October 31, 2017 • 25 mins
Big Food's having a tough time, and yogurt is no exception. Large, bureaucratic food companies have trouble keeping up with consumers looking for fresh ingredients and new products. Newcomers like Chobani are beating out old standbys such as General Mills' Yoplait and DannoneWave's Dannon. This week on Material World, Jenny and guest host Craig Giammona dig into the evolution of yogurt, the changing consumer and the lessons yogurt provides for the rest the grocery store.
Correction: A previous version of this episode misstated Gary Hirshberg's last name.
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Episode Transcript
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Speaker 1 (00:00):
In an earlier version of this episode, we mispronounced Gary
Hirshberg's name. We apologize for that error and it's been corrected.
Yogurt started in this country as plane one type. That's
it kind of like the original Ford right. You can
(00:21):
have any color as long as it's black. And today,
the average supermarket in the United States has more than
two hundred choices of yogurt in it, and yet Americans
are still consuming yogurt one fifth rate of our European counterparts.
(00:59):
I'm n Kaplan and I'm here with a special guest host,
Craig Giomona, who's backed by popular demand, to walk us
through what's happening with one of America's favorite breakfast products, yogurt.
It's going to be back on Material World, and we've
talked before a lot about some of the problems that
big food, the large food companies are having and how
that's changing the grocery landscape. And this week we decided
(01:21):
to dig into yogurt because it provides really a good
window onto why some of these large food companies are
struggling and what they're doing to respond. Big food companies
are really having a tough time consumers. These days are
(01:43):
attracted to smaller upstarts that cater to more of what
they're looking for, clean labels and better ingredients and yogurt
that really came in the form of one company, Chivanni.
That's right. I mean, the story of yogurt really the
last ten years has been Greek yogurt. America essentially didn't
eat Greek yogurt before Joe Bonnie burst onto the scene
in two thousand seven, and Greek now is something like
(02:06):
fifty of the market, so it's really been driving the
growth in the category and that's a part of the reason,
a big part of the reason why you're seeing all
those new products pop up on the shelves in the
dairy case. So, Craig, you cover yogurt. How big is
the industry overall? What kind of growth have we've been seeing?
You know, it's something like nine billion dollars in the
US and the sales have gained about twenty five percent
(02:28):
since So those are the kind of numbers that obviously
catch the attention of the food companies. You know, big thing,
like I said, with the shift of Greek was that
it had more protein, So that kind of hit one
of the big time trends, people looking for protein less sugar,
Greek yogurt burst onto the scene and that's how we
kind of get to today with nine billion in sales
and about that coming from Greek. The Greek yogurt has
(02:52):
really taken away from the big incumbents here who really
made up the bulk of the yogurt industry before, right, So,
so Jo Bonnie success has really come at the expense
of General Mills, which makes the Yo Played brand. Yo
Played for years was the leading brand of yogurt in
the US, but Joe Bannie passed them for the first time.
So it's pretty amazing that this company, Joe Banni, which
(03:13):
didn't exist, you know, it was founded in two thousand five,
is now the leading brand. And then there's Dannen, which
is the the U S arm of the French company
two Known. They remain the leading seller of yogurt overall.
They have several brands, so they're still a powerhouse, but
you know, their sales have kind of been flat, so
they're looking to kind of defend their turf as well.
So much like other parts of the food industry, the
(03:34):
big yogurt companies have been challenged by these small, small companies.
But unlike most areas, Chobani is one example where this
upstart has actually overtaken the big incumbent giants. Yeah, that's
why I think yogurt is so interesting because I mean,
we see these big food companies struggling, you know that.
I think something like the largest ten food companies in
(03:54):
the US have lost sixteen billion in sales over the
last three years. And it's pretty baggering numbers when you
look at the revenue that's being posted by companies like
General Mills, Kella, Campbell, Kraft, Hinds. There's been these all
these struggles, and the story is that, you know, these
products that dominated the grocery store for you know, thirty
(04:15):
or forty years, they're just facing challenges from you know,
companies that doing are doing things a little bit different,
whether it's better ingredients or cleaner labels, better packaging. The
food world has really been shaken up, and like you said,
the reason why yogurt is so interesting is because in
yogurt we have the upstart company has actually taken over
the lead of the category. So I think yogurt kind
of gives us a window onto everything that's going on,
(04:37):
and you know, possibly we'll see that as we go
forward in some other categories to which is why it's
so interesting to get a sense of what it was
like to build a successful yogurt business before the rise
of Greek We talked with Gary Hershberg, chairman of stony Field,
which was a pioneer in organic yogurt. Stony Field, which
started as a tiny company in New Hampshire, was acquired
(04:57):
by Dannon and was later sold to lack tell Us
for eight hundred and seventy five million dollars. Well, we
started the company as a seven cow organic farming school
back in nineteen three. I often say that the we
had a wonderful company back then, just no supply and
(05:19):
no demands. That the world had was not yet ready
for organic. But we really began this with a sort
of more academic and public health and and philanthropic idea
that that we we all are what we eat, that
organic is really preventative health, and that new discoveries in
the world of organic agriculture really needed to find their
way to the consumer. So we we actually launched this
(05:41):
little yogurt company as a way to help fund our
farming school. Eventually we retired the school um In those days,
yogurt was was really two categories. It was big cups
and little cups. You know, the modern consumer forgets now
that we have squeezeables and drinkables and and grass fed
and greek and and all. But it was a pretty
(06:02):
simple category back then. And frankly, it wasn't always the
healthiest food. There were a lot of sugars um, a
lot of gelatins and fillers and and so when we
first started introducing ourselves to supermarkets with my partners very clean,
minimal ingredient label, most just raised their eyebrows and thought, well,
(06:23):
this stuff will never sell. It's it's not sweet enough
for it's not you know, we weren't using Disney characters
on the label. But well, per capita consumption was very
low in those days. Things really started to take off.
