Are you the master of your brand?

Chobani announced that they will be launching 9 non-dairy SKUs this month. The coconut-based products—both cup and bottle format—have 25% less sugar than other non-dairy alternatives.

So What? For those of you who haven’t been along for the crazy ride in the yogurt category the last decade, let me start with a brief overview on Chobani:

In 2005, Hamdi Ulukaya got a loan from the Small Business Administration and bought an old Kraft Foods plant with the goal of making yogurt similar to what he’d grown up with in Turkey: low in sugar and thick in texture. That year Greek yogurt commanded a scant 0.8% market share. In less than five years, Chobani realized over $1 billion in annual sales and became the leading seller of Greek yogurt in America. Today, Chobani (which means ‘shepherd’ in Turkish) is the market share leader in the $9 billion yogurt space with over $2b in sales.

How’d Chobani do it? While I hate backward analysis (it rarely factors in the power of luck), there was a definitely strategy at play in the early days. First, Hamdi was prescient to the changing taste of Americans. The market for ‘simple ingredients’ and ‘less processing’ was niche in 2005, but it had momentum that Hamdi was willing to bet on. The yogurt category, with its health halo and processed characteristics, was ripe for disruption. Second, producing high protein yogurt isn’t easy. Most mass-produced yogurt at the time had no ‘straining’ step, and putting in the proper equipment would be a huge capital investment for big companies. Hamdi knew that if he could gain shelf space fast enough he could displace the bigger brands before they could make the necessary investments. Lastly, there was Chobani’s pricing strategy. Most yogurt at the time was selling for ~$0.65 a cup, with artisan Greek brands going for ~$1.65. Chobani came in at ~$1. Greek yogurt is much more expensive to make—more protein equals more money—but Hamdi realized that taking the margin hit would provide a (temporary) competitive advantage. Together, amplifying weak consumer signals and digging a technical and pricing moat, pushed Chobani to amazing success.

However, all is not well in yogurt-land. Greek yogurt sales are down 5% and dollar sales of yogurt in general dropped nearly 2% last year. Have we reached ‘peak yogurt?’ Possibly, although I think it’s a momentary pause as the big players in the category reassess their strategies. Which brings us back to Chobani’s new non-dairy offerings.

As the dominant player in Greek yogurt, Chobani is feeling the pain with this segment decline. In the last several years their actions have indicated that they desperately know they need to diversify their offerings or risk sinking as the Greek segment tumbles. They’ve launched flavor variations, pushed into smooth yogurt (the very yogurt they originally disparaged), launched—and then dropped—a line of savory, yogurt-based meze, offered a sour cream alternative and, just a few months ago, made an advancement into kids with Gimmees. Non-dairy looks like another attempt to maintain relevance…but what if its more than that?

Look closely at the label of these new non-dairy offerings and you’ll find something strange. The cup and bottle products just say: coconut-based Chobani. Nowhere do you see the word ‘yogurt’ or ‘milk.’ Executives claim this is for legal reasons, which I’m sure is mostly true. The battle between dairy companies and alternative dairy producers is heating up and Chobani likely sees it not ending well. However, I think there may be an ulterior motive, one that points at Chobani’s longer term strategy. By walking away from labels, and leaning into their name, Chobani could be setting themselves up for a massive brand stretch.

In terms of food, if I say Philadelphia you likely think ‘cream cheese.’ However, did you know that much of what’s labeled Philadelphia in the supermarket isn’t cream cheese at all? Other than its iconic, silver-boxed original, most Philadelphia products (e.g. fat free, 1/3 less fat, etc.) don’t fit the cream cheese ‘standard of identity.’ Kraft-Heinz has, for years, been playing up the Philadelphia name and minimizing any mention of cream cheese. I’d conjecture that this was done to reposition the brand in consumers’ minds, moving it from a ‘commodity’ dairy product to profitable and ductile masterbrand. Today, Philadelphia stands for creaminess, richness and amazing flavor, characteristics that Kraft-Heinz has extended into Philadelphia Dips, RTE cheesecake cups, Philadelphia Snacks, dual textured spreads, snack bars, and Philadelphia Cooking Crèmes.

I believe Chobani is following Philadelphia’s lead. The only permanent relief Chobani can hope to receive from the volatility of the yogurt category is to diversify and escape it. Accordingly, Chobani is setting themselves up to be a ‘lifestyle brand’ broadly associated with less processing and clean ingredients. I predict they will push strongly into the rest of the refrigerated dairy category next, slowing shedding their Greek yogurt shackles (Chobani cottage cheese or Chobani snacking cheese?) before moving to frozen dairy—I think Chilly Cow’s (the ultra-filtered milk light ice cream) arrival signals a potential weakness and white space forming in Halo Top’s current reign. From there, Chobani could extend into a number of categories that have too much sugar, are overly processed or (if this coconut execution is a success) are in need of a plant-based overhaul.