 2.9%, making it difficult for them to offset the declines in other areas.
Ioannis Pontikis, a Morningstar analyst, said in an email to Food Dive that intensifying competition in yogurt overall has led to a downward push in pricing as companies seek to gain an advantage. As a result, companies such as Danone are focusing their efforts in kids yogurt, probiotic and plant-based, which are still growing.
"We expect Danone to sharpen its focus on those more trendy segments going forward, with a strategy of introducing and distributing more of the most successful yogurt products/innovations nationwide," Pontikis said.
Silveira told Food Dive that despite some struggles in recent years for the category, the yogurt segment remains vibrant as innovation helps attracts consumers to the popular dairy and plant-based product. IRI data provided by Danone showed that in the last 13 weeks ending Dec. 29, sales in the yogurt category grew 0.9% while Danone's jumped 1.5%.
"The key thing is that the ones that are going to win are the ones that will be true to the yogurt need, which is it needs to be healthy, it needs to be tasty," Silveira said. "We cannot compromise on taste. Consumers, they will not repeat if you go in those growth spaces ... (and if) we fail to deliver taste. I think this will be the key element that is going to (determine) who's going to win and who's going to lose in this game."