We we we really hit our timing just right in
the early eighties. Through throughout the rest of that decade,
(06:44):
the category itself and this is well before Greek grew
about nineteen annually that when stony Field started, the idea
of organic yogurts seemed crazy, But times have changed. None
of the big Fortune one d or multinationals were in
the space at all. Anybody in organic in those days
was a startup um, you know. I think the buyers
(07:06):
had two concerns. One, we were coming in with a
much higher cost yogurt. When when we launched our dollar
sixty nine courts of yogurt, the highest price out there
was a dollar thirty nine, maybe occasionally a dollar forty nine.
When we launched our little cups at sixty nine cents,
that those are the days of three for a dollar,
you know, maybe maybe forty nine yogurt. So we were
(07:29):
on the one hand, they loved the idea of more
you know, penny profit at the shelf, but on the
other they just feared that the consumer wouldn't take to it.
The other, of course, was that, um, they were concerned
that our kind of stridency about no antibiotics, no hormones,
no pesticides, no herbicides might also reflect negatively on the
(07:51):
rest of the category. But of course that's now a
distant memory, as every literally every retailer and now every
multinational have capitalism on this trend. So while those early
doubts were certainly a hurdle for us, we we were
over able to overcome them. I think for two reasons. One,
(08:12):
our products tasted fantastic and to um as they say,
we were the cleaner label, particularly with the baby boomer moms.
And now, of course this is doubly so with millennials.
You know, every statistic shows you that millennials want to
know everything. They want it all, and they want to
know how it's made, what's in it. They know about GMOs.
(08:37):
It's interesting to hear the comment from Gary Hurstbrook because
his big realization was that organic was going to become
a thing. And I mean it's easy to think now, oh,
organic food is everywhere. I mean you see organic food
in Walmart and Kroger, But that goes back to a
time when it was still pretty niche, you know. I
mean these guys we looked at as hippies up in
New Hampshire, Who were, you know, doing this um touchy
feely thing. You know. I think at the time it
(08:58):
really wasn't viewed as some thing that was going to
go mainstream. But it is a good indication kind of
of how these trends change and how sort of one
company that's on the cutting edge of these things can
shake up an industry. Right. The whole organic movement is
part of increasingly health conscious consumers wanting to eat things
that are better for them, and that's really a big
part of the promise with Greek yogurt too. It's high
(09:20):
in protein, and whether it's true or not, the senses
that it's part of a nutritious diet, that's right. And
then you fast forward to two thousand seven and Greek
yogurt comes onto the scene, and you know, Greek yogurt
is incredibly popular in Europe and Canada as well, but
it's just not eaten by Americans, or was not eaten
by Americans at all really until um Chobani shows up
(09:41):
on the scene. You know, Hamdi Lacaiah, the founders, a
Turkish immigrant, bought an old dairy plant in Upstate New
York and started making kind of recipes that he knew
from Turkey. Two thousand seven, he's selling Chobani out of
the back of his car. And you know, you fast
forward ten years, Chobani hits nearly two billion in sales.
You know, they operate this massive yogurt plant in Idaho
(10:03):
now in addition to Upstate New York. And you know,
it was a couple of things. I think it was
number one that the protein was was a really big
factor as far as getting people to to eat Greek yogurt.
And it is really amazing when you think of a
company that didn't exist now accounts for essentially fifty percent
of the overall yogurt market nine billion dollar industry, and
(10:24):
that lit a fuse on the rest of the yogurt market.
We saw all sorts of different upstart start Greek yogurt
companies as well as other kinds like French yogurt and
Australian yogurt, and also the big players trying to jump
on board too with their own versions of Greek yogurt
and other kinds of add ins that they thought might
be able to boost sales. It's also prompted big deals
(10:46):
in the industry. The big change of late obviously is
that all the big players are in it. You know,
you can't really go a week without one of them
Uni Leaver, Campbell's Leftalus, which just bought Stony Field, paid
a very hands some price for it then on and
you know all the others are. Yeah, there's sort of
a feeding frenzy here with and and you really see
(11:07):
them the multiples which are quite crazy. I think big food,
you know, gets a lot of criticism for not being
able to innovate and being too slow, but you know,
they certainly see the numbers like everybody else. So when
Joe Bonnie burst onto the scene Dan and said, Okay,
(11:28):
everybody wants Greek yogurt, we'll put out Oi Ghost, which
is their Greek brand. So they were all kind of
quick to respond. And obviously retailers see this too. They're saying, wow,
look at this growth in the dairy case. Let's put
some more products on there. Let's give more space. And
you know, space is really out of premium when you
talk about refrigerated and frozen sections of the store. It's
not like, okay, we just can pull out these potato
(11:49):
chips and put this yogurt in. It's very sort of
um it's a lot of ways a finite thing because
of how expensive it is to keep stuff refrigerated. So
Jo Bonnie definitely, I think brought a lot of it
engine to innovation in the category, and you saw just
sort of a cascade of new products coming to the
market over the last couple of years, and the old
standbys of the yogurt world aren't going to give up
(12:10):
very easily. Like you said, General Mills and Dannon are
pushing out new innovations to try to keep up. That's right. So,
I mean, as we're talking about, Greek really exploded and
the sales numbers have been up, up, up, but if
you look now ten years into Greek yogurt has really
started to slow down. Greek is down a bit. You know,
there's different explanations for that, but overall the yogurt categories down.
