PepsiCo: US dairy products market is ‘nowhere near its full potential’

By Elaine Watson

- Last updated on GMT

PepsiCo: US dairy products market is ‘nowhere near its full potential’
The US market for dairy“remains largely untapped”, according to PepsiCo, which is pumping $206m into a new US facility to make yogurts and other dairy products as part of a joint venture with Müller.

The factory - in Batavia, New York - will become operational in 2013 and create 186 jobs.

However, products made at Müller factories elsewhere under the new ‘Wave’ joint venture will hit shelves in the US earlier, a spokeswoman told FoodNavigator-USA

“Yogurts will be introduced prior to the Batavia facility being operational. Exact timing is not being released for competitive reasons.”

Meanwhile, US retailers had responded favorablyto news of PepsiCo’s planned market entry, she claimed. “While the[US]dairy category has grown significantly in recent years, it is nowhere near its full potential.The US market for dairy is growing, but remains largely untapped.”

A ‘tremendous opportunity’ for a new market entrant

She added:“Greater consumer awareness of the health benefits of dairy has recently sparked greater demand for high-quality dairy products. Per capita in the US, consumption of yogurt and value-added dairy products is one-third that of Europe. There is tremendous opportunity for new products to enter the US dairy market.”

Asked why PepsiCo was confident it could cash in, she said: “The joint venture brings together two companies with complementary strengths.

“PepsiCo is the largest food and beverage business in the US, with a leading position in health and wellness thanks to popular brands like Quaker and Tropicana, and expertise in taste and go-to-market logistics and marketing.

“Müller has the technical dairy manufacturing expertise and is well-known for producing Europe’s most unique and delicious yogurt.”

‘Convergence products’ combine dairy with other foods such as grains and fruits.

So what kind of yogurts does the JV plan to sell?

She said: “Yogurt is a great standalone business, but the opportunities for growth are even greater when considering the potential for ‘convergence’ products – those that combine dairy with other healthful and delicious foods from growing categories such as grains and fruits.

Asked if Greek yogurt or functional yogurts with added health ingredients formed part of their plans, she added: “Value added dairy and yogurt will be included in the portfolio. Nothing more is being released at this time for competitive reasons.”

And the brand name? PepsiCo has “nothing to share at this time.”

Euromonitor: There is still room for a new player

Market researchers contacted by this publication when news of the joint venture first broke, said a new market entrant such as PepsiCo could breathe fresh life into the fixture ​and generate incremental sales rather than merely stealing market share off the top two players.

Euromonitor International senior research analyst Virginia Lee said: “If PepsiCo wants to get into this market there is a real opportunity to drive growth by expanding the number of eating occasions for yogurt so it moves beyond something you would just have at breakfast into a post workout snack or an evening snack as well.

“There is still room for a new player, as long as they can secure the shelf-space, which for a company like PepsiCo should not be a problem, at least to start with.”

Beware ‘functional’ yogurt?

While there were opportunities to talk about protein and fiber and their health benefits within Greek or other yogurt formulations, more overtly ‘functional’ yogurts had had mixed fortunes, with probiotics performing well but products with omega-3s and plant sterols proving less appealing, she said.

“The market is growing strongly, but in terms of what’s driving that growth, it pretty much is Greek yogurt right now, and I’d predict that for the next two to three years most of the action will be in Greek.”

PepsiCo entered the dairy category in 2009

PepsiCo entered the dairy category in early 2009 via a joint venture with Almarai, the largest juice and dairy company in the Middle East. More recently it coughed up a cool $3.8bn for a controlling stake in Russia’s largest dairy firm Wimm-Bill-Dann.

Germany’s largest privately-owned dairy producer, Theo Müller has built up a sizeable market share in the UK yogurt category in recent years with Müller Light, Müller fruit corners, Müller Rice, Müller Vitality (with pre- and probiotics), kids’ brand Müller Little Stars and new luxury dessert yogurt range Amoré.

It has also established a strong presence in several other European markets and entered the Israeli market in 2008.

Related topics: Markets

Related news

Show more