Friday, July 13, 2012

Half of All Marriages End in Divorce

The statistics have remained the same for years: 50% of all marriages end in divorce. And as of this past Monday, Tom Cruise is three for three. (Yes, I admit, the Hollywood junkie in me was stunned by how quickly those papers were signed. I honestly was hoping for a bit of drama.) 

But, just as one marriage ended, another commenced this past week, and that was between PepsiCo Inc., and the Theo Müller Group, the largest private dairy business in Germany. I first heard about the possibility of this joint partnership in April from an editor friend in Germany who expressed concerns and doubts about the possibility of the union ever taking place.

It did. And it has taken the name of Müller Quaker Dairy.

The joint effort builds on PepsiCo’s most wholesome brand—Quaker—one that many financial analysts have repeatedly said has the potential to be so much more than breakfast cereal and snack products. The venture also marks the boldest attempt by either company to offer dairy products in the States. (Over the years, select Müller products have been imported and sold through specialty, ethnic grocery stores. And, PepsiCo is in its second decade of a partnership with Starbucks and Dairy Farmers of America to market packaged, ready-to-drink, Starbucks-branded coffee-milk beverages.)

The first products Müller Quaker Dairy plans to roll out are refrigerated yogurts. They will initially be produced in Germany and imported into the States. Production will be transferred in 2013 to a new, state-of-the-art yogurt manufacturing plant in Batavia, N.Y., that the joint venture is building.

The initial rollout includes 16 stock-keeping units (SKUs), representing three different lines.

Müller Corner and Müller Greek Corner come in a dual-compartment, square-shaped container. The add-ins can be flipped, stirred or dipped into the yogurt. Corner varieties include Blueberry, Strawberry, Crispy Crunch, Choco Balls, Chocolate Flakes and Crunchy Granola. The Greek-style varieties include Honeyed Apricot, Strawberry, Blackberry & Raspberry, and Caramelized Almonds.

Müller FrütUp varieties include Blueberry Bliss, Very Cherry, Luscious Lemon, Peach Passion Fruit, Radiant Raspberry and Splendid Strawberry. The fruit comes in a mousse that sits on top of the yogurt for the consumer to stir in.

I know these products are great because I have enjoyed them during my frequent visits to Germany.  The company has decades of category-leading innovation and dairy expertise and is one of Europe’s most well-known yogurt producers. I understand the company’s desire to get into the U.S. market.

And who is a better mate than PepsiCo? After all, it is the largest food and beverage business
in the States with a dedicated innovation-driven research and development program, a robust go-to-market system, and superior marketing and brand recognition.

I want this marriage to work, not only because the products warrant success, but also because these two companies are vested in growing the dairy business through innovation. But I have concerns. For starters, after seeing Kraft Foods Inc., cease production of its Athenos Greek yogurt line after only being in the market for about a year and a half, I worry that the Greek yogurt consumer will not embrace a product boasting a German brand and the Quaker Oats man. After all, Athenos was an established Greek hummus, cheese and pita brand, and it could not sustain a yogurt line.

Then there’s the fact that most Americans don’t know the Müller brand. The good news is that with 16 items rolling out at once, the brand should be noticed on the store shelf. But is there room for that many SKUs?

Indeed, one of the biggest challenges for any dairy trying to break into the yogurt market is getting shelf space. PepsiCo, with its mammoth distribution system, is already a player in the refrigerated dairy case with its Tropicana juice brand. Is that enough clout to reduce the facings of another brand? That is what must happen. It’s not like a supermarket is going to add extra cooler space to house these 16 new items, which, in their defense, do bring excitement to the category.

The good news is that Müller Quaker Dairy is working with a trusted team of agencies to bring the playful discovery of the new products to life. The company would not disclose specific marketing dollars, but did tell me that they are touching all communication points--TV and print ads, street sampling, in-store activation and online engagement initiatives--to reach its target consumer, which is women between the age of 21 and 49 years.

Who knows, maybe supermarkets will add refrigerated dairy space. After all, Americans consume less than half the amount of yogurt that Europeans do.

Good luck to Müller Quaker Dairy! Congratulations and best wishes for many happy years!

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