(12:30):
It's largely because of how bad yo plate has been
for General Mills. I mean, last year was down double
digit percentage points and that's kind of pulling the whole
category down, which, as we just talked about, that freaks
everybody out because now the retailers are looking at it
this and saying it's down three percent, down four percent,
Should we start giving less space? But what's happened is,
(12:51):
you know, the big guys basically are trying to kind
of take their market share back. For General Mills, they
came out with a French product called we Um. It's
sold glass jars, and it's their attempt to kind of
go after the premium market, you know, and it's sort
of a Greek type yogurt. It has more protein and
then when you look at dan and the big thing
for them has been a push towards non GMO yogurt.
(13:14):
So for Dannon, the largest seller of yogurt in the US,
the big bet is that consumers will gravitate to yogurt
made without GMOs. Dannon was founded in two by an
immigrant who had a thriving yogurt business in Europe and
(13:34):
escaped to the United States and built his business here
using his expertise and know how, and really brought the
concept of prepared yogurt to the United States. That's Michael
new Wirth, a spokesman for the Known Wave, which owns Dannon.
(13:55):
It started off as plane simple plane yogurt and over
time evolved into a lot of different types of varieties,
beginning in five years later with the introduction of fruit
on the bottom. He introduced a light product, varieties that
were made just for kids, and varieties that had special
(14:19):
cultures called probiotics. And today we're seeing more and more
interest in preferences for non GMO project verified varieties. So
we are the first to offer non GMO project verified
varieties of yogurt for um Um some of our brands
(14:43):
for a company of Dad and size. Producing non GMO
yogurt is a big undertaking and required major changes to
their supply chain About seven years ago. In two thousand
and ten, we started to work more directly with the
dairy farmers that provide us with milk. Prior to that,
we had bought milk through a co op and didn't
(15:04):
really know the farms and the farmers. Now that we
know who's making the milk, we could go upstream and
work with them to develop specific types of products that
would be of UM, that would fulfill this increasing interest
for non GMO Project verified products, and that would also
(15:27):
enable us to measure things like our our environmental impact
on the milk and so. Based on the unique relationship
with the farmers plus the interest of shoppers to look
for these products increasingly, we started to work about a
(15:48):
year and a half ago to develop the feed supply
that could feed those cows and um and ultimately be
non GMO Project verified, which is the case now as
we're introducing our first Dannen and d Animals branded products
that are non Geomo Project verified. Despite the fact that
(16:10):
they have far more resources and more years in the business,
big players are fighting an upheld battle consumers are still
attracted to younger, fresher brands that seemed to resonate because
they're perceived as more authentic. One of these challengers is Nousa,
an Australian style yogurt brand that hit a hundred sixty
three million sales last year from just six million. For
(16:31):
news Is founder Coel to May, it wasn't about trying
to replicate what happened with Greek yogurt. She just wanted
to fill a hole that she saw in the market.
I founded Nussa in two thousand nine with Rub Graves,
who is a fourth generation dairy farmer, and essentially I
was bringing a recipe from Australia that was whole milk
(16:52):
infused with honey and just probably the most delicious thing
that I've ever tasted. So really the hole in the
market was my stomach. That was sort of the real
sort of motivation is that I really wanted to eat
this yogurt more than once a year from the point
that I discovered it in Australia and coming back to
the US, I just I couldn't find anything quite like it.
That was sort of the inspiration of like, Okay, this
(17:15):
could be something that could fill avoid not just for
myself but for other people. In the US. Yogurt sales
have slowed in recent months, do in large part to
the struggles of yo Plate, who slump has weighed on
the industry. But NUSA thinks there's still room for growth. No,
the category has definitely flattened, and um, because we've had such,
(17:36):
you know, this amazing run. I think people both from
a consumer and retail buyers are really looking for that
next big thing because it's been such a growth driver
in not just our category, but in the whole grocery store.
And um, you know, we like to think that NUSA
is part of the next big thing, but you know, really,
when you look at what's going on, when you drill
(17:58):
down into the category, it's really premium yogurt is driving
that growth. And I think that is really because you know,
the premium brands, you know, new So sort of leading
that charge. Um, are really more connected into what millennials
want from food brands, and that is, you know, clean ingredients,
(18:20):
real food, but also pushing sort of the boundaries on innovation.
So um, you know, I think it really is the
premium players that are, you know, where the next sort
of growth is going to come from and is coming from.
