BATAVIA, New York: PepsiCo Inc best known for Pepsi-Cola and Frito-Lay chips — is taking its Muller yogurt brand nationwide expanding its portfolio of healthier foods at a time that US consumers are increasingly shunning traditional soft drinks.
Yogurt is one of the fastest selling categories in grocery stores, and PepsiCo sees plenty of room for growth even though it has come late to the party.
“Dairy has become everybody’s favorite avenue when it comes to escaping the miseries of obesity,” said Bevmark Consulting CEO Tom Pirko. “Everybody’s trying to figure out a health angle.”
To boost its chances of success, PepsiCo has partnered with Germany’s Theo Muller Group, a stalwart of the European dairy industry, repeating a strategy that has already made the snack-and-soda company a leading US purveyor of hummus and other healthy dips.
Earlier this month, the Muller Quaker Dairy joint venture opened a yogurt plant in upstate New York. By combining Muller’s expertise with its own marketing and distribution muscle, PepsiCo aims to build a loyal US following.
But that won’t be easy even with PepsiCo’s size, Muller’s reputation and growing demand for nutritious food, said industry experts. Consumers are demanding, and pricing is hyper-competitive.
Traditional yogurts from General Mills Inc’s Yoplait and Danone’s Dannon often use eye-popping discounts. Even Chobani, the darling of the Greek yogurt craze, has been running promotions more often. The competition was so fierce that Kraft Foods pulled its Athenos line of Greek yogurt in 2012, only two years after its launch.
PepsiCo is expected to fare better, said Wells Fargo analyst Bonnie Herzog, but a lot will ride on how much PepsiCo opens the company pocketbook. “Quite frankly it’s going to depend on how much marketing they put behind this big roll-out,” Herzog said.
But PepsiCo Chief Executive Indra Nooyi says the company need not go overboard in its spending to make the brand a success. The company’s investment in the 50/50 joint venture will not “break the bank” and the yogurt is innovative enough to sell at a premium price, she said. There are no plans to fund aggressive promotions to spur sales temporarily.
“Fortunately or unfortunately, money alone does not do it,” Nooyi told Reuters after a tour of the new yogurt factory in Batavia, New York.
The US market for yogurt is worth $7bn, according to Euromonitor International, having grown at an average rate of 8.5 percent during the last five years.
Reuters
