Dannon is Dairy Foods' 2014 Processor of the Year
A generation ago, Americans ate more butter than yogurt. Annual per capita consumption of butter was 4.4 pounds and yogurt was 3.7 pounds, according to the U.S. Department of Agriculture. Butter consumption hasn’t changed much since then, but the yogurt category has exploded, increasing every year since 2000. Per capita yogurt consumption was 14.9 pounds in 2013, according to the USDA.
Yogurt today is a long way from its roots as a niche product sold in health food or ethnic groceries.
Consumer acceptance of Greek yogurt certainly has helped the category. Now, food manufacturers are promoting yogurts made in other styles, like Australian, Bulgarian, Icelandic and Vietnamese.
One American company has been making yogurt for nearly 75 years, long before these Johnny-come-latelys arrived on the scene. The Dannon Co. opened shop in a New York City borough in 1942. Now headquartered in White Plains, N.Y., Dannon has gone through a few owners since its founding. Today it is a division of Danone, the French multinational that also owns Evian and other bottled water brands, and is a leading maker of early life nutrition and medical foods.
Dannon has been a long and loud advocate for healthy, good-for-you dairy foods and beverages. The company’s mission, said CEO Mariano Lozano, is to bring health through food to as many people as possible. The company uses many tactics to achieve its mission. In the last year alone, Dannon has:
- Rolled out innovative new products in the yogurt category.
- Entered the dessert category with its Creamery line.
- Expanded yogurt in the foodservice segment through a partnership with Starbucks.
- Pledged to improve the nutritional profile of its yogurt portfolio by reducing sugar and fat.
- Promoted the health and nutrition of cultured dairy foods through research, symposia and other avenues.
For these reasons, Dairy Foods has named The Dannon Co. the Processor of the Year. (We also honored the company in 2006.)
Bringing health through food to the American public is a huge task, especially in light of the nation’s eating habits which have led to obesity problems for children and adults alike. In addition, the public is bombarded with conflicting research studies. One declares a nutrient to be “bad” followed by another study finding the opposite result, leaving consumers confused and skeptical about diet advice.
But Dannon is up to the task of improving Americans’ health. Chief Marketing Officer Sergio Fuster said Dannon has specific brands that satisfy consumers’ need-states, which include snacking satisfaction, dieting, taking care of yourself and everyday pleasure. He pointed to various brands that address specific demographic markets and need-states, including:
- Activia, for digestive health.
- Dannon All Natural, made with natural ingredients for a clean label.
- Creamery, classic desserts reinvented with Greek-yogurt or Grade A milk.
- DanActive, to help support the immune system.
- Danimals and Dan-o-nino, dairy snacks and smoothies for children.
- Light & Fit, nonfat yogurt promoted to help with weight management.
- Oikos, traditional high-protein Greek-style yogurt.
“The company’s broad portfolio makes us unique,” he said.
Dannon also makes Oikos frozen yogurt, the No. 2 national brand in frozen yogurt, the company said. (Separately, Dannon purchased a frozen yogurt maker, YoCream of Portland, Ore., in 2011.)
The Dannon Co. has come a long way since 1942 when Daniel Carasso, a Spaniard living in France moved to the United States and founded Dannon Milk Products Inc. in the Bronx. Carasso changed the name Danone to Dannon to make the brand sound more American. (“Danone” was the nickname Carasso’s father, the company founder, called his son.)
Carasso and his business partner Joe Metzger started making plain yogurt, then flavored varieties and then the iconic fruit-on-the-bottom version. Today, Dannon offers 200 SKUs. The company’s newest product line is Creamery, launched this year. It is an attempt to capture another day-part or usage occasion: a dessert for the evening hours. The yogurt-based desserts deliver a “cheesecake” experience without the graham-cracker crust, Lozano said.
Creamery’s high-protein Greek yogurt-based desserts and milk-based chocolate puddings have less fat than their inspiration sources and are more indulgent than yogurt, Fuster said. “Protein” is the pre-eminent theme in food marketing (especially dairy foods) today. The pudding has 5 grams of protein in 5.3 ounces; the blueberry cheesecake has 7 grams. Even though the products are considered to be an “indulgence,” they keep to Dannon’s mission of health and wellness. The desserts contain fewer than 200 calories per serving.