And you know, obviously when you look at sort of
the rest of the country and or the rest of
(18:40):
the world, you know, we look at consumption, the US
still lags, so really thinking about, you know, how can
you take yogurt from more of this, you know, traditional
breakfast time to going into different day parts and thinking
of it as a snack or as a dessert and
really being able to sort of build that consumption in
an exciting way. And while sales are flat, Dannon in
(19:03):
general mills are both trying to push into premium yogurt,
which seems to be resonating with customers. You know, I
think the legacy brands really are understanding that it is
the premium brands that are driving this growth, and how
can they sort of come in and play in that
sphere which is not always easier for them, you know,
from a lot of different reasons, from price to um
(19:26):
really being able to get sort of the share of
voice with millennials, who you know, just think of them
as sort of the dinosaurs of the category and not
really people that can innovate and do interesting things. We
talked about this a little bit at the beginning of
the show. But to pull it all together, what is
what's happening in yogurt mean for the rest of the
(19:48):
package food industry. Well, I mean, I think with yogurt,
as we said that, the big thing here is that
the upstar brand, the Challenger brand, has become the leading brand.
So you've seen Joe Bonnie kind of take over, and
you know, Greek yogurt has slowed down a bit, but
Jobanni has had a lot of success with a product
they called Flip, which is, you know, basically yogurt with
little pieces of almonds or chocolate on top and you
(20:10):
mix it in. And you know, General Mills now has
a product like that. Noosa has come out with a
product like that. So you know, it'll be interesting to
see the next few years whether they can reignite growth.
I mean, the big thing is they need to get
more Americans to eat yogurt. Were still way behind Europe
and Canada when it comes to per capita consumption. So
if this category is gonna sort of go through a
(20:31):
rebirth another rebirth, it's gonna key on kind of more
people coming in. And you know, big thing right now
is everybody's looking for the quote unquote next Greek and
you know, you talk to people in it. It's just
not a slam dunk as far as whether that's coming
or whether it's going to be sort of much more
of a slog after we've seen, like I said, ten
years of really strong growth. But for other kinds of
(20:52):
food and drink companies, I think that this phenomenon is
pretty scary if you're a big company and you're looking
at the fact that in yogurt, this upstart was really
able to overtake the incumbent players, I mean, big companies,
just even though they have every possible resource, it's hard
for them to figure out how to pivot quickly and
attract the same consumers that startups have found really willing
(21:15):
to try their product. Yeah, there's no question about that.
And as we see more and more, honestly, one of
the things to mention is that more and more shopping
is going to start to happen online. And these upstart
brands are also very very good at kind of building
their brands online because that's what they've that's what they're
forced to do. They don't have the money for TV
ads or Super Bowl ads, so a lot of these
brands are sort of digitally native to use the term,
(21:37):
and they're really good at it. And I think you're
right that these other big food and beverage companies are
looking at yogurt and saying, we have to make sure
that doesn't happen to us, and maybe they benefit from
that of sort of looking and saying, how did Joe
Bonnie do this? I mean, there hadn't been innovation in
that category. Why was somebody able to come in with
this innovation and sort of take over the category? And
(21:58):
you know, there's all across the food escape. I think
there are examples of some complacency on the part of
the big guys, and they're just not good at moving quickly.
And the trends right now move faster than they ever
have with social media, and you know, it's like they
see a lot of tweets about kale and they say, oh,
it look seems like this kale is a thing, you know,
that maybe we should do something with kale. And then
it's three years later before the kale product comes out
(22:19):
and the trend has moved on. So I think, you know,
it's not gonna get any easier for the big food
and beverage companies, and certainly this yogurt example, it becomes
kind of a lesson for them to make sure that
they try to protect their market share, right. I mean,
it's much easier to make an incremental change on a
core product like what Danon is doing with gm O
free that that seems to be easier to get through
(22:42):
the many ranks of people you have to go to
for approval at a giant company, instead of trying out
a whole new product where there's no proven market and
you don't know if consumers are gonna like it, And
that seems to be pretty tough at a big business.
And it makes sense because if it is a fail,
you have to talk about it on the quarterly earning
call and people are going to be furious. That's a
(23:02):
big part of the pressure, I think is just the
inability to fail. You know, these companies want to be sure.
They want to market test and get twenty executives in
the room to all give the green light. And when
they move, when these billion dollar companies move, they want
to make sure they're right. And I think that that
unwillingness to fail has been a big part of the problem.
And I mean we should mention that, you know, for
a company like Dannon, and as big as it is
(23:24):
to say that we're only going to serve non gmo yogurt,
that that was a big change. You know, it's a
major supply chain challenge and a lot that goes into that. So,
you know, we have to give Danna and I think
a little bit of credit for for trying to be
aggressive and for hitting on something they think is going
to work. But there's no question that, you know, these
companies need to do more to sort of enable their
structures within the companies to be able to react more
(23:46):
quickly to these trends because it's only going to move faster,
especially as Amazon gets more into this business, You're just
gonna see more and more disruption, right the real question
is for big food, who's going to be next. That's
(24:10):
it for this episode of Material World. Thanks a lot
for listening. For past episodes, check us out on Apple Podcast,
Bloomberg dot com, or wherever you listen to shows like this.
If you want to know more about what's happening with
big food and grocery stores, follow me Craig Giammona on
Twitter at sit Your Writer and for more on all
the things you drink and smoke Jenny's at Jenny M. Kaplan.
