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Cover Story: The Greek Yogurt Revolution

June 3, 2013
By: Catherine Merlo, Dairy Today Western and Online Editor google + 
Greek Yogurt
Greek yogurt accounts for 40% of the growing yogurt retail sector, up from just 2% in 2004. It takes about 3 lb. of milk to make 1 lb. of Greek yogurt.  

Greek yogurt triggers new dairy demand, but are dairy producers profiting?

When Chobani founder Hamdi Ulukaya set out in 2005 to create his American brand of Greek yogurt, the Turkish immi­grant and his small team spent 18 months perfecting the quality and taste of their creamy, protein-rich dairy product.

And how that perfectionism has paid off.

Chobani has since become the top-selling Greek-yogurt brand in the U.S., and the company has exploded into a $1 billion business. Helped by its high-visibility role as a 2012 Olympic sponsor and its social media fan base, Chobani is almost synonymous with the Greek yogurt boom.

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But Chobani isn’t the only player reaping Greek yogurt’s mounting rewards. Yogurt brands like Dannon, Fage, Yoplait and a host of others also are seeing success with dairy’s new rising star.

Just eight years ago, Greek yogurt accounted for only 2% of the U.S. yogurt market. Today, it comprises an estimated 40% of the $6.5 billion yogurt retail sector.

In 2012, the U.S. produced 4.4 billion pounds of spoonable, or non-frozen, yogurt. That required 5.7 billion pounds of cows’ milk, or about 3% of the U.S. milk supply, says Andrew Novakovic, a Cornell University dairy economist. About one-third of that made its way into Greek yogurt.

What makes Greek yogurt different from its conventional shelf-mates is its lower water content. The Greek yogurt process strains much of the whey from the milk. The result is a thicker, higher-protein product that—with its health halo, tangy taste and versatility in recipes—"is a new way to enjoy yogurt," says Michael Neuwirth, senior director of public relations with The Dannon Company.

Moreover, Greek yogurt requires 3 lb. of milk for every 1 lb. of finished product. "Forty percent of the market using three times the milk is a very positive evolution for the producer community," Neuwirth says.

But is Greek yogurt’s increased milk usage translating into real profits for U.S. dairy producers? It depends on where they’re located. Yogurt, like other Class II products, tends to be made where milk production is large and major cities are nearby.

New York state is a good example. Thanks in part to Chobani’s New Berlin plant opening in 2007, the state was named "America’s Yogurt Capital" last year after surpassing California as the nation’s top yogurt producer. From 2007 to 2012, New York’s yogurt plants nearly tripled in production to 692 million pounds, says Gov. Andrew Cuomo’s office.

During that same five-year period, the amount of milk used to make yogurt in New York increased sharply, from 166 million pounds to about 1.7 billion pounds. Since 2000, the number of New York yogurt processing plants has nearly doubled to 27. Another major plant, Muller Quaker Dairy in Batavia, N.Y., will begin yogurt production this year.

Most of New York’s increased production is due to the rise of Greek yogurt, Cuomo’s office adds.

Those may be exciting numbers, but New York’s yogurt boom carries what dairy economist Novakovic calls "the Chobani paradox."

"While it is certainly true that growth in the yogurt sector in New York is a very positive development, the benefit is likely not as large as seems to be widely perceived," he says.

The primary benefit stems from direct plant employment and the resulting economic contributions to the local community, Novakovic says. While dairy farmers gain increased market security and reduced transportation costs, he says there is only a small effect on the price of milk, which is largely determined by national pricing factors.

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FEATURED IN: Dairy Today - June/July 2013

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