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PepsiCo Takes Plunge Into Yogurt

Hot & Cool Food Trends

Initiating (perhaps) a cease-fire from the cola wars, PepsiCo has decided to jump into the yogurt business, taking on new competitors such as Dannon, Fage and Chobani.

Beginning this month, PepsiCo will be selling the creamy white stuff in the Northeast and mid-Atlantic states.

Initially the yogurt will be manufactured in Europe by Theo Müller, a privately held German dairy company that will partner with PepsiCo to get into the expanding U.S. yogurt market.

But the two organizations have invested more than $200 million in a 363,000 square-foot plant in Batavia, N.Y., that will employ about 180 people and soon produce upwards of five billion cups of yogurt a year here in the USA.

Led by CEO Indra Nooyi, PepsiCo has been striving to reduce its dependence on sugary carbonated soft drinks and salty snacks, by developing new better-for-you products, and by working to make some of its existing portfolio—such as its Frito-Lay products--more nutritious. Nooyi calls the strategy “fun for you, better for you, good for you.”

Americans, on average, consume about 12 pounds of yogurt annually, which is half of what Canadians eat, and about a third of what Europeans consume. So the PepsiCo-Müller alliance views the U.S. joint venture as one with tremendous upside.

Quoted in a story by Stephanie Strom for The New York Times, Alan Faust says the yogurt products fall somewhere between Greek and conventional yogurts. Faust is director of dairy perishable and frozen foods for Kroger stores. “It’s a really high quality, flavorful product with good body texture,” Faust said.

The products will come in square packages with one corner filled with an ingredient the consumer can add to the yogurt by folding the corner or using a spoon. In addition to fruits, such as strawberry and blueberry, other add-on options include caramelized almonds, tiny chocolate-covered crunch balls and granola.

A third variety of yogurt, called Fruit Up, has more of a mousse consistency and has the fruit sitting up above the yogurt, reversing the usual “fruit on the bottom” product more familiar to Americans.

According to consumer research firm Mintel, overall U.S. yogurt sales will come in at around $7 billion in 2012; that’s about a 9 percent increase over the previous year. Dannon and Yoplait remain the dominant brands. But Greek yogurt brands such as Fage and Chobani have made big gains in the market recently.

It will be fun to see how well the new player in the category does in this new “Pepsi Challenge.”

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