PepsiCo is entering the yogurt category.
Last week a number of news outlets reported that the company will soon start selling yogurt in several cities in the Northeast. PepsiCo has formed a partnership with German dairy company Theo Muller and will sell yogurt under the Muller brand.
This isn’t a small introduction; the two companies are investing over $200 million in a new factory in upstate New York and presumably will invest heavily in building brand awareness and generating trial.
In an article last week, The New York Times quoted Sam Lteif, chief executive of Muller Quaker Dairy: “We’re very excited about this. There’s a huge opportunity for dairy in the U.S. market, and we’re optimistic about getting into it.”
It is easy to see why PepsiCo would want to enter the yogurt market: the category is booming and it fits with PepsiCo’s focus on nutritious foods.
But I suspect the Muller launch will be a huge challenge for three reasons.
First, entering an established category like yogurt is always difficult. Consumer habits are set, channels are full and norms are established.
Second, introducing a new brand is a daunting task. It takes time and money and luck.
Third, yogurt is a particularly competitive category right now. Established leaders Dannon and Yoplait (General Mills) are desperately trying to push back newcomers Chobani and Fage. Everyone is innovating and investing.
PepsiCo is entering a massive dogfight. It is hard to imagine that Muller will emerge from the fray in good shape.
If PepsiCo is serious about getting into yogurt, the company should acquire one of the four big players. The Muller launch may be just a way to test the waters.