It's All Greek Yogurt to Me

By AnnaLisa Kraft - July 21, 2012 | Tickers: GIS, KRFT, PEP, WFM | 0 Comments

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You may find it hard to believe but the fastest growing food item in the American market is.. yogurt! First reported by Fortune, the numbers aggregated from a Nielsen survey, Barclays reports and numbers coming from the privately held Chobani and Fage yogurt makers show yogurt sprinting past other foods. Whether you pronounce it yawgurt like the Brits or yo-gurt as in 'yo..Adrian' like Americans do it is popular worldwide. And pleasantly enough it gave me the opportunity to watch a few clips from My Big Fat Greek Wedding because as Toula’s father says in the movie as he carpools a mortified Toula and her friends to school, “Give me a word any word and I will show you how the root is Greek (pronounced Grick).” One of Toula’s friends pipes up,” Hey, Mr. Portokalos , how about …profits?”  “Yes, that is Greek, greek yogurt . “ OK that  last part didn’t really happen, but major food companies would agree with Mr. Portokalos big time.

The two biggest American food companies, General Mills Inc (NYSE: GIS), Kraft Foods Inc (NASDAQ: KRFT), and beverage behemoth Pepsico Inc (NYSE: PEP) are all making major pushes into the Greek yogurt (as well as regular yogurt) market currently dominated by Chobani, Fage, and Stonyfield Farms’ Oikos yogurt. The Quaker Oats division of Pepsi has a partnership with Germany’s  Muller and their Muller Greek yogurt, (as well as Frutup and regular yogurt) hit the US this last Monday with little fanfare, but expect the Pepsi promotion machine to ratchet up shortly. This is their first foray into the dairy market.

The one company most poised to take advantage of this is General Mills which is now devoting an entire division just to its Yoplait yogurt and other yogurt brands. They consider yogurt one of their five core global categories. They are introducing Calin, a high protein ‘functional’ yogurt to France and the U.K. and just bought back their Irish yogurt license. And they are not just offering Yoplait Greek yogurt but also Yoplait Greek 100, a lower calorie Greek yogurt (the only one approved by Weight Watchers), and Yoplait Frozen Greek Smoothies. And finally General Mills is bringing Canadian brand Liberte Mediteranee and Liberte Greek yogurts to America sometime this summer.

With the huge Greek yogurt commitment by General Mills, Kraft must be rueing the day they sold their yogurt division in 2004 to Cool Brands for after tax proceeds of $42 million. But better late than never as they have been expanding their Athenos line of feta cheese, hummus and pita chips to include Athenos Greek yogurt. In 2010 the brand manager for Kraft Athenos said he expects yogurt sales to double every year.

Finally Whole Foods Market Inc (NASDAQ: WFM) benefits as they have the most varieties of Greek yogurt available on their shelves and aside from independent health food stores and coops were the first to introduce the yogurt commercially here.

Hey Mr. Portokalos Which One Should I Buy?

There is shareholder friendly General Mills with its 3.40% yield, a P/E of 16.60 and PEG of 2.15 trading near its 52 week high of $41.06.  General Mills just recently reported impressive earnings and had fiscal 2012 sales of $16.7 billion. It’s 70% held by institutions but only .11% by insiders.  The company also reported good growth in China with the Chinese loving their Bugles, Haagen Dazs ice cream and Wanchai Ferry frozen Chinese food. Who knew?

One major caveat about General Mills. It is currently challenging a lawsuit that claims according to the FDA its Greek yogurt cannot be called yogurt or Greek style. Oops! Instead of the traditional straining procedure that is what makes Greek yogurt so thick and creamy they used a commercial dried milk powder.  General Mills  has asked the federal judge to dismiss, but any action could take months and compromise their Greek yogurt initiative.

Kraft is certainly another good alternative if lawsuits scare you. It has a P/E of 19.99 a PEG of 1.44 and a yield of 2.90%. It too, is flirting with 52 week highs since it is spinning off its global snack brands, Cadbury and Oreos to become Mondelez International. Kraft will also be joining the benchmark Nasdaq 100 on July 23. The Athenos line is not likely to move the needle on Kraft immediately but with 73.50% held by institutions, Kraft is a popular consumer staple defensive name. Kraft reports August 2.

Pepsi will not likely see immediate accretive value in the Greek yogurt introduction but as an indication that Pepsi is keeping up with the trend to healthier eating and to diminish its image as a purveyor of salt, fats and sugar it’s a step in the right direction. Pepsi has a 3.10% yield and reports July 25. It has a 17.38 P/E and a 3.10% yield and is trading close to its 52 week high of $70.89 up from its low of $58.50. Pepsi also can be proud of 40 years of dividend increases.

Whole Foods Market carries the privately branded Greek yogurts as well as all the standard healthy foods. It has pulled back from its 52 week high of $97.25. It has the highest P/E of these four at 41.97 and the smallest yield of .60%. It is also the one that has moved from $53.32 to just shy of $100 this last year.

Comparing these companies is sort of like what Mr. Portokalos said in his toast at Toula’s wedding, “ So tonight we have apples and oranges. We all different but in the end we all fruit.”  Or fruit yogurt.  Opa!

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