World Dairy Diary

Greek yogurt now accounts for a quarter of the total yogurt market after a dizzying growth spurt that is especially apparent here in the heart of upstate New York. The nation’s No. 1 and No. 2 Greek yogurt brands — Chobani and Fage, respectively — are both expanding plants within 60 miles of each other, and another company is building a plant in western New York. The expansions come as the big U.S. yogurt makers are focusing on Greek products, too.

While the quick growth has some hallmarks of a food fad — think cupcakes or bubble tea — the long-term investments point to a widespread industry belief that many Americans will continue to like their yogurt a bit richer.

“I personally do not believe that the yogurt story has started yet. I believe the yogurt story in this country is about to start,” Chobani’s founder, Hamdi Ulukaya, said during an interview in his office. “The magnitude hasn’t started yet.”

The company said production will increase from 1.5 million cases a week to more than 2 million when the current $134 million expansion is completed this year. Another $128 million Chobani plant being built 2,000 miles west in Twins Falls, Idaho, will add still more.

About 60 miles northeast, the Greek company Fage (pronounced FA’-yeh) is in the early stages of doubling the capacity of its 3-year-old plant in Johnstown, N.Y. to about 160,000 tons of yogurt annually.

The NPD Group, a consumer marketing research firm, reports that Greek yogurt appeals most to adult females and that it’s more popular in smaller and higher-income households.

In Australia, seven flavors (Peach, Blueberry, Strawberry, Vanilla, Mango, Passion Fruit, and Pineapple) are available in Woolworths stores throughout New South Wales.

In Canada, five flavors (Black Cherry, Strawberry, Peach, Plain and Pomegranate) are available at a variety of Loblaw banner stores in the Greater Toronto Area and Hamilton. Loblaw Cos. Ltd. will serve as the test market retail partner in the Greater Toronto Area for a one-year period.

“For the millions of Americans who live with lactose intolerance, Yoplait Lactose Free yogurt delivers worry-free consumption with the great taste expected from Yoplait,” General Mills added.

In a double-blind trial, researchers investigated the effect of vitamin D on the glycemic status, cholesterol levels and endothelial biomarkers of diabetics. Patients were given either a plain yogurt drink or the same drink fortified with vitamin D, twice a day for 12 weeks.

Patients who had taken the vitamin D yogurt also had improved cholesterol levels with lower total cholesterol and low-density lipoprotein, the “bad,” cholesterol and an increase in high-density lipoprotein, the “good,” cholesterol.

All the improvements in cholesterol seemed to be due to the reduction in insulin resistance, the study said.

Agro Farma founder and CEO Hamdi Ulukaya said the decision to move to the Magic Valley was tied to the region’s milk production capacity and trainable workforce. Idaho is the nation’s third leading dairy producer, with the majority of those dairy farms centered outside cities like Twin Falls and Jerome.

The Twin Falls Urban Renewal Agency and city council members approved an agreement earlier Thursday helping pave the way for the new facility.

Under terms of the deal, about $4.3 million in urban renewal money will go toward acquiring land, and almost $13 million more will go toward infrastructure including water lines, wastewater improvements and utilities. The city will chip in $6.75 million in tax dollars for wastewater pretreatment and sewer line improvements.

The plan is to have the facility open sometime next year, with wages for workers starting at $14 per hour.

“It’s a milk-rich product,” said one industry spokeswoman.

Fage, which began flying its yogurt in from Greece in 1998, suspected the market was big enough to justify a plant in the United States. That plant opened in Johnstown, N.Y. in 2008. Meanwhile, another Greek-style yogurt plant, operated by Norwich-based Agro Farma, began producing Chobani Greek yogurt at a former Kraft Foods plant in South Edmeston, N.Y., in 2007.

Today, Chobani says it has become the best selling yogurt in the United States. Fage says it isn’t far behind, ranking fourth. The boom comes despite their steeper prices.

And dairy farmers are scrambling to meet demand.

“For the first time in over a decade, we have reason to be optimistic about dairy in the state of New York,” said Julie Suarez, director of public policy for the New York Farm Bureau.

Both companies, meanwhile, have plans to expand.