(24:34):
Material World is produced by Magnus Henrickson and Liz Smith.
The head of Bloomberg Podcast is Francesca Levie. We'll be
back in two weeks. Yeah, I like that. Ominous
In an earlier version of this episode, we mispronounced Gary
Hirshberg's name. We apologize for that error and it's been corrected.
Yogurt started in this country as plane one type. That's
it kind of like the original Ford right. You can
(00:21):
have any color as long as it's black. And today,
the average supermarket in the United States has more than
two hundred choices of yogurt in it, and yet Americans
are still consuming yogurt one fifth rate of our European counterparts.
(00:59):
I'm n Kaplan and I'm here with a special guest host,
Craig Giomona, who's backed by popular demand, to walk us
through what's happening with one of America's favorite breakfast products, yogurt.
It's going to be back on Material World, and we've
talked before a lot about some of the problems that
big food, the large food companies are having and how
that's changing the grocery landscape. And this week we decided
(01:21):
to dig into yogurt because it provides really a good
window onto why some of these large food companies are
struggling and what they're doing to respond. Big food companies
are really having a tough time consumers. These days are
(01:43):
attracted to smaller upstarts that cater to more of what
they're looking for, clean labels and better ingredients and yogurt
that really came in the form of one company, Chivanni.
That's right. I mean, the story of yogurt really the
last ten years has been Greek yogurt. America essentially didn't
eat Greek yogurt before Joe Bonnie burst onto the scene
in two thousand seven, and Greek now is something like
(02:06):
fifty of the market, so it's really been driving the
growth in the category and that's a part of the reason,
a big part of the reason why you're seeing all
those new products pop up on the shelves in the
dairy case. So, Craig, you cover yogurt. How big is
the industry overall? What kind of growth have we've been seeing?
You know, it's something like nine billion dollars in the
US and the sales have gained about twenty five percent
(02:28):
since So those are the kind of numbers that obviously
catch the attention of the food companies. You know, big thing,
like I said, with the shift of Greek was that
it had more protein, So that kind of hit one
of the big time trends, people looking for protein less sugar,
Greek yogurt burst onto the scene and that's how we
kind of get to today with nine billion in sales
and about that coming from Greek. The Greek yogurt has
(02:52):
really taken away from the big incumbents here who really
made up the bulk of the yogurt industry before, right, So,
so Jo Bonnie success has really come at the expense
of General Mills, which makes the Yo Played brand. Yo
Played for years was the leading brand of yogurt in
the US, but Joe Bannie passed them for the first time.
So it's pretty amazing that this company, Joe Banni, which
(03:13):
didn't exist, you know, it was founded in two thousand five,
is now the leading brand. And then there's Dannen, which
is the the U S arm of the French company
two Known. They remain the leading seller of yogurt overall.
They have several brands, so they're still a powerhouse, but
you know, their sales have kind of been flat, so
they're looking to kind of defend their turf as well.
So much like other parts of the food industry, the
(03:34):
big yogurt companies have been challenged by these small, small companies.
But unlike most areas, Chobani is one example where this
upstart has actually overtaken the big incumbent giants. Yeah, that's
why I think yogurt is so interesting because I mean,
we see these big food companies struggling, you know that.
I think something like the largest ten food companies in
(03:54):
the US have lost sixteen billion in sales over the
last three years. And it's pretty baggering numbers when you
look at the revenue that's being posted by companies like
General Mills, Kella, Campbell, Kraft, Hinds. There's been these all
these struggles, and the story is that, you know, these
products that dominated the grocery store for you know, thirty
(04:15):
or forty years, they're just facing challenges from you know,
companies that doing are doing things a little bit different,
whether it's better ingredients or cleaner labels, better packaging. The
food world has really been shaken up, and like you said,
the reason why yogurt is so interesting is because in
yogurt we have the upstart company has actually taken over
the lead of the category. So I think yogurt kind
of gives us a window onto everything that's going on,
(04:37):
and you know, possibly we'll see that as we go
forward in some other categories to which is why it's
so interesting to get a sense of what it was
like to build a successful yogurt business before the rise
of Greek We talked with Gary Hershberg, chairman of stony Field,
which was a pioneer in organic yogurt. Stony Field, which
started as a tiny company in New Hampshire, was acquired
(04:57):
by Dannon and was later sold to lack tell Us
for eight hundred and seventy five million dollars. Well, we
started the company as a seven cow organic farming school
back in nineteen three. I often say that the we
had a wonderful company back then, just no supply and
(05:19):
no demands. That the world had was not yet ready
for organic. But we really began this with a sort
of more academic and public health and and philanthropic idea
that that we we all are what we eat, that
organic is really preventative health, and that new discoveries in
the world of organic agriculture really needed to find their
way to the consumer. So we we actually launched this
(05:41):
little yogurt company as a way to help fund our
farming school. Eventually we retired the school um In those days,
yogurt was was really two categories. It was big cups
and little cups. You know, the modern consumer forgets now
that we have squeezeables and drinkables and and grass fed
and greek and and all. But it was a pretty
(06:02):
simple category back then. And frankly, it wasn't always the
healthiest food. There were a lot of sugars um, a
lot of gelatins and fillers and and so when we
first started introducing ourselves to supermarkets with my partners very clean,
minimal ingredient label, most just raised their eyebrows and thought, well,
(06:23):
this stuff will never sell. It's it's not sweet enough
for it's not you know, we weren't using Disney characters
on the label. But well, per capita consumption was very
low in those days. Things really started to take off.
