THE YOGURT CRUNCH

NANCY GRIFFIN

The yogurt category these days is plenty active.

Its ability to straddle the spectrum of consumer needs is keeping the category a pivotal player in the dairy case.

Indeed, in some cases, strong demand -- and fierce loyalty to specific brands and types of yogurt -- are proving to be too much of a good thing as retailers struggle with out-of-stocks and a squeeze on available

space in the dairy.

Yogurt has come a long way, said Jack Demoulas, dairy buyer at Demoulas SuperMarkets, Tewksbury, Mass.

"The whole category is very strong," he told SN. "The six-packs -- six half-size 4-ounce containers -- are a huge part of the market. We welcome that -- there's less handling involved."

Handling is an issue, given the volume the category is moving these days. Supermarket yogurt sales for 1995 reached $1.6 billion, up 6% over 1994, according to A.C. Nielsen figures prepared for the International Dairy Foods Association, Washington, and released in February.

Total retail sales of refrigerated yogurt in 1994 reached $2 billion for the first time, representing an increase of 9.1% over 1993, according to figures researched by Find/SVP Published Products, New York, in its refrigerated yogurt market report issued last year.

"What's driving the increased sales has been the growing popularity of dessert-type yogurts," said Martin Veeger, assistant director for economics and market research at IDFA. "They appeal to the consumer need for indulgence and lower fat levels."

But the yogurt story these days is more complex than that, retailers and other industry watchers told SN.

While dessert yogurts, featuring indulgent flavors like chocolate, are recognized as the fastest-growing segment of the market, there still lingers a healthy twist to that growth, since much of the action is in products containing little or no fat.

What's more, the "purist" end of the yogurt spectrum is coming on strong as well, in the form of organic yogurts that contain no pesticides, additives, hormones or preservatives.

Retailers interviewed by SN agreed that no matter what variety a given consumer or consumer group prefers, yogurt is something consumers just can't seem to get enough of -- and something store shelves are getting too much of, in many cases.

"There's not enough room to give yogurt sufficient space in the store," said Jim Booz, dairy and frozen food specialist at Genuardi's Family Markets, Norristown, Pa.

"It's still a growing category, especially the lights and the nonfats. But there's not a segment in the yogurt section you could say 'Get rid of it because it doesn't sell.' From 16-ounce and 32-ounce to the kids' minipacks, they all sell.

"Maybe five to seven years ago, yogurt was boring," said Booz. "The cartons were plain and so were the flavors inside."

Indeed, Booz said yogurt could command more of the dairy aisle than it already does. "If money was no object," he said, "we could expand our yogurt section, if there was a way to do it without cutting space from other categories."

But the lack of space for yogurt can easily lead to out-of-stocks. And a new report from the Food Marketing Institute shows that for consumers, yogurt is the least "switchable" item in the store.

Other recent industry surveys concur that supermarkets had better be ready to supply customers with exactly the brand, style and flavor of yogurt they want, when they want it, because this is one category where consumers will accept no substitutes.

"If you don't have the flavor and brand the consumer wants, they won't buy another," said Ken Harris, a partner in the Evanston, Ill., office of Cannondale Associates. "It's one of the most significant out-of-stock items in the entire store."

The key, Harris said, is for retailers to know precisely when they need products and act accordingly.

"Four days a week, they're in great shape. The remaining three -- weekends -- they're 70% underspaced. This will force a re-evaluation of current space strategy. They'll need auxiliary holding power for yogurt in the case or they'll need to develop display areas," he said.

Stew Leonard's, a specialty retailer with supermarkets in Norwalk and Danbury, Conn., doesn't take a chance on out-of-stocks with yogurt.

"We have three people -- all day, every day -- who do nothing but stock yogurt. It's a lot of yogurt," said Stew Leonard Jr., company president. Leonard said the two high-volume stores move 50,000 cups of yogurt every week. Stew Leonard's currently sells about 2,000 units of Stonyfield's regular line weekly.

"We just added the organic line today, and it looks like it will sell another 2,000," said Leonard. "We also sell about 2,000 containers of yogurt with granola. The kids' yogurts sell well, but the chocolates don't seem to."

The retailer's store-label yogurt, which is available in regular fat and fat-free versions -- and is called simply "Stew Leonard's" -- also sells very well, according to Leonard.

As a group nationally, private labels were third overall in sales for 1994, behind the market leaders Dannon and General Mills, which sells Yoplait and Columbo brands. Together, these two branded suppliers controlled 62% of the market, while private labels held 14.9%.

Supermarket sales of the newer mix-in yogurts reached $135 million, a 35.8% increase for 1995, a much larger jump than in other yogurt segments. Sales of fruit-on-the-bottom yogurts are "essentially flat," having dropped 0.9% to $234 million last year, said Veeger of IDFA.

Blended or Swiss-style yogurts constitute by far the largest segment of yogurt industry sales, topping $1.2 billion for 1995, up 5.6% over 1994. Divided by fat content, low- and nonfats are outselling regular fat. Low-fat yogurt supermarket sales totaled $774 million in 1995, up 10.7%. Nonfat totaled $742 million, up 3.3%. Regular fat totaled only $62 million, down 11.7%.

At Big Y Foods, Springfield, Mass., the Big Y private-label line of yogurts in low-fat and Swiss style is selling well. So is the full-fat, said Val Vivenzo, director of dairy and frozen food.

