Greek Yogurt Growing Fast, Creating Jobs

Chobani yogurt greek By Michael Hill

SOUTH EDMESTON, N.Y. (AP) -- Chobani is making Greek yogurt as fast as Americans are eating it.

Its plant here in upstate New York farm country already pumps out 1.5 million cases of the thick yogurt every week, and pallets are stacked four stories high in the chilled warehouse.

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But like other Greek yogurt makers, Chobani is expanding.

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.

Greek yogurt is made a bit differently than the thinner, more watery product that dominated U.S. supermarket shelves for decades. The whey is strained off, leaving a creamier yogurt high in protein and low in fat.

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."

Ulukaya has harnessed the Greek yogurt boom more successfully than anyone. In 2005, he bought an old Kraft Foods plant southeast of Syracuse with plans to make the kind of yogurt common in his home country of Turkey. He believed the standard yogurt found on many supermarket shelves "wasn't made right."

His company, Agro-Farma, started by making yogurt for Stonyfield Farm other companies before launching Chobani in 2007 with limited runs to stores in the New York City area.

The Chobani plant today bustles with 14 production lines mechanically squirting yogurt into plastic cups that zip down conveyor belts.

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.

By multiple accounts, the seeds of the Greek yogurt boom were planted years ago through Fage imports to New York City. Fage opened its U.S plant in 2008 to keep up with growing demand. Russell Evans, Fage's marketing director, said sales have grown on average of 50 percent a year for a decade.

"It's going up exponentially every year," he said. "It's constantly expanding."

Though often pricier, Greek yogurt is increasingly becoming a refrigerator staple as consumers seek healthy, "authentic" foods. Kate Winnebeck, a 30-year-old Rochester, N.Y., resident, likes its tanginess, but said it was nutrition that initially attracted her.

"I was looking for ways to get even more protein into my diet," she said. "And I didn't want to, at the time, eat a lot of eggs in the morning. I don't have time for that. I work full-time."

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.

The Chobani and Fage two plants are a boon to upstate New York's ailing economy, not only for the more than 1,240 full-time jobs combined, but because of their voracious demand for milk from New York's dairy farmers (it takes roughly four gallons of milk to make one gallon of Greek yogurt). Fifty or more tanker trucks make daily deliveries to the Chobani plant alone.

Little wonder Gov. Andrew Cuomo's administration chipped in $16 million in state incentives for the Chobani expansion, and the governor became personally involved in ironing out a local intra-community dispute that was holding up the Fage expansion.

"It's been very good for the dairy industry," said Greg Wickham, chief executive officer of Dairylea Cooperative Inc., which supplies milk for Chobani.

Another manufacturer, Alpina, plans to open a plant to the west in Batavia this summer that will make both Greek and Swiss-style for a yogurt and granola product.

At least initially, Greek yogurt zoomed to popularity without a lot of attention from the major yogurt makers. Citigroup Global Markets in an analyst report last month said its growth to $1 billion in annual sales - out of total yogurt sales of $4.1 billion - caught the major U.S. yogurt makers "flat-footed." The result: Chobani had 53 percent of the Greek yogurt market, followed by Fage with 17 percent, France's Danone (its subsidiary Dannon makes Oikos) with 14 percent and General Mills (Yoplait Greek) with 5 percent, according to Citigroup.

The big players have clearly taken steps to grab some of the market back. General Mills added capacity and Dannon is in the process now, according to representatives of the two companies. General Mills this winter will introduce Yoplait Greek Parfaits with granola and new flavors of Yoplait Greek yogurt in multi-packs.

"I think that you're going to see a very high level of innovation in the yogurt category generally and in Greek yogurt specifically over the next 6 to 12 months," General Mills chief executive officer Kendall J. Powell told a conference call with analysts last month.

General Mills and Dannon also began TV advertising this past summer. Oikos took direct aim at Chobani with a TV ad claiming their Greek yogurt was preferred 2-to-1 in a taste test.

UBS analyst David Palmer said Greek yogurt's momentum continues and the market shift to Chobani has accelerated.

Still unclear is where the Greek market will top out, or whether it will crash back to earth like the old low-carb craze. Few expect a drop off anytime soon.

"We believe it is not a fad but rather a part of the market that is here to stay," said Dannon spokesman Michael Neuwirth said. "At what level, I can't predict."

One note of caution comes from one of Greek yogurt's U.S. pioneers, outgoing Stonyfield CEO Gary Hirshberg, who said he's noticed "a little bit of a rebound" for regular yogurt recently. He said just recently some supermarkets that swapped out regular Stonyfield yogurt for its Greek Oikos yogurt (Danone owns a majority share of Stonyfield) have asked to swap back.

"It's hard to tell where this is going," Hirshberg said.

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