Production of yogurt in New York increased by 57 percent from 2004 to 2010, according to figures from the state Department of Agriculture and Markets. But the amount of milk used in manufacturing yogurt statewide quadrupled, rising from 149 million pounds in 2004 to 665 million pounds in 2010, reflecting the relative gains by Greek-style yogurt.

While Chobani labels its products “Greek yogurt,” Fage officials say their company, based in Athens, produces true Greek yogurt. Whether Greek or Greek style, the yogurt’s production is a boon for dairy farmers.

“Greek-style yogurt uses a lot of milk,” said Jessica Ziehm, spokeswoman for the state Department of Agriculture and Markets. “It uses three to four times the amount of milk that regular yogurt requires.”

And the result has been popular with consumers.

“What people are enjoying most about Greek yogurt is the flavor and the rich texture,” said Mona Golub, spokeswoman for Price Chopper supermarkets. But she said the health benefits also are a strong selling point.

It’s natural, with no artificial flavors or ingredients, and it has little or no fat or cholesterol. Referring to Chobani, she said the probiotics — beneficial bacteria that help digestion — are another attraction.

Julian Jaramillo, Alpina’s chief executive officer, said the company picked Batavia over other potential sites in several different states because of its proximity to a supply of milk from local farmers, as well as the skills of local workers.

“It is an optimal location,” Jaramillo said.

Alpina will receive an extensive package of incentives from state and local agencies, ranging from benefits under the state’s Excelsior Jobs Program, along with $750,000 from a grant program operated by the state Office of Community Renewal. National Fuel Gas Co. and National Grid also have agreed to help pay to extend utility lines to the new plant. The project also will receive property, sales and mortgage tax breaks through the Genesee County Economic Development Center and other aid from the Town of Batavia.

Alpina executives said construction on the new plant is expected to begin in August, with operations beginning by May 2012.

The region’s milk producers, combined with a location that offers easy access to major markets along the East Coast and Midwest, give Western New York a competitive advantage in the agriculture business, said Dean Norton, president of the New York Farm Bureau.

Thirty-three-people work at the plant, which is capable of using 110 million pounds of milk to produce 70 million pounds of yogurt a year. Production is expected to begin within the next few weeks.

Financial details of the sale haven’t been released but Yoplait apparently won’t be cutting staff at the newly acquired company.

“Everyone here will stay,” said Liberte marketing director Frederique Delagrave. The company currently has some 560 employees, half of whom work in Quebec.

In a statement Wednesday, Yoplait said the acquisition was part of its international growth strategy.

“Fresh dairy products will have sustained growth, especially outside Europe and in new market segments, and we intend to position Yoplait accordingly,” said Yoplait president Lucien Fa.

Liberte, which has its head office in the Montreal region, is one of the leading Canadian producers and distributors of natural and organic yogurts. It also processes organic milk and goat milk in Quebec.

The acquisition from Dean Foods comes at an unsettled time. General Mills has spent 33 years building Yoplait into the top-selling yogurt in the United States. But now, as a longtime licensee, General Mills faces the possible loss of that lucrative brand.

The French dairy Sodima has told General Mills it will sever their licensing deal in 2012. General Mills is fighting that effort.

And Yoplait’s other 50-percent owner has put its stake up for sale, drawing strong interest from rival food companies, who might want to sell the brand themselves.

Kirstie Foster, a spokeswoman for General Mills, said the company was interested in Mountain High to expand its reach into the all-natural and large-size yogurts, carried in 32-ounce and 64-ounce containers.

Asked whether Mountain High Yoghurt also represented a Plan B for General Mills, Foster said no.

“Mountain High is an exceptional brand that is experiencing exceptional growth,” she said.

Yakult USA will subsequently look to expand the drink’s coverage in the country beyond its current markets of California, Nevada, Arizona, Texas, Colorado and New Mexico.

Yogurt wasn’t the only healthier snack showing growth. Fresh fruit ranked third in per-capita consumption growth, and string cheese/pre-packaged cheese cubes or shapes ranked fourth, according to NPD’s SnackTrack, which continually monitors the consumption of snack foods both at home and out-of-home.

However, potato chips showed the second-largest consumption growth among kids’ snack categories.

The biggest selling point for Commonwealth Dairy’s yogurt is it will be branded with the Vermont Seal of Quality, said Dobousek, which means 85 percent of its milk will come from the Green Mountain State.