Lozano is an Argentinean who joined Danone in March 2000. After stops in Slovakia, South Africa and Brazil, Lozano was appointed President and CEO of The Dannon Co. in January 2014. His perspective, gained from working around the world, gives him a good idea of the potential for yogurt sales in the United States.
For example, in Spain and France, the average annual consumption of yogurt is 70 pounds per person and 32 pounds in Argentina, he said. Lozano said U.S. consumption is 17 pounds (a little higher than USDA’s preliminary 2013 figure). Lozano puts the consumption trend this way: the average American eats less than one yogurt every seven days. So consider the sales – and the impact on dairy farming – if every American takes three dairy servings a day, and one of those servings is yogurt. Dannon’s aim, he said, is to “try be part of the daily dairy life of Americans” with yogurt that is “relevant, sexy and healthy enough for people to eat much more frequently.”
Who eats yogurt?
So far, women and children are sold on the merits of yogurt, whether it is taste, convenience, low calorie count or because of functional benefits like digestive health. But the yogurt industry is changing the perception that yogurt is for women only. Advertising has become more gender-neutral than it was even two years ago.
Greek yogurt has brought more men to the category. The high-protein content first attracted body builders and athletes. Greek yogurt is now a mainstay in the shopping baskets of all Americans. Makers of granola bars, breakfast cereals, chip dips and salad dressings use Greek yogurt as an ingredient.
During the 2012 Super Bowl, Dannon’s Oikos brand appeared alongside manly beer ads, and landed the Greek yogurt in the top 10, Fuster said. This summer, Dannon signed a deal with the National Football League to make the company the league’s official yogurt sponsor. Fuster called that “a strong statement” and one that should bring more men to yogurt. The sponsorship and Dannon’s line for children also dovetails nicely with the NFL’s anti-obesity Fuel Up To Play 60 campaign to encourage children to exercise for an hour a day.
Another change in the yogurt category has been a shift away from marketing yogurt as a diet food for women to positioning yogurt as a mainstream snack for everyone. Yet part of what holds back consumption from growing is how we eat. Our dining habits have shifted from eating a meal at a table to snacking at a desk or in a car.
Lozano observed that we are a nation of eaters and drinkers on-the-go, and points to our love affair with soft drinks, lattes and smoothies. But most of the yogurt on the shelves (nine out of 10 products, by Lozano’s reckoning) require a spoon to consume. So Dannon is developing grab-and-go products that can be consumed on the run and without a spoon. Two such products have been developed for children and for adults. For children, Danimals pouches are convenient lunchbox products that can be frozen and then thawed by lunchtime. For adults, Dannon is testing Light & Fit protein shakes with 12 grams of protein and 5 grams of fiber in a 10-ounce bottle.
In Europe, yogurt is frequently eaten for dessert, Fuster said. In the United States, another food trend is “indulgence,” which takes on many meanings. Dannon interprets this as sweet but without high calories or fat. Thus, in July, Dannon rolled out chocolate flavors of Oikos with caramel on top.
Another opportunity is “out-of-home,” the industry term for restaurants and institutional outlets like schools and universities. Dannon packages a 6-pound bag for foodservice customers, like hotels and restaurants that make their own yogurt parfaits on their premises.
This year, Dannon and the coffee chain Starbucks announced a partnership to develop yogurt parfaits. The relationship came about by chance - as Lozano tells it, Danone’s Chairman Franck Riboud met Starbucks CEO Howard Schultz at an event and started talking (“passionately,” Lozano said) about food and beverage trends and how to make an impact on society with yogurt. The men agreed to do something together, shook hands and Riboud passed the ball to his U.S. operation to work out the details.
The result, Fuster said, is that Dannon “renovated” the yogurt parfait and test-marketed juice-yogurt smoothies under the Starbucks brand Evolution Fresh (“Evolution Fresh Inspired by Dannon”). With 12,000 Starbucks stores and 20 to 30 million customers every day, that is a lot of exposure to Dannon’s products. The foods and beverages will appeal to a consumer segment Fuster called the “Natural Purist” who looks for minimally processed foods, with low sugar content and as close to raw as possible. Evolution Fresh products can be consumed as snacks, but most probably will be purchased at breakfast time, Fuster said.
