Greek-style yogurt's rise catches General Mills off guardGreek-style yogurt has emerged as a supermarket darling, a high-protein product with a health aura that rattles the longtime leader. Once virtually unknown, Greek-style yogurt now captures about one-quarter of the U.S. yogurt market. Yoplait, a brand of Minnesota-based General Mills, has "some work to do . . . to get into the game," General Mills' retail chief said Wednesday.
By: Tom Webb, St. Paul Pioneer Press / MCT
For three decades, Yoplait has reigned as queen of the yogurt aisle. But suddenly, a young rival is posing a threat.
Greek-style yogurt has emerged as a supermarket darling, a high-protein product with a health aura that rattles the longtime leader. Once virtually unknown, Greek-style yogurt now captures about one-quarter of the U.S. yogurt market.
"We have some work to do, to sort of step back and get into the game," Ian Friendly, General Mills' U.S. retail chief, told analysts Wednesday as the company released first-quarter earnings.
Many consumers would agree. General Mills, which owns the Yoplait brand, initially rushed its own version of Yoplait Greek to market, to poor reviews.
Then General Mills reformulated its Greek yogurt, but lacked production capacity and advertising support to fight the Greek invasion. Only last month were those bottlenecks resolved.
This is a bad time for fortress Yoplait to be shaken. In March, General Mills paid $1.2 billion for majority control of Yoplait's global operations, with the dream of replicating Yoplait's U.S. record of success around the world.
For the Golden Valley-based foodmaker, Yoplait has long been a shining star. Over three decades, Yoplait sales grew at an amazing double-digit annual rate, topping $1.5 billion a year.
General Mills helped sales by jazzing up Yoplait in dozens of ways -- adding dessert yogurt, kids yogurt, yogurt-in-a-tube, even fizzy yogurt. They cranked out "indulgent" flavors like cherry cheesecake and cotton candy.
But somehow, they missed the public's hunger for a healthier, simpler, more natural yogurt. Competitors did not.
Greek-style yogurt is thicker, tarter, less sweet and has more calcium and protein than most supermarket varieties. Popular with dieters, Greek-style yogurt sales have doubled in the past year, even as regular yogurt sales dipped.
So General Mills is looking to bolster Yoplait Greek, with coupons, free samples, social network buzz and more.
"We've got strong levels of investment behind our Greek yogurt business this year," Friendly said during Wednesday's earnings call. "New manufacturing capacity came on line in August....We've also turned on national advertising support for this product for the first time. Early response has been good."
But not entirely. Yoplait Greek seems to lack the trendiness of rivals like Chobani, Fage and Oikos. Fans say it has a different taste and texture.
Lisa Cain, a Massachusetts blogger who writes as Snack Girl, enjoys Greek-style yogurt but wasn't impressed by the Yoplait version.
"It tastes terrible," she wrote in March. Most of the 69 people who commented on the post agreed (although it's not clear how many tried new Yoplait Greek, rather than the discontinued original).
Either way, it's nothing against Yoplait, Cain said in an interview Wednesday.
"When they announced it, everyone was excited that Yoplait was coming out with a Greek offering because so many people eat it (Yoplait)," Cain said. "But most people didn't like it."
But as General Mills admits, there's still work to do in Greek yogurt.
"Yogurt's going to be a piece-by-piece buildup over the year and into next year," Friendly told analysts. "It's not going to be an overnight solve."
Yogurt woes aside, General Mills on Wednesday said its first-quarter results topped analysts' consensus estimates, with net sales up 9 percent to $3.85 billion. Net earnings fell 14 percent, to $406 million.
Most of the sales increase came from price hikes the company has passed along to consumers in the wake of higher input costs.
"One of the challenges is inflation, which is playing out as we thought it would," CEO Ken Powell said in an interview. "It's going to be somewhere between 10 (percent) and 11 percent, which is very high inflation for us."
Shares of General Mills rose 2.5 percent, or 95 cents, to close Wednesday at $38.44.
Distributed by MCT Information Services