Though no contracts have yet been signed, Commonwealth expects to get its milk supply from St. Albans Cooperative Creamery and Agri-Mark.

Because Commonwealth will be purchasing a large amount of Class II milk, which is used to produce ice cream, frozen desserts, yogurt, eggnog, cottage cheese, and cream cheese, the demand should drive prices up for Vermont dairy farmers.

The new 40,000-square-foot building will have an output capacity of 50 million pounds — or 130 million cups — of yogurt annually. To do so, it will need 32.5 million pounds of skim milk and 400,000 pounds of butterfat annually.

“It’s very convenient. It’s very individualized …” said Balzer of yogurt in a Jan. 1 interview with National Public Radio. “This is just for you. It’s your own flavor. It has a health halo certainly surrounding it. It really does define what I think America wants from its food supply.”

Plain or flavored, served in a cup, a tube or a tub, yogurt provides calcium, potassium and high-quality protein. Some yogurts are fortified with vitamin D, which promotes calcium absorption and bone health. Yogurt is also a good option for people who have trouble drinking fluid milk. The “live active cultures” in yogurt feed on lactose, milk’s natural sugar, making yogurt an excellent choice if you’re lactose intolerant.

According to consumption research conducted by Dairy Council of California, families with children and adults in their 30s eat the most yogurt, with adults eating less in their older years. There’s plenty room for growth within the yogurt category, according to registered dietitian Andrea Garen.

“Americans have certainly embraced single-serving flavored and frozen yogurts, but plain, unflavored yogurt is still fairly foreign,” said Garen, Project Manager with Dairy Council of California. “Yogurt is a versatile food ingredient used around the world, particularly in Greek and Indian cuisine.”

The new Yogurt Parfait includes slices of fresh strawberries, covered in creamy, vanilla yogurt topped with either Chick-fil-A’s own Harvest Nut Granola blend or Chocolate Cookie Crumbs. Topped with granola, the Yogurt Parfait has 240 calories and 5 grams of fat, and the cookie crumb option brings the parfait down to 200 calories with 4.5 grams of fat. Both choices also are trans-fat free. Initially promoted as a breakfast option, the parfait will be offered throughout the day and starts at $2.25.

The low-key item isn’t expected to supplant Chick-fil-A’s mainstay chicken. But it’s a sign the company is evolving along with its customer base, said William “Woody” Faulk, vice president of brand strategy and design.

Diners want a broader range of nutritional choices, he said. The yogurt parfait may fill a need among customers who have been to the doctor and have been encouraged to adjust their diets. In that environment, “all-fried, all the time is not sustainable” for a restaurant chain, said Faulk.

“Sales of yogurt and smoothie products have been a shining star for the dairy category in recent years,” said Paul Rovey, Arizona dairy producer and chair of Dairy Management Inc.™, which manages the national dairy checkoff. “Checkoff-funded dairy ingredient marketing efforts work with key food and beverage manufacturers to assist in the development of new products that drive volume by highlighting the nutrition, functionality, versatility and good taste of dairy ingredients.”

Trading remains in line with previous statements, the group said. The retail environment remains tough, Dairy Crest said, adding that it has been using promotions to grow volume.

Sales of Country Life butter, which has been helped by an advertising campaign featuring John Lydon (formerly Johnny Rotten of the band the Sex Pistols), and Clover are up by 25% to 30%, it said.

Cathedral City sales have increased approximately 10% by volume and 20% by value over the year, Dairy Crest said.

Speaking at a presentation for analysts, chief executive Mark Allen said Dairy Crest had not been adversely affected by a move to own label products as recession-hit consumers seek value. Volumes are down 4% in own label dairy products, but Dairy Crest has been lifting volumes, he said.

The companies were pressed to halt the use of rBGH milk after more than 200 hospitals around the country — including Kaiser Permanente, Legacy Good Samaritan and OHSU in Portland, Good Shepherd in Hermiston and Southwest Medical Center in Vancouver — pledged to serve rBGH-free products to their patients, staff and visitors.

The hormone, sold under the brand name Posilac, was first marketed by Monsanto in 1994. The drug was purchased by a division of Ely Lilly last year.

Farmers use the hormone in their herds because it increases milk production by about one gallon per day per cow. It’s approved for use in cows by the U.S. Department of Agriculture, which says studies show it is safe for human consumption.