Starbucks, Danone team up to sell yogurt at coffee shops, grocery stores

New York TimesJuly 23, 2013 

Starbucks is taking on the thriving market for yogurt, teaming with French dairy powerhouse Danone to create a line of yogurts that will be sold in the coffee company’s stores and in grocery stores.

To be called Evolution Fresh, Inspired by Dannon, the new products will capitalize on Danone’s long history of making yogurt and the extensive reach of Starbucks, which has grown to more than 10,000 U.S. stores.

“Yes, it is a new business channel for us, but I wasn’t really looking at it because of business,” said Franck Riboud, chief executive of the Danone Group. “I was really looking to Starbucks because I love their community, the 70 million customers who visit their stores each week, and the way they attract and talk and listen to that community.”

Yogurt is one of the hottest categories in food, introducing new brands, flavors and permutations at mind-numbing speed, and shaking up traditional players like Danone and Yoplait, which is owned by General Mills and the French dairy cooperative Sodiaal. Chobani, the company widely credited with awaking U.S. interest in yogurt, didn’t even exist 10 years ago, and now its founder is a billionaire.

At a time when dairy companies are fighting over limited space on the refrigerated shelves in grocery stores, Danone’s expansion into Starbucks offers the yogurt company a powerful new sales outlet.

Still, Americans consume far less yogurt than their European counterparts. The French, for example, eat a little more than 72 pounds (144 cups) of yogurt per capita in a year, Riboud said, while Americans each eat an average of roughly 13 pounds (or 24 cups).

That gap has convinced companies like Starbucks that as fast as yogurt sales have increased here, there is still plenty of room for the market to grow.

“When I attended the natural foods show in Anaheim in the spring, I could not believe the ubiquity of yogurt brands,” said Howard Schultz, chief executive of Starbucks. “And over the last 18 months, there has been an acceleration of yogurt sales in our stores that is bigger than anything we’ve seen in the past.”

Harry Balzer, the chief food industry analyst at the NPD Group, has been calling yogurt “the food of the decade” for more than a decade.

“Why yogurt is the food of the decade for that long is for this primary reason: You don’t need to prepare it,” Balzer said. “It can be breakfast, it can be lunch and it is the fastest-growing dessert at dinner time, but what’s best about it is there is no cooking and no cleaning up involved, and that’s exactly what Americans want.”

Yogurt sales have grown quickly over the past decade. Packaged Facts, a market research firm, estimates that U.S. yogurt sales grew 6.6 percent, to $7.3 billion in 2012, compared with 2011, driven almost wholly by increased sales of Greek yogurts.

But Balzer said sales had flattened this year because children were not eating as much.

“Greek yogurt is a very important part of what’s driving the market, but it’s an adult product,” he said.

The perceived health benefits, he said, are secondary to convenience, but health is why Starbucks decided to rethink the yogurt parfait it has long sold.

“Over the last few years, we have certainly begun to notice that anything we did in our stores that even evoked a healthier alternative has resonated with our customers,” Schultz said. “Adding healthier items and tweaking existing ones to increase their healthiness has provided a significant tail wind in terms of serving our customers.”

Additionally, he said, Starbucks’ business has become less dependent on morning traffic than ever before.

“People are using Starbucks stores in many, many other ways throughout the day, and that has created opportunities for us in the food space,” Schultz said.

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