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The Background Yoghurt and yoghurt drinks tap into two key sales drivers in the grocery market: health and convenience. As a result, the sector has enjoyed year-on-year growth since the 90s, and with ongoing investment in new product development and advertising, the boom is set to continue. While 60% of the yoghurt-buying public are primarily attracted to it because of its healthy positioning, yoghurt is a family favourite that is in the enviable position of being seen as both a dessert and a snack, and is considered a virtuous 'afters' by consumers with very different lifestyles.

Yoghurts have ridden out the food scares and anti-obesity campaigns of the past few years more successfully than many other dairy-based foods, with their healthy positioning and multipacks making them a convenient option for children's snacks and packed lunches.

The total yoghurt and yoghurt drinks market is expected to reach £950m by the end of 2006 - a growth of more than 50% since 2001, according to Mintel.

It is yoghurt drinks that have really taken off in the past five years. Seen as portable, healthy and a snack option, their sales will reach £330m this year, a rise of 432% since 2001. They now account for a quarter of the total market, with functional yoghurt drinks extending their reach beyond traditional yoghurt consumers and being taken in a similar way to vitamins as a morning health boost.

The functional yoghurt drink sector hit the UK in 1996 with the launch of Yakult's probiotic drink, but the brand has recently seen its share fall as rivals have launched into the sector. Its positioning has focused on the science behind the product rather than on its taste; last year it launched a low-fat version.

The key sector trends to have emerged, with manufacturers quickly copying each others' successful entries, have been functional yoghurt drinks positioned as a children's snack, dessert-flavoured yoghurts and added benefits to products in the virtually fat-free sector. Muller's Vitality pre- and probiotic drink was launched in 2002 and went on to overtake Yakult, but it is Danone's Actimel that now leads this subsector.

Fat-free losing ground

The healthy credentials of yoghurt are a key reason for purchase, but there has been a shift in exactly what consumers consider healthy and the type of products they prefer. This has seen the virtually fat-free sector lose sales as the added health benefits found in functional products have gained favour.

Indeed, most products launched in the past year are claiming health and functionality benefits rather than low-fat credentials. Danone, for example, is adding fibres and proteins to its Shape brand and Muller began enriching its Vitality range with Omega-3 in November 2005.

Yoghurt is particularly entrenched as a family favourite, with fridges stocked with multipacks, ensuring a simple and healthy option is available for kids.

Products aimed at children have come under close scrutiny since the nation became obsessed with the fight to curb rising obesity rates. While the sugar and flavouring content of some products has been criticised, yoghurt is one food that parents feel they can feed their children with a clear conscience. Organic brands have fared well in this climate.

'It all comes under the halo of being fundamentally good for you, but there's a low level of knowledge and a high level of faith,' says David Gouge, director of Brand Development Business, who has worked with yoghurt brands. 'Yoghurt have the advantage that kids like it and mums (believe) it's good for them.'

With only three or four big manufacturers battling it out for market share, competition is fierce and investment in the category is high.

Muller and Danone combined account for about 50% of the market. Muller Corners and Mullerlight have the biggest brand share and the company is one of the sector's biggest advertisers. Last year it introduced umbrella advertising created by TBWA\London under the strapline 'Lead a Muller life', creating a masterbrand and associating it with people enjoying life to the full. It has invested heavily in NPD, introducing limited-edition flavours to create seasonal interest. Its Corner offering now has 28 variants, including Fruit and Crunch Corner.

Danone's brands are mostly positioned in the healthy eating sector. Actimel focuses on wellbeing, Danacol includes plant sterols to help reduce cholesterol, Shape is its low-fat brand and Activia competes in the functional yoghurt pot sector.

When it comes to flavours, strawberry has been in the lead since the early-90s and featured in a quarter of all new product activity over the past year.

Snack potential

While yoghurts are firmly placed in the snacking sector within the home, they are less easily adapted to consumption as an out-of-home snack. Yoghurt drinks go some way toward fulfilling that function, but in mainland Europe some products have taken on the biscuit market with products that bridge the gap between chilled cakes and yoghurt pots, using the structural stability of a cake or biscuit component to make handheld snack bars.

