Yogurt: the new Pepsi challenge

Sun Jun 23, 2013 11:43am EDT
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By Martinne Geller

BATAVIA, NEW YORK (Reuters) - PepsiCo Inc (PEP.N: Quote) - 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 U.S. 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 U.S. 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 U.S. 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 GIS.N Yoplait and Danone's (DANO.PA: Quote) 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 KRFT.O 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.   Continued...

PepsiCo CEO Indra Nooyi poses for a portrait by products at the Tops SuperMarket in Batavia, New York, June 3, 2013. REUTERS/Don Heupel