Competition in the yoghurts and pot desserts market has been heating up over the past year with a number of the big players, including Danone, Yoplait Dairy Crest, Nestlé and Müller, splashing out on advertising and new product development. And, unsurprisingly, it is with functional foods that many are trying to make their mark.
"The key reason for the growth in the yoghurts and pot desserts market last year is dairy's unique positioning to tap into the health trend because of its natural health credentials," explains Adam Grant, sales director at Danone. "Another main factor has been the high degree of innovation, which has been very much focused on health, together with the amount of marketing support that has been put behind brands."
Indeed, over the past 12 months Danone alone has poured £20m into its portfolio, which includes Actimel, Activia, Shape and Danacol.
On the back of all this activity, the yoghurts and pot desserts market, excluding yoghurt drinks, experienced growth of 3.1%, taking its value to £1.54bn [TNS 52 w/e January 29, 2006]. Valued at £898m, with a year-on-year increase of 6.9%, yoghurts are driving growth, accounting for 60% of the total category.
However, the second-biggest sector, chilled desserts, failed for the first time in many years to achieve growth, dropping 1.6% to £445m.
The fromage frais category also struggled to keep consumers interested, with sales dipping 2.4% to £195.4m.
Across the category, premium offerings showed good growth in the past year, with consumers wanting products at both the healthy and the indulgent ends of the spectrum.
"While healthy and wellbeing categories are growing as more and more consumers are watching what they eat, at the other end of the spectrum indulgent products also continue to grow, with the introduction of Gü Chocolate Puds a real success," says Nisa-Today's trading controller Steve Dixon.
Meanwhile, the yoghurt drinks sector continues to soar, up 50.8% to £262.2m, according to ACNielsen [52 w/e October 1, 2005], led by the runaway success of Danone Actimel - although, after years of unprecedented growth, sales have inevitably started to stabilise as the market has begun to mature.
Müller marketing director Chris McDonough says all the retailers have embraced the growing consumer trend towards convenience and health over the past 12 months in the yoghurt drinks category.
Yet, while they have increased their volumes over the past year, they shouldn't expect future growth to be of the same magnitude, he warns.
"The continued rise of yoghurt drinks now shows signs of slowing down," he says.
"However, growth is still very strong as is consumer uptake, with category penetration rising steadily during the course of the past year from 38% to 45% of households."
With the introduction of numerous me-too products offering added health benefits, such as cholesterol-lowering properties in Benecol, Danacol and Flora Pro-activ, McDonough warns that rationalisation may be necessary in the near future. This is a concern shared by Nestlé. "Functional shots are becoming very competitive and you have to wonder how many variants on a theme it is fair to ask the consumer to discriminate between," says Mark Beales, head of marketing at Nestlé Chilled Dairy UK.
That said, the company does believe there is still room for growth in both the kids' arena and in healthy on-the-go options. To cash in on the latter, Nestlé recently added an on-the-go yoghurt fruit and cereal breakfast drink called Ski Up & Go to its portfolio.
Away from all the newer fancy functional offerings, Yoplait Dairy Crest has also done a grand job of growing Yop, its traditional yoghurt drink offering. The drink rose 17.4% in value to £8.5m last year [ACNielsen, 52 w/e October 1, 2005].
Marketing director Gerry Roads says the company aims to double sales of the popular product this year. To this end, Yop will benefit from a £5m above-the-line spend.
Focus on Yoghurts & Pot Desserts (April 2006)