The phenomenal growth of the UK yoghurt market looks set to continue and will reach £2.25bn by 2011, an increase of 40% at current prices from 2006, according to Mintel. This is a real-market increase of 28%, with yoghurt drinks, the main driver, set to achieve a market share of 23% by 2011, compared with 20% now.

YOGHURT/YOGHURT DRINK MANUFACTURERS BY SALES
2005 2001 01-05
pounds m % pounds m % % change
1 Muller 383 31.8 274 34.7 39.8
2 Danone 212 17.6 80 10.1 165.0
3 Nestle 80 6.6 68 8.6 17.6
4 Yeo Valley 73 6.1 68 8.6 7.4
5 Yoplait 50 4.1 46 5.8 8.7
6 Unilever 40 3.3 0 0.0 n/a
7 Onken 33 2.7 29 3.7 13.8
8 Yakult 29 2.4 21 2.7 38.1
9 McNeil 27 2.2 5 0.6 440.0
Other brands 216 17.9 35 4.4 517.0
Own-label 63 5.2 163 20.7 -61.3
Total 1206 100.0 789 100.0 52.9
Source: Mintel.

YOGHURT/YOGHURT DRINK BRANDS BY SALES
2005 2001 01-05
pounds m % pounds m % % change
1 Muller Corner 175 14.5 170 17.2 2.9
2 Mullerlight 130 10.8 125 12.6 4.0
3 Danone Actimel 113 9.4 48 4.9 135.4
4 Yeo Valley Organic 53 4.4 47 4.8 12.8
5 Danone Bio Activia 50 4.1 28 2.8 78.6
6 Yoplait Weight Watchers 49 4.1 52 5.3 -5.8
7 Nestle Ski 42 3.5 49 5.0 -14.3
8 Danone Shape 37 3.1 40 4.0 -7.5
9 Muller Vitality drink 32 2.7 13 1.3 146.2
10 Onken yoghurt 31 2.6 53 5.4 -41.5
11 Yakult 29 2.4 28 2.8 3.6
12 Benecol 24 2.0 9 0.9 166.7
13 Muller Vitality yoghurt 18 1.5 5 0.5 260.0
14= Nestle Sveltesse 16 1.3 11 1.1 45.5
14= Yoplait Petits Filous 16 1.3 17 1.7 -5.9
16= Flora pro.activ 15 1.2 0 0.0 n/a
16= Total Greek yoghurt 15 1.2 14 1.4 7.1
18 Rachel's Organic 14 1.2 10 1.0 40.0
19 Muller Amore 13 1.1 0 0.0 n/a
20 Nestle Munch Bunch 10 0.8 12 1.2 -16.7
Source: Mintel.

ANALYST COMMENT - Anne Bourgeois Head of PR, Datamonitor

The UK yoghurt market is worth £850m and is set to grow a further 18% to almost £980m in 2009. A key factor driving sales growth has been increasing demand from consumers for dairy products with functional properties, which has led to the promotion of added-value products such as probiotic yoghurts.

This looks set to be a record year for yoghurt, with 756 launches worldwide in the first six months of the year. Yoghurt drinks are also growing, with 210 launches hitting the market from January to June.

Yoghurt drinks tap into all three of the most important consumer trends: health, convenience and sensory, or in this instance taste, benefits. Since yoghurt drinks are sold in portable single-serve packs, they are particularly conducive to on-the-go consumption and offer an easy way to aid digestion.

Sales of functional products are rising across all food and drink categories and are appreciably faster than those of mainstream food and drinks markets. The UK functional food market was worth £419m in 2004, with annual sales growth averaging almost 6% over the 1999-2004 period. It is forecast to grow at a slightly slower but still significant 5.6% between 2004 and 2009, far outstripping growth in the overall food and beverage market.

The most important health benefit for UK functional food consumers is gut health, accounting for almost a third of all functional food and drink sales in 2004.

Most adults have been told from child-hood that milk is an essential part of a healthy diet, which makes it particularly worthwhile to launch functional milk variants aimed at improving bone health, as well as yoghurt variants intended to improve gut health.