Market Watch Diary: Yogurt + Greek = Success
A funny thing happened on the way to the refrigerator: John Doe decided to use yogurt on top of his breakfast cereal this morning instead of milk.
John’s decision sums up much of the reasons why milk sales continue to decline and yogurt sales are increasing. Yogurt, and more specifically, Greek-style yogurt, is one of the great dairy success stories.
The size of the yogurt market has been increasing almost nonstop for several decades. Sales data are tough to find; on a volume basis, retail sales were up about 8% in 2010; up about 1% in 2011 and up just 0.7% in 2012.
But retail sales only cover one of three market channels. Based on anecdotal evidence, yogurt usage at restaurants is growing and more yogurt is being used as an ingredient in other foods, such as baked goods and desserts. The best available measure of growth is production data.
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During 2012, dairy companies in the U.S. produced 4.4 billion pounds of yogurt. This is more than double the 2.1 billion pounds produced just 10 years ago. Yogurt output and sales have a remarkable compound annual growth rate (CAGR) of 7.5%. A growth like that is a marketer’s fondest dream come true.
And this sales growth is also good for the bottom line of your dairy farm. In fact, it’s even better than it looks at first glance. Why? Because the volume of milk going into yogurt is increasing at a faster pace than yogurt sales.
To which you might say: "That sounds like Greek to me!" You are correct. It is Greek—Greek yogurt sales. The retail volume of Greek-style yogurt sales increased more than 200% in 2010, increased another 134% in 2011 and more than 70% in 2012.
Here’s the kicker: It takes more milk to make a pint of Greek yogurt than a pint of conventional yogurt. About 80% of the Greek-style yogurt being produced today requires twice as much milk as conventional yogurt, according to an analysis by Dairy Management Inc.
A pretty good rule of thumb: It takes a pound of milk to make a pint of yogurt; it takes two pounds of milk to make a pint of Greek yogurt. Greek yogurt is Grade A milk and cultures, maybe some fruit—nothing else.
Sales growth is very likely to continue because consumers are eating yogurt for all of the right reasons:
1. nutrition and health benefits,
2. taste,
3. convenience,
4. hunger satisfaction and
5. because "yogurt is a healthy start to the day."
In fact, more than one-third of the yogurt consumed at home is eaten at breakfast. Interestingly, at one time not too long ago, one-third of the milk consumed at home was at breakfast, primarily on cereal.
Funny how times and people change. Yogurt, including drinkable varieties, is replacing some of the milk once found in refrigerators and ultimately on top of cereal.
