By Paul Ziobro
Chobani founder and owner Hamdi Ulukaya says a new manufacturing
plant should easily push the Greek yogurt brand past $1 billion in
annual sales and provide more ammunition for the company against
brands like Yoplait and Dannon that are nibbling away at Chobani's
leading share.
Next week, Chobani plans to open a new one million-square-foot
plant in Twin Falls, Idaho, that cost $450 million to get up and
running. Paired with its existing plants in upstate New York, the
new plant will allow Chobani to ship more yogurt to stores where
Mr. Ulukaya said it had been unable to meet demand. He said the new
plant also will help Chobani come up with new products, like a
children's yogurt sold in tubes.
"Our aim is to bring more people into the category," Mr. Ulukaya
said Wednesday during an interview in New York.
The new plant also will allow Chobani to do more promotions, Mr.
Ulukaya said. That was something it was unable to do in many parts
of the country, even as more mainstream yogurt brands, like General
Mills Inc.'s (GIS) Yoplait and Danone SA's (BN.FR, DANOY), have
used more discounts to steer consumers to their Greek yogurts.
Other companies, like PepsiCo Inc. (PEP), are also trying to get in
on rapid growth in Greek yogurt.
Chobani has exploded onto the yogurt scene over the last five
years with its thicker, more protein-rich product. With sales
expected to approach $1 billion in 2012, Mr. Ulukaya says Chobani
controls about 20% of the U.S. yogurt market, and that the Greek
yogurt market could double in size over the next few years.
But Chobani has begun to experience some growing pains. Its
triple-digit growth rate has slowed to about 65% this year,
according to investment bank Sanford Bernstein. Its market share
also slipped to 40% of the Greek yogurt category, down from more
than 50% in 2011. Part of that has been due to capacity
constraints, but it has also come as the Dannon and Yoplait brands
have fought fiercely to combat the share loss they have experienced
in recent years.
While Danone has been able to play catch-up lately to become a
solid No. 2 player in Greek yogurt with its Dannon Oikos brand,
General Mills's inability to find a foothold--it has just a 9.1%
share of the market--has caused some investors angst and weighed on
its share price.
General Mills has poured more money into its yogurt brands,
coming out with products like a 100-calorie Yoplait Greek yogurt,
and significantly increased promotions. Nearly half of General
Mills's Greek yogurt was sold using discounts for the four weeks
ended Oct. 12, Bernstein estimates, raising concerns that the gains
may not hold.
"We worry that General Mills might just be 'buying' share with
aggressive [promotions]," Bernstein analysts wrote in a research
report last month. General Mills reports fiscal second-quarter
earnings next week.
Mr. Ulukaya said he isn't too concerned with rivals, although he
hinted that an upcoming marketing campaign would focus on the
quality of Chobani, which doesn't use milk protein concentrate or
other thickeners like some other brands. Every pound of Chobani is
made from three pounds of milk, whereas competitors tends to use
two pounds of milk. He said other brands are gaining share through
marketing.
"You could make a bowl of macaroni and cheese and call it Greek
yogurt, and there's no regulation against that," he said.
Mr. Ulukaya has said Chobani rejected buyout offers from several
major food companies in the past and isn't currently mulling an
initial public offering or other transaction anytime soon.
"We really don't have an exit strategy," he said.
Chobani generates nearly all its sales in the U.S., with some
coming also from Canada, the U.K. and Australia, where it recently
launched. The Australia plant will likely be an outpost to expand
into Asia, with Singapore a likely early market being eyed, Mr.
Ulukaya said.
Write to Paul Ziobro at paul.ziobro@dowjones.com
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