Starbucks and Danone Joining Forces to Sell Yogurt

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 stores in the United States.

“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 today, 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 American 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 space offers the yogurt company a powerful new sales outlet.

Still, Americans consume far less yogurt than their European counterparts. The French, for example, eat 33 kilos, or a little more than 72 pounds (144 cups), of yogurt per capita in a year, Mr. Riboud said, while Americans each eat an average of only 6 kilos, or 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,” Mr. 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 last decade. Packaged Facts, a market research firm, estimates that yogurt sales in the United States grew 6.6 percent, to $7.3 billion in 2012, compared with 2011, driven almost wholly by increased sales of Greek yogurts.

But Mr. 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 in its stores. “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,” Mr. 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’s 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,” Mr. Schultz said.

The company bought Evolution Fresh, a juice business started by the founder of Naked Juice, in 2011, and earlier this year, it paid $100 million for La Boulange bakery. Evolution products have begun showing up in Starbucks stores and on grocery shelves, and La Boulange’s products will begin replacing the company’s traditional lineup of baked goods and foods later this year.

Mr. Schultz and Mr. Riboud have known each other in passing for several years, but first met for a heart-to-heart about eight months ago, after Mr. Riboud read “Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time.” “I really wanted to meet Howard because of what he expressed in the book about the management of human resources and the DNA of the Starbucks company,” Mr. Riboud said. “I got the feeling that our DNA was not so far apart when I read about all the social programs of Starbucks, and I asked for an appointment.”

He shared a famous speech his father, Antoine Riboud, had made in 1972 about the social responsibilities a company has, and in March after a nice dinner, Mr. Riboud and Mr. Schultz shook hands on the deal to collaborate on Evolution Fresh, Inspired by Dannon. “I have eaten more yogurt in the last 18 months than I have eaten in my entire life,” Mr. Schultz said. “The product I love is Actimel” — a probiotic yogurt drink known as DanActive in North America — “which I think is an unbelievable hidden jewel within Danone.”

The new products will first appear next spring in Starbucks stores and in grocery stores in 2015. The companies said they would then roll them out in various international markets.

Article source: http://www.nytimes.com/2013/07/24/business/starbucks-and-danone-joining-forces-to-sell-yogurt.html?partner=rss&emc=rss