Culture of Growth

ROSEANNE HARPER

Like many products, yogurt faced slowing sales during the recession. But, sales never stopped heading up.

Total dollar sales for refrigerated yogurt sold in supermarkets were up 4.8% for the 52 weeks ending Dec. 26, 2009, and volume sales were up 4.7% during the same period, according to the Nielsen Co. No small feat for a $3.7 billion category.

For the same time period, Chicago-based market research firm Information Resources Inc. shows yogurt dollar sales at all U.S. food stores up 2.81% from a year earlier and unit sales up 3.83%.

Retailers confirmed the health of the category.

“Our [yogurt] category sales have grown 9% to 15% each year for the past five years,” said Tony Abbatemarco, operations manager at Middletown, N.J., Food Circus, which operates nine supermarkets under Foodtown and Super Foodtown banners.

Meanwhile, Bryan Jackson, dairy manager at Ralph's Thriftway, Olympia, Wash., told SN his yogurt sales have risen 10% in the last two years.

“Greek style and probiotics are the big things now. We sell a lot of Greek-style yogurt, both full fat and light,” Jackson said

Other retailers, too, said Greek-style yogurt is a star right now. The two major yogurt brands, Yoplait and Dannon, recently launched Greek-style lines. In fact, Dannon's is still rolling out this week.

“Greek [style] yogurt is definitely the hot button this year,” said Britt Lindemann, a Kowalski's Markets store manager, who oversees the chain's dairy buying.

Retailers called the category an exciting one that drives dairy case sales.

“It definitely brings customers to the dairy case, where they buy other products as well,” Lindemann said.

All the new products and innovative packaging, as well as manufacturers' promotions, stir up appeal, but juggling the huge number of SKUs can be a challenge.

Refrigerated space is finite. So some retailers borrow space from another category such as cottage cheese or sour cream. Indeed, one retailer told SN he took space from milk. “Milk turns so fast, we're restocking all the time anyway, we don't need such a ton of space for it.”

Others have set up secondary bunkers or tiered endcaps, and one retailer told SN he has cut facings down to one or two in order to accommodate more variety.

“My SKUs have grown by a third in the last two years, and I have limited space,” Jackson at Ralph's Thriftway said. “I want all those new items so I'm going down to one facing each, in order to carry as many as I can.

“I also added an endcap, kitty-cornered across from the main display, devoted to kids' and baby yogurt.”

At Kowalski's Markets, nearly 20 feet of five-deck case is devoted to yogurt, which may seem like a luxury to some retailers, but still Lindemann said he could use more space.

“We do movement counts all the time, and weed out the slower movers. If customers ask for them, we'll bring them back, but not a lot.”

For the last few years, dairy directors and buyers have told SN that when there's a remodel or a reset, they lobby hard for more yogurt space, because they want to give all the new items a fair shake.

The big brands are regularly launching new items and putting promotional heft behind them. More regional and premium lines are appearing, too.

Food Circus' Foodtown stores carry at least 100 more SKUs than they did five years ago, Abbatemarco told SN. And space has been added to accommodate them.

“We've gone from 12 feet to 20 feet of yogurts,” he said.

Food Circus also has had success with a line of private-label yogurt it launched a few years ago, but saw reason to revamp it last year.

“We reformulated and relaunched the line in late 2009,” Abbatemarco said. “We also downsized the cups based on market trends and consumer demand. Now, in private label, we have 12 flavors in 6-ounce cups, and four flavors in quarts.”

Oddly, despite yogurt's acknowledged sales success, the category has not generally spurred the introduction of much private label.

Schaumberg, Ill.-based Nielsen Co.'s figures show that private-label, refrigerated yogurt for the 52 weeks ending Dec. 26 made up just 12.9% of the category's dollar market share in supermarkets, and 12.2% dollar market share in food/drug/mass merchandisers, including Wal-Mart Stores.

It's puzzling to some industry observers as to why more retailers haven't developed private-label yogurt. Or, for that matter, why consumers haven't warmed up to it when it is available.

One retailer who has had a private-label line for quite a while said it's not high on his best-seller list.

“We have private label in 10 varieties, but I won't add any more SKUs. It sells best when none of the others are on sale, or when it's on sale.”

David Browne, a senior analyst at Mintel, a Chicago-based market research firm, thinks it's surprising that there isn't more private label.

“In general, in other categories, there has been a shift to private label,” Browne said. “Look at some of the others in dairy, like milk and cheese. Milk can be sometimes 50% private label and yogurt still is barely 12% of market share.

“It's just surprising there hasn't been more innovation in private label. It seems like an oversight.”

Browne also said he thinks yogurt is missing a middle tier.

“There's great variety in regular yogurt, and organic is doing well, but what about an all-natural, meaning no hormones or additives, but not organic.”

It could bring in a whole new group of customers, or there could be some trading up from regular, or down from organic, depending on how important price was to the customer, he said.

Pricing probably played a role in keeping yogurt drink sales down during the last year, observers pointed out.

Nielsen numbers show dollar sales of refrigerated yogurt drinks and shakes in supermarkets down 11.3% as of Dec. 26, compared with a year earlier. In food/drug/mass merchandiser outlets, including Wal-Mart, that category was down 10% from a year earlier.

Some retailers said they thought yogurt drink sales were down because the drinks were seen as discretionary purchases, more of a luxury, at their higher retail prices.

“They were at the soft end of sales this past year,” Lindemann said.

Dannon's Danimals drinks did OK, according to IRI's figures. For the 52 weeks ending Dec. 27, Danimals at all U.S. food outlets showed an increase of 4.3% in dollar sales over a year earlier, according to IRI.

Dannon has based much of its long-term sales strategies on getting young taste buds accustomed to yogurt, officials have told SN in earlier interviews. The fact that until recent years America's children had not been exposed much to yogurt could account for this country's per capita consumption of yogurt being significantly lower than that in European countries.

In fact, Dannon data shows that as of October 2009, per capita annual yogurt consumption in the United States is just 11.8 pounds, compared with 34.7 pounds in Germany, 40 in France and more than 60 in Switzerland.

This highlights the category's potential for growth in the United States, Michael Neuwirth, Dannon's senior director of public relations, pointed out.

What's more, the opportunity is particularly big for supermarkets, Neuwirth told SN. “What's happening is the grocery channel is not capturing as much of the growth as they could,” Neuwirth said. “A lot of sales are going to the mass merchandisers.”

Neuwirth said, too, that the category now is driven by new needs. For instance, probiotic products such as Activia “work when eaten on a regular basis, and consumers are finding that out,” he said.

Retailers said they see consumers' focus on healthy eating creating a boost in sales.

“Probiotics continue to drive popularity,” said Thriftway's Jackson. “I see a solid future for the category.”

Mintel has predicted sales of refrigerated yogurt will grow 28% through 2014.