Big Y has expanded shelf space over the past few years, from an average of 4 to 8 feet, to 12 feet, in most stores, and up to 16 feet in the larger Big Y World-Class markets.

"Yogurt continues to increase in volume," said Vivenzo. "The future looks healthy."

At Harris Teeter, Charlotte, N.C., full-fat yogurts sell well, too, although the big growth is in low-fat sales, said Ruth Kinzey, spokeswoman for the chain. The category as a whole sells so well, she said, that Harris Teeter has increased space for yogurt in the past few years and has not dropped any lines.

"We believe growth in this area will continue as consumers continue their focus on health foods," said Kinzey.

"The concept of healthy indulgence is something people cotton to," said Cannondale's Harris. "Snackwell's just decided not to compete against all the other brands. They said 'What area do we want to own?' and decided 'Chocolate!' It was big medicine in the category. It made a big splash."

This year looks to be promising for new yogurt products, according to Michelle Buck, Snackwell's business director for new business, who added that 1995 saw the introduction of 120 new stockkeeping units. "Already in the first quarter of 1996, we've seen 91 new SKUs launched."

"Yogurt is a hot category for new items. We look to them to drive the growth of the category as they have in the past," said Buck. This month, Snackwell's is shipping two new chocolate flavors: Milk Chocolate and Milk Chocolate-Caramel Nut.

"Years ago, yogurt had a diet focus. As it becomes mainstream, there's a taste focus," Buck said. "There will be more pasteurized products because they have a superior taste vs. the live culture products."

Maybe so, but for some retailers healthy or "diet" yogurts still lead the way in the category. Whole Foods in Austin, Texas, for example, carries Stonyfield's and an array of regional natural yogurts such as Altadena and White Mountain, as well as Horizon organic yogurt.

"Our customers are looking for different things," said Michael Whiston, dairy buyer at an Austin Whole Foods store. "They want a quality product, but they also look at things like acidophilus content of the yogurt. They might want clean cows, with no BST hormones used. They might also be looking for an environmentally friendly farm.

"Yogurt is a big part of my set, with big sales and mostly in nonfats," said Whiston. "There doesn't seem to be much of a market here yet for the dessert yogurts."

There are similar indications at retailers closer to the West Coast.

"The trend we see is toward natural yogurts," said Pat Redmond, dairy buyer at Spokane, Wash.-based Rosauers Supermarkets, a chain with 17 stores in Washington, Oregon, Idaho and Montana. Total yogurt sales at Rosauers have risen 10% so far in 1996 over 1995, and 1995 sales "were up substantially from 1994."

Redmond spent a few days in Seattle recently, looking around at all the natural foods markets. "They had lots of natural yogurts -- all natural flavors. It's just plain old yogurt. They're more perishable, but the variety is tremendous.

"One of the good things for us is they cost a little more, so it's in the $1 ringup range. We're putting them in some of our stores," Redmond said.

Mainstream yogurt manufacturers, however, are appearing to be banking on continued popularity of the dessert lines. Early this year, Dannon, a subsidiary of Parisian Group Danone and the industry leader with 38% market share, went nationwide with Double Delights, "a superpremium yogurt" packaged with two compartments: yogurt on one side, fruit on the other.

"Fifteen percent of Double Delights sales came from new category buyers," said Dannon spokeswoman Anna Moses.

While many yogurt producers started with the plain yogurts and worked their way up to decadent dessert flavors, one producer took the opposite route. TCBY, known for its frozen yogurt shops nationwide, last year began producing more traditional refrigerated yogurts. The firm began shipping six standard fruit flavors in October.

Then, in January 1996 it introduced TCBY's 6-ounce Fat-Free Fantasy line with nine flavors: Banana Cream Pie, Coconut Cream Pie, Amaretto Cheesecake, White Chocolate, Orange & Cream, Coffee & Cream, Caramel Cream, Lemon Chiffon and Key Lime Pie.

"We took some of the acidity out of yogurt," said Dan Williams, TCBY vice president for marketing and sales, retail and food service. "This expands yogurt to the nonyogurt users."

And consumers' choices will continue to expand, as long as supermarket shelf space for the category does as well, said Bob Burke, vice president of sales and corporate development for Stonyfield Farm of Londonderry, N.H.

"In the fall, we'll launch our new line of dessert yogurts, with flavors such as Black Forest, Strawberry Cheesecake, Lemon Chiffon and Mocha Fudge, which is cappuccino-flavored yogurt with fudge sauce on the bottom," said Burke.

"We've also been trying to capitalize on subsegments like kids' and organic," said Burke. "We launched our line of completely organic yogurts in January. In April we added 6-ounce containers to the Planet Protector yogurt line for kids that we launched last year."

In the future, "besides dessert yogurts that are for dinner, you'll see more yogurts packaged with mix-ins," Cannondale's Harris predicted. "For instance, yogurts created especially for breakfast with granola, and for lunch with fruit -- the full spectrum, from kids' products, to adult lo-cal to the super indulgent types."

Not every new yogurt item catches fire. The American market has proven largely reluctant to swallow "drinkable" liquid yogurts. But even their day may come. Find/SVP's report said sales rose 7.8% in 1994 and projects sales of $20.4 million, a compound annual growth of 6.3%, by 1999.

"They're popular all over Europe. I think the American palate just wasn't ready for them; but there will be new ones, used as a milk shake or milk replacement drink, probably as blends, not just yogurt," said Harris.