We we we really hit our timing just right in
the early eighties. Through throughout the rest of that decade,
(06:44):
the category itself and this is well before Greek grew
about nineteen annually that when stony Field started, the idea
of organic yogurts seemed crazy, But times have changed. None
of the big Fortune one d or multinationals were in
the space at all. Anybody in organic in those days
was a startup um, you know. I think the buyers
(07:06):
had two concerns. One, we were coming in with a
much higher cost yogurt. When when we launched our dollar
sixty nine courts of yogurt, the highest price out there
was a dollar thirty nine, maybe occasionally a dollar forty nine.
When we launched our little cups at sixty nine cents,
that those are the days of three for a dollar,
you know, maybe maybe forty nine yogurt. So we were
(07:29):
on the one hand, they loved the idea of more
you know, penny profit at the shelf, but on the
other they just feared that the consumer wouldn't take to it.
The other, of course, was that, um, they were concerned
that our kind of stridency about no antibiotics, no hormones,
no pesticides, no herbicides might also reflect negatively on the
(07:51):
rest of the category. But of course that's now a
distant memory, as every literally every retailer and now every
multinational have capitalism on this trend. So while those early
doubts were certainly a hurdle for us, we we were
over able to overcome them. I think for two reasons. One,
(08:12):
our products tasted fantastic and to um as they say,
we were the cleaner label, particularly with the baby boomer moms.
And now, of course this is doubly so with millennials.
You know, every statistic shows you that millennials want to
know everything. They want it all, and they want to
know how it's made, what's in it. They know about GMOs.
(08:37):
It's interesting to hear the comment from Gary Hurstbrook because
his big realization was that organic was going to become
a thing. And I mean it's easy to think now, oh,
organic food is everywhere. I mean you see organic food
in Walmart and Kroger, But that goes back to a
time when it was still pretty niche, you know. I
mean these guys we looked at as hippies up in
New Hampshire, Who were, you know, doing this um touchy
feely thing. You know. I think at the time it
(08:58):
really wasn't viewed as some thing that was going to
go mainstream. But it is a good indication kind of
of how these trends change and how sort of one
company that's on the cutting edge of these things can
shake up an industry. Right. The whole organic movement is
part of increasingly health conscious consumers wanting to eat things
that are better for them, and that's really a big
part of the promise with Greek yogurt too. It's high
(09:20):
in protein, and whether it's true or not, the senses
that it's part of a nutritious diet, that's right. And
then you fast forward to two thousand seven and Greek
yogurt comes onto the scene, and you know, Greek yogurt
is incredibly popular in Europe and Canada as well, but
it's just not eaten by Americans, or was not eaten
by Americans at all really until um Chobani shows up
(09:41):
on the scene. You know, Hamdi Lacaiah, the founders, a
Turkish immigrant, bought an old dairy plant in Upstate New
York and started making kind of recipes that he knew
from Turkey. Two thousand seven, he's selling Chobani out of
the back of his car. And you know, you fast
forward ten years, Chobani hits nearly two billion in sales.
You know, they operate this massive yogurt plant in Idaho
(10:03):
now in addition to Upstate New York. And you know,
it was a couple of things. I think it was
number one that the protein was was a really big
factor as far as getting people to to eat Greek yogurt.
And it is really amazing when you think of a
company that didn't exist now accounts for essentially fifty percent
of the overall yogurt market nine billion dollar industry, and
(10:24):
that lit a fuse on the rest of the yogurt market.
We saw all sorts of different upstart start Greek yogurt
companies as well as other kinds like French yogurt and
Australian yogurt, and also the big players trying to jump
on board too with their own versions of Greek yogurt
and other kinds of add ins that they thought might
be able to boost sales. It's also prompted big deals
(10:46):
in the industry. The big change of late obviously is
that all the big players are in it. You know,
you can't really go a week without one of them
Uni Leaver, Campbell's Leftalus, which just bought Stony Field, paid
a very hands some price for it then on and
you know all the others are. Yeah, there's sort of
a feeding frenzy here with and and you really see
(11:07):
them the multiples which are quite crazy. I think big food,
you know, gets a lot of criticism for not being
able to innovate and being too slow, but you know,
they certainly see the numbers like everybody else. So when
Joe Bonnie burst onto the scene Dan and said, Okay,
(11:28):
everybody wants Greek yogurt, we'll put out Oi Ghost, which
is their Greek brand. So they were all kind of
quick to respond. And obviously retailers see this too. They're saying, wow,
look at this growth in the dairy case. Let's put
some more products on there. Let's give more space. And
you know, space is really out of premium when you
talk about refrigerated and frozen sections of the store. It's
not like, okay, we just can pull out these potato
(11:49):
chips and put this yogurt in. It's very sort of
um it's a lot of ways a finite thing because
of how expensive it is to keep stuff refrigerated. So
Jo Bonnie definitely, I think brought a lot of it
engine to innovation in the category, and you saw just
sort of a cascade of new products coming to the
market over the last couple of years, and the old
standbys of the yogurt world aren't going to give up
(12:10):
very easily. Like you said, General Mills and Dannon are
pushing out new innovations to try to keep up. That's right. So,
I mean, as we're talking about, Greek really exploded and
the sales numbers have been up, up, up, but if
you look now ten years into Greek yogurt has really
started to slow down. Greek is down a bit. You know,
there's different explanations for that, but overall the yogurt categories down.