While Dannon’s yogurts are made with conventional milk, the company has a tie to organic dairy foods through Stonyfield Farm, Londonderry, N.H., which is majority owned by parent company Danone. Stonyfield and Dannon have shared the Oikos Greek yogurt brand, however, earlier this year Dannon took on the Oikos brand with Stonyfield now using Stonyfield Greek for its Greek yogurt product. Similarly, Dannon shares a tie with YoCrunch, which is also a sister company and specializes in yogurt with toppings.
As noted, Dannon’s mission is to bring health through food to as many people as possible. The company is acutely aware of the country’s obesity problem (called an “epidemic” by some observers), especially among children. Lozano points out that 35% of children age 5 to 12 are overweight or obese. While it might seem self-serving for a yogurt company to promote its products as health food to the overweight, it doesn’t mean the company is wrong. Yogurt is healthier and more nutrient-dense than potato chips or cheese curls. And Dannon is taking steps to improve the nutritional profile of its foods. In March, at the Building a Healthier Future summit in Washington, D.C., Dannon announced a four-part commitment to:
- Improve the nutrient density of its product portfolio by increasing nutrients that Americans are encouraged to consume.
- Reduce the amount of total sugar to 23 grams or less per 6-ounce serving in all of its products for children and in 70% of the company’s products overall.
- Reduce the amount of fat in its portfolio so that 75% of products will be low-fat or fat-free.
- Invest $3 million in nutrition education and research focused on healthy eating habits.
The summit was organized by The Partnership for a Healthier America. Dannon said it based these goals on guidance from the Institute of Medicine and the 2010 Dietary Guidelines for Americans, which recommends that Americans consume more nutrient-dense foods, like yogurt. Nutrient-dense foods are those that provide more vitamins and minerals, like vitamin D and potassium, and less fat, sugar and salt. According to Dannon, most yogurts are already nutrient-dense and provide three of the four nutrients of public health concern most lacking in American diets as identified by the 2010 DGA: calcium, potassium and Vitamin D.
Dannon plans to achieve its goals by 2016 through a combination of innovations and reformulating existing products. Last year, the yogurt maker reformulated its best-selling children’s product, Danimals smoothies, and reduced sugar by 25%. Dannon’s new Greek yogurt product for children, called Danimals Greek, already meets the criteria.
The $3 million investment will help support the development of education programs for health care providers, such as WIC (Women Infant Children) nutrition counselors.
“Additionally, these funds may support research grants and scientific partnerships with U.S. universities and organizations dedicated to nutrition research, and outreach to diverse populations. We collaborate with foundations, academic institutions and individual researchers in many ways to support nutrition and health. One example of this is recently we established a grant for nutrition education with the Academy of Nutrition and Dietetics Foundation,” said Michael J. Neuwirth, Dannon’s senior director of public relations.
Dannon makes yogurt at its own facilities in Ohio, Texas, Utah and Oregon. It has a pilot plant at its headquarters. Lozano said Dannon has to find “smart ways” to expand and keep up with demand. To make sure it was operating efficiently, Dannon re-examined the capabilities of each of its company-owned plants. Following that review, Lozano said certain SKUs can now be produced at any plant. Dannon also has turned to other dairy processors. For example, Dannon has a co-manufacturing relationship with Schreiber Foods in Green Bay, Wis.
Capital investment in equipment and training has made Dannon an efficient processor. Its production facilities are highly automated. Form-fill-seal machines turn plastic roll stock into yogurt cups that are sealed immediately after filling. Not only is this an efficient processing and packaging method, but also it provides the highest level of food safety. FFS machines also lower a manufacturer’s carbon footprint.
At the end of the production lines, freshly filled yogurt packages and beverages are assembled on pallets. When Dairy Foods visited Dannon’s Minster, Ohio, plant in 2012, it saw driverless automated guided vehicles pick up pallets and convey them to cooling tunnels. Then the product moved to a storage cooler before being shipped to distribution centers. Dannon has DCs in Dayton, Ohio, Orefield, Pa., Salt Lake City and Fort Worth, Texas.
