Will capacity surge put pressure on prices as big guns invest in the Greek yogurt boom?

The rush to build new capacity in the US yogurt sector - largely driven by the Greek yogurt boom - could put pressure on prices in the short term, although things should even out over time, predicts Yoplait-maker General Mills.

There has been a lot of investment in yogurt manufacturing in the US in the past couple of years, with Dannon and General Mills both adding extra capacity for Greek.

Greek yogurt market leader Chobani recently expanded its New York factory and is preparing to open a $128m new factory in Twin Falls Idaho this fall, while Fage USA is completing a $120m expansion to double the capacity of its plant in Johnstown New York.

Finally, new market entrant Muller Quaker Dairy, a joint venture between PepsiCo and German dairy giant Müller, is building a $206m new factory in Batavia, New York.

I believe in the short run there will be excess capacity

Asked by an analyst about the likely impact of all the new capacity at the Barclays Back to School conference in Boston last week, executive vice president US Retail Ian Friendly, said: "There is certainly a lot of capacity coming online in the yogurt category both from current and new players.

“But the good news is that yogurt is the second biggest category we compete in and a category that size that is still growing in double digits can absorb a lot of capacity.

“I believe in the short run there will be excess capacity but the growth of the category should absorb that over time so there may be some downward pressure I would expect, particularly on the Greek segment where most of the activity is focused and there are a lot of people competing.

“But over the longer haul I would think the growth of the industry would absorb that.”

Retailers are continuing to expand their yogurt sections

Meanwhile, retailer acceptance of General Mills’ new yogurt launches was “at or above our expectations and retailers are continuing to expand their yogurt sections to make room for all the innovation”, he said.

“New yogurt products are just arriving on store shelves across the country including our 100-calorie Yoplait Greek offering, expanded distribution of our Mountain High brand and the beginning of a phased US roll-out of Liberte, our Canadian yogurt brand.

“We’ve also added more fruit to our original style Yoplait and Yoplait Light is now just 90 calories per cup and carries the Weight Watchers endorsement.”

2011 Euromonitor data, which showed that yogurt consumption per capita was just 6.6kg in the US compared with 20.3kg in France, 11.7kg in Canada and 9.8kg in UK, demonstrated that there was still huge potential in the US yogurt market, he said.

Dannon: Our Greek yogurt portfolio is the fastest growing in the US

Dannon spokesman Michael Neuwirth said Dannon's portfolio of Greek yogurt "is now the fastest growing within the Greek segment in the US", while the overall yogurt category still had enormous growth potential given that "the average American eats a cup of yogurt less than once per week".

He added: "We recently invested in and brought online a new line for Greek in one of our plants and another is coming online very shortly. Because of our long-term perspective, we are virtually always in expansion mode.

"We take a long-term vision of the market given our belief that the category has a lot of room to continue to develop. We believe that the options and expanded offerings in Greek yogurt that we are bringing to market, including our Light & Fit 80 calorie cups, and new varieties of Dannon Oikos, are filling needs that were previously unmet."

Get him to the Greek! Chobani market share tops 47% ahead of Dannon at 20% and Fage at 14%

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Chobani's rise in the Greek yogurt market has been nothing short of meteoric, going from a market share of zero to 47% in just five years

The rise of Greek yogurt in the past five years has been nothing short of meteoric, with consumers buying into its low-fat credentials, high protein content and thicker texture.

According to a recent report by Bernstein Research citing Nielsen data, Greek yogurt now accounts for more than a third (35%) of US yogurt sales, up from just 4% in 2008 (although in volume terms premium-priced Greek has a far lower share of the market).   

First-to-market Fage USA, which dominated the category in 2007 with a 93.5% share, now commands a 13.9% share, while Chobani has a 47.3% share, Dannon (Oikos, Light & Fit) has a 19.7% share and General Mills (Yoplait Greek) has a 5.7% share.

Despite the category's explosive growth, however, not everyone that has tried to cash in on the Greek yogurt boom has been successful, with Kraft Foods recently discontinuing its Athenos Greek yogurt brand, which was launched in late 2010.

Click here for details of a lawsuit filed in California against Cabot and Agri-Mark about its Greek-style yogurts.