(12:30):
It's largely because of how bad yo plate has been
for General Mills. I mean, last year was down double
digit percentage points and that's kind of pulling the whole
category down, which, as we just talked about, that freaks
everybody out because now the retailers are looking at it
this and saying it's down three percent, down four percent,
Should we start giving less space? But what's happened is,
(12:51):
you know, the big guys basically are trying to kind
of take their market share back. For General Mills, they
came out with a French product called we Um. It's
sold glass jars, and it's their attempt to kind of
go after the premium market, you know, and it's sort
of a Greek type yogurt. It has more protein and
then when you look at dan and the big thing
for them has been a push towards non GMO yogurt.
(13:14):
So for Dannon, the largest seller of yogurt in the US,
the big bet is that consumers will gravitate to yogurt
made without GMOs. Dannon was founded in two by an
immigrant who had a thriving yogurt business in Europe and
(13:34):
escaped to the United States and built his business here
using his expertise and know how, and really brought the
concept of prepared yogurt to the United States. That's Michael
new Wirth, a spokesman for the Known Wave, which owns Dannon.
(13:55):
It started off as plane simple plane yogurt and over
time evolved into a lot of different types of varieties,
beginning in five years later with the introduction of fruit
on the bottom. He introduced a light product, varieties that
were made just for kids, and varieties that had special
(14:19):
cultures called probiotics. And today we're seeing more and more
interest in preferences for non GMO project verified varieties. So
we are the first to offer non GMO project verified
varieties of yogurt for um Um some of our brands
(14:43):
for a company of Dad and size. Producing non GMO
yogurt is a big undertaking and required major changes to
their supply chain About seven years ago. In two thousand
and ten, we started to work more directly with the
dairy farmers that provide us with milk. Prior to that,
we had bought milk through a co op and didn't
(15:04):
really know the farms and the farmers. Now that we
know who's making the milk, we could go upstream and
work with them to develop specific types of products that
would be of UM, that would fulfill this increasing interest
for non GMO Project verified products, and that would also
(15:27):
enable us to measure things like our our environmental impact
on the milk and so. Based on the unique relationship
with the farmers plus the interest of shoppers to look
for these products increasingly, we started to work about a
(15:48):
year and a half ago to develop the feed supply
that could feed those cows and um and ultimately be
non GMO Project verified, which is the case now as
we're introducing our first Dannen and d Animals branded products
that are non Geomo Project verified. Despite the fact that
(16:10):
they have far more resources and more years in the business,
big players are fighting an upheld battle consumers are still
attracted to younger, fresher brands that seemed to resonate because
they're perceived as more authentic. One of these challengers is Nousa,
an Australian style yogurt brand that hit a hundred sixty
three million sales last year from just six million. For
(16:31):
news Is founder Coel to May, it wasn't about trying
to replicate what happened with Greek yogurt. She just wanted
to fill a hole that she saw in the market.
I founded Nussa in two thousand nine with Rub Graves,
who is a fourth generation dairy farmer, and essentially I
was bringing a recipe from Australia that was whole milk
(16:52):
infused with honey and just probably the most delicious thing
that I've ever tasted. So really the hole in the
market was my stomach. That was sort of the real
sort of motivation is that I really wanted to eat
this yogurt more than once a year from the point
that I discovered it in Australia and coming back to
the US, I just I couldn't find anything quite like it.
That was sort of the inspiration of like, Okay, this
(17:15):
could be something that could fill avoid not just for
myself but for other people. In the US. Yogurt sales
have slowed in recent months, do in large part to
the struggles of yo Plate, who slump has weighed on
the industry. But NUSA thinks there's still room for growth. No,
the category has definitely flattened, and um, because we've had such,
(17:36):
you know, this amazing run. I think people both from
a consumer and retail buyers are really looking for that
next big thing because it's been such a growth driver
in not just our category, but in the whole grocery store.
And um, you know, we like to think that NUSA
is part of the next big thing, but you know, really,
when you look at what's going on, when you drill
(17:58):
down into the category, it's really premium yogurt is driving
that growth. And I think that is really because you know,
the premium brands, you know, new So sort of leading
that charge. Um, are really more connected into what millennials
want from food brands, and that is, you know, clean ingredients,
(18:20):
real food, but also pushing sort of the boundaries on innovation.
So um, you know, I think it really is the
premium players that are, you know, where the next sort
of growth is going to come from and is coming from.