Milk is the raw material for every dairy product, and buyers and sellers naturally have different agendas: farmers want the best price for their milk while dairy processors seek the lowest price. Both parties entail risk because milk prices and availability fluctuate, sometimes wildly, for a variety of reasons.
So Dannon’s relationship with McCarty Family Farms, Rexford, Kan., is noteworthy. In 2011, Dannon struck a deal with the dairy farm to be the sole supplier of milk for Dannon’s Fort Worth plant. Besides wanting to reduce price volatility, Dannon sought to improve its environmental sustainability. A milk condensing operation at the farm reduces the environmental impact of milk shipping and it allows the farm to reuse the water that is removed during condensing of the milk.
The partnership has created more than 50 jobs, effectively doubling the size of McCarty Family Farms to more than 100 associates.
The mission begins at home
Dannon starts its mission to bring health through food with its employees, known as Danoners (pronounced “da-KNOWN-ers”). Yogurt and Evian water are freely available at the corporate office in White Plains, N.Y. Employee benefits include after-work yoga classes and in-office massages. The emphasis on healthy habits turns Danoners into ambassadors for better living. Dannon educates employees about yogurt so that they can speak knowledgably about it with their family, friends and neighborhoods and at volunteer events, like community fairs.
“We feel we have a responsibility to educate America” about yogurt, said Tony Cicio, vice president of human resources.
Promoting health extends beyond food. To encourage physical fitness, Dannon challenged employees to walk (or otherwise be active) every day. It has a map showing a route from a processing plant in Montreal to its frozen yogurt plant in Oregon and passing through the headquarters in New York and the plant in Ohio. Employees track their progress with a step-counting device. Six hundred employees have joined the challenge to get physically fit and one employee has lost 60 pounds, Cicio said.
Leaders have to take care of themselves, he said. Dannon does more than look after the health of its employees. It nurtures their professional lives. Dannon trains employees on a four-part CODE: Committed, Open, Doer and Empowered.
Every employee has been declared a leader, Cicio said, and that recognition gives them permission to speak their minds at meetings. The company celebrates individuality. It wants employees to collaborate. Innovation may come from a junior person, he said, and it becomes contagious.
“The culture is to be accountable for your tasks and be open to and responsible for challenges,” he said. It might be difficult for a subordinate to speak up in a meeting at other companies, but “those at Dannon who don’t speak up feel left behind.”
Rather than a top-down, command-and-control management style, the company recognizes that those who do the work know best how to do it. That is why a team of line employees from the Ohio plant traveled to France to meet an equipment manufacturer. The team gave input on the best way to set up the line. Safety teams at the plants instruct co-workers on best practices in manufacturing and equipment use. Video cameras on the production lines allow team members to observe their own and others’ work habits. Factory personnel correct their peers when they see unsafe behaviors such as improper lifting techniques or reaching under or over equipment.
Newly acquired companies maintain their cultures, but learn the CODE. “We bring them into our culture but we recognize the local culture and respect their best practices. We respect why we bought the company in the first place,” Cicio explained.
Another part of the corporate culture is transparency. At headquarters, that is literally true. There are no hardwall offices, not even for Lozano and senior executives. They work at desks in an open office plan. For meetings and for privacy, teams meet in conference rooms with doors that can be closed.
What’s next for Dannon?
Dannon is in an enviable position for a dairy processor. Retailers and consumers love the product, and they want more. Fuster pointed out that yogurt is a top 15 category for U.S. grocers. Retailers will add more shelf space for the category if consumer demand continues to increase. Again, Dannon’s frame of reference for yogurt’s potential is Europe. While a typical U.S. grocery store might devote 20 feet of refrigerated shelf space to yogurt, Fuster said, its Parisian counterpart might offer up to 60 or 80 feet.
The Hispanic population in the United States is seen as a demographic market that can help Dannon grow. It favors drinkable yogurts, especially. As noted, Dannon’s Creamery line includes puddings, which poses a logical question: Does Dannon plan to develop more nonyogurt foods? Lozano is not yet ready to answer that publicly.
Right now, the Dannon CEO and his team are busy trying to convince every man, woman and child in America to eat one yogurt every day. If they succeed, Dannon and every other yogurt processor selling in the United States will benefit. As will the health of every yogurt consumer.