As yogurt has moved from being a “health food” to being a mainstream “healthy food” that Americans of all ages enjoy, the opportunities for new products have burgeoned, said Kasi Reddy, vice president of research and development and quality assurance at Stonyfield Farm Inc.

In a presentation at the Dairy Management Inc.™ (DMI) Dairy Innovation Forum 2005, Reddy also explained how some of the lessons that Stonyfield has learned in the organic yogurt business—including adopting packaging innovations, leveraging consumer preferences and moving new products quickly from concept to market—could help other dairy industry segments grow.

Historically, Americans have lagged behind the rest of the world in yogurt consumption, said Reddy. While the average U.S. consumer enjoys 5.4 lbs. of yogurt a year, a consumer in France eats 76.7 lbs. per year, a U.K. consumer eats 22.9 lbs. and Canadian consumers enjoy 11.7 lbs., according to statistics from ACNielsen.

That gap seems to be closing, however, as many Americans change their approach to eating and managing their weight, according to Reddy.

Riding the health and wellness trend
“Healthy food has become the new wonder drug,” Reddy told his audience of 150 dairy, food and beverage leaders gathered for the two-day, invitation-only event in New Orleans Feb. 23-24. Yogurt has been one of the beneficiaries of food’s new role for consumers, said Reddy. An excellent source of nutrients and a natural vehicle for prebiotics and probiotics, yogurt has shown “strong and steady growth,” Reddy said.

He noted that Stonyfield’s organic yogurt is the fastest-growing brand in the grocery channel and that its smoothies are the No. 1 single-serve smoothie brand in the Eastern United States.

To achieve this success, though, and keep leveraging yogurt’s growing appeal, Stonyfield has had to do its homework and change many things about its product in response to marketplace feedback.

Paving the path for smoothies
Originally an organic farming school in Wilton, N.H., Stonyfield Farm today is a company that employs 250 people in New Hampshire and California and outsells its competition in the organic yogurt market 4-to-1, according to Reddy. In 2004, the Londonderry, N.H.-based firm had net sales of $174 million.

With more Americans looking for nutritious foods and beverages that they can eat or drink on the go, Stonyfield saw the potential for cultured dairy drinks, or “drinkable yogurts” containing “friendly and probiotic bacteria” and inulin, a calcium-absorption-boosting fiber and prebiotic for digestive health.

Traditionally, drinkable yogurt was a category the industry perceived as “too risky,” Reddy said. Among the development issues to overcome were:

• A highly acidic and tart taste.
• Poor shelf-life stability.
• High viscosity and heavy body and texture qualities.

To tackle these issues, Stonyfield set R&D objectives to develop specific product formulations aimed at targeted consumer groups, supported by consumer-specific packaging sizes and configurations. One of the key objectives for the new products was to lure non-yogurt consumers. To achieve that, the product had to meet the criteria of:

• A nutritional advantage over the competition.
• A very mild taste profile without a classic yogurt taste.
• Refreshing mouthfeel and smooth body and texture profile.
• Shelf stability.

Stonyfield’s Juice Smoothie is an example of its process and success in terms of innovation. Stonyfield’s consumers preferred the concept of this new drinkable yogurt product formulated with fruit juice and added calcium. As a result, Stonyfield devised the Juice Smoothie, the only “juice yogurt smoothie” in the natural foods marketplace, according to Reddy. Composed of organic fruit juice and nonfat yogurt, Juice Smoothies come in two flavors—Surfin’ Strawberry and Orange Wave.

Stonyfield packages all of its drinkable lines into colorful, single-serve plastic bottles and also bundled into four- and six-packs for the natural foods and grocery channels and for club stores such as Costco.

Aggressive launch timelines
Long-term R&D in functional and nutraceutical components has proven to be the foundation of Stonyfield’s success and growth over the last decade. Long-term R&D has enabled Stonyfield to launch many successful product lines with launch timelines as short as 90 days, said Reddy.

In 2004, the company launched 21 new or repositioned products and planned to introduce at least 12 new or repositioned products in first half of 2005.

Today, Stonyfield Juice Smoothies account for about 42% of the yogurt drink market in natural foods stores—a rapidly expanding area in which organic yogurt drinks are growing at 45%, said Reddy. One way Stonyfield builds acceptance is through sampling campaigns designed to turn people who don’t eat yogurt into fans. “Sampling moves product,” he asserted.

Stonyfield’s concept of what its consumers want in their products is clear: as many healthy components as possible without sacrificing natural and organic compliance, he said. In addition, Stonyfield relies on “gut feel and common sense” to pick new product ideas. He told the audience that one standard the company uses is, “If it’s innovative and healthy and you don’t have to sacrifice taste qualities, launch it.” Reddy also emphasized the value the company places on being responsive to the marketplace and quick to innovate.