And you know, obviously when you look at sort of
the rest of the country and or the rest of
(18:40):
the world, you know, we look at consumption, the US
still lags, so really thinking about, you know, how can
you take yogurt from more of this, you know, traditional
breakfast time to going into different day parts and thinking
of it as a snack or as a dessert and
really being able to sort of build that consumption in
an exciting way. And while sales are flat, Dannon in
(19:03):
general mills are both trying to push into premium yogurt,
which seems to be resonating with customers. You know, I
think the legacy brands really are understanding that it is
the premium brands that are driving this growth, and how
can they sort of come in and play in that
sphere which is not always easier for them, you know,
from a lot of different reasons, from price to um
(19:26):
really being able to get sort of the share of
voice with millennials, who you know, just think of them
as sort of the dinosaurs of the category and not
really people that can innovate and do interesting things. We
talked about this a little bit at the beginning of
the show. But to pull it all together, what is
what's happening in yogurt mean for the rest of the
(19:48):
package food industry. Well, I mean, I think with yogurt,
as we said that, the big thing here is that
the upstar brand, the Challenger brand, has become the leading brand.
So you've seen Joe Bonnie kind of take over, and
you know, Greek yogurt has slowed down a bit, but
Jobanni has had a lot of success with a product
they called Flip, which is, you know, basically yogurt with
little pieces of almonds or chocolate on top and you
(20:10):
mix it in. And you know, General Mills now has
a product like that. Noosa has come out with a
product like that. So you know, it'll be interesting to
see the next few years whether they can reignite growth.
I mean, the big thing is they need to get
more Americans to eat yogurt. Were still way behind Europe
and Canada when it comes to per capita consumption. So
if this category is gonna sort of go through a
(20:31):
rebirth another rebirth, it's gonna key on kind of more
people coming in. And you know, big thing right now
is everybody's looking for the quote unquote next Greek and
you know, you talk to people in it. It's just
not a slam dunk as far as whether that's coming
or whether it's going to be sort of much more
of a slog after we've seen, like I said, ten
years of really strong growth. But for other kinds of
(20:52):
food and drink companies, I think that this phenomenon is
pretty scary if you're a big company and you're looking
at the fact that in yogurt, this upstart was really
able to overtake the incumbent players, I mean, big companies,
just even though they have every possible resource, it's hard
for them to figure out how to pivot quickly and
attract the same consumers that startups have found really willing
(21:15):
to try their product. Yeah, there's no question about that.
And as we see more and more, honestly, one of
the things to mention is that more and more shopping
is going to start to happen online. And these upstart
brands are also very very good at kind of building
their brands online because that's what they've that's what they're
forced to do. They don't have the money for TV
ads or Super Bowl ads, so a lot of these
brands are sort of digitally native to use the term,
(21:37):
and they're really good at it. And I think you're
right that these other big food and beverage companies are
looking at yogurt and saying, we have to make sure
that doesn't happen to us, and maybe they benefit from
that of sort of looking and saying, how did Joe
Bonnie do this? I mean, there hadn't been innovation in
that category. Why was somebody able to come in with
this innovation and sort of take over the category? And
(21:58):
you know, there's all across the food escape. I think
there are examples of some complacency on the part of
the big guys, and they're just not good at moving quickly.
And the trends right now move faster than they ever
have with social media, and you know, it's like they
see a lot of tweets about kale and they say, oh,
it look seems like this kale is a thing, you know,
that maybe we should do something with kale. And then
it's three years later before the kale product comes out
(22:19):
and the trend has moved on. So I think, you know,
it's not gonna get any easier for the big food
and beverage companies, and certainly this yogurt example, it becomes
kind of a lesson for them to make sure that
they try to protect their market share, right. I mean,
it's much easier to make an incremental change on a
core product like what Danon is doing with gm O
free that that seems to be easier to get through
(22:42):
the many ranks of people you have to go to
for approval at a giant company, instead of trying out
a whole new product where there's no proven market and
you don't know if consumers are gonna like it, And
that seems to be pretty tough at a big business.
And it makes sense because if it is a fail,
you have to talk about it on the quarterly earning
call and people are going to be furious. That's a
(23:02):
big part of the pressure, I think is just the
inability to fail. You know, these companies want to be sure.
They want to market test and get twenty executives in
the room to all give the green light. And when
they move, when these billion dollar companies move, they want
to make sure they're right. And I think that that
unwillingness to fail has been a big part of the problem.
And I mean we should mention that, you know, for
a company like Dannon, and as big as it is
(23:24):
to say that we're only going to serve non gmo yogurt,
that that was a big change. You know, it's a
major supply chain challenge and a lot that goes into that. So,
you know, we have to give Danna and I think
a little bit of credit for for trying to be
aggressive and for hitting on something they think is going
to work. But there's no question that, you know, these
companies need to do more to sort of enable their
structures within the companies to be able to react more
(23:46):
quickly to these trends because it's only going to move faster,
especially as Amazon gets more into this business, You're just
gonna see more and more disruption, right the real question
is for big food, who's going to be next. That's
(24:10):
it for this episode of Material World. Thanks a lot
for listening. For past episodes, check us out on Apple Podcast,
Bloomberg dot com, or wherever you listen to shows like this.
If you want to know more about what's happening with
big food and grocery stores, follow me Craig Giammona on
Twitter at sit Your Writer and for more on all
the things you drink and smoke Jenny's at Jenny M. Kaplan.
(24:34):
Material World is produced by Magnus Henrickson and Liz Smith.
The head of Bloomberg Podcast is Francesca Levie. We'll be
back in two weeks. Yeah, I like that. Ominous
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