Dannon Co., Inc.

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Dannon Co., Inc.

120 White Plains Road
Tarrytown, New York 10591-5522
U.S.A.
(914) 366-9700
Fax: (914) 366-2805

Wholly Owned Subsidiary of Groupe Danone S.A.
Founded: 1942; incorporated as Dannon Milk Products, Inc.
Sales: $600 million
Employees: 700
SICs: 2023 Dry, Condensed & Evaporated Dairy Products

Dannon Co., Inc., popularized yogurt in the United States in the 1950s and has remained the nation’s leading producer of yogurt. Originally marketed as a no-frills health food, Dannon yogurt achieved success in fruit-filled and sweetened varieties. The brand is sold throughout the United States by a network of more than 50 groups of food brokers.

Yogurt has long been a staple in the diet of Balkan and Near East peasants. A product formed from milk into the consistency of custard by fermentation in the open air, it was popularized in western Europe soon after 1900 by Elie Metchnikoff, a Nobel laureate who attributed the long life of Bulgarians to one of the two bacteria that converted milk into yogurt. Although Metchnikoff s hypothesis has not been borne out by further investigation, yogurt is a nutritious, vitamin-rich food. It can be eaten by the estimated 50 million Americans who have difficulty in digesting milk, and studies have suggested that it can aid in the prevention of gastrointestinal infections.

By virtue of his position as director of the Pasteur Institute in Paris, Metchnikoff conferred credibility on yogurt as a health food. Its consumption spread to western Europe, especially France (where even in the 1980s eight times as much yogurt was being eaten per person as in the United States). A Spanish businessman, Isaac Carasso, obtained cultures from Bulgaria and the Pasteur Institute. He began to manufacture yogurt in Barcelona in 1919 for sale through pharmacies. As business expanded he established a French branch in the 1920s. His son Daniel, for whom he named the product Danone, directed the French operation.

Daniel Carasso came to the United States in 1942 with Joe Metzger, a Swiss-born Spanish businessman, and Metzger’s son Juan. They purchased a small yogurt factory in New York City and continued production using the family formula but changing the name from Danone to Dannon. At first Dannon Milk Products turned out only 200 half-pint glass jars a day of the obscure product for small numbers of ethnic Turks, Arabs, and Greeks and, in Juan’s words, “health-food fanatics.” Juan Metzger, who washed out the returnable jars every day, later recalled in a People interview, “We only sold $20 worth a day, but even then we were the bigger of the two companies in the business.”

In order to publicize yogurt, Dannon’s founders hired an advertising firm. Samples were distributed in quality restaurants, airports, and places where international travelers congregated. Soon radio comedians were poking fun at the product. In one week the Metzgers counted 24 jokes about yogurt on the air, mostly ridiculing its claims to foster longevity. “What was the best one?” Joe asked his son. “Well,” replied Juan, “there was the one about the 97-year-old woman who died, but the baby lived.”

Although the American public of the 1940s seemed to find yogurt’s exotic name and origin hilarious, it was slow to accept the product. In that era “health food” generally was regarded as a preoccupation of wacky cultists, based largely in southern California. Moreover, the tart, sour natural flavor of yogurt was not to the liking of the American public. Around 1950, however, Dannon found the key to wider acceptance by adding a layer of strawberry preserves to the bottom of the container. The company slogan changed from “Doctors recommend it,” to “A wonderful snack... a delicious dessert.” A low-fat yogurt was introduced later to soothe the qualms of weight-conscious customers.

Before long a fleet of 55 leased trucks was supplying virtually every New York supermarket and delicatessen with Dannon yogurt. Celebrities like Bernard Baruch, Danny Kaye, Adlai Stevenson, Judy Holliday, and Kim Novak admitted to liking it. Waxed cups replaced the glass jars. Dannon moved from the Bronx in 1952 to a larger facility in Long Island City, Queens. In 1958 Juan Metzger said, “We knew we were over the hump two years ago, when Bob Hope told a joke about yogurt and nobody laughed.”

Daniel Carasso returned to Europe in 1948. Joe Metzger became president of Dannon Milk Products, Inc., in 1952, moving up to chairman of the board in 1959, when Juan Metzger became president. By then Dannon was producing yogurt in six flavors, comprising half to three-quarters of the yogurt made in the United States, and generating annual sales of about $3 million. In 1959 the company was acquired by Chicago-based Beatrice Foods Co. for between $3 million and $3.5 million in stock. Metzger continued to head its Dannon yogurt subsidiary and became its chairman of the board in 1965.

By 1967 Dannon came in 10 varieties. The company was selling about 30 percent of the 100-million half-pint cups of yogurt being purchased annually in the United States. Automation had dramatically increased production, but the basic method of making yogurt continued almost unchanged: bacteria converted the sugar in pasteurized low-fat milk, causing it to thicken and become yogurt. Shipping depots had been established in Boston, Detroit, Philadelphia, and Washington because Dannon, which claimed to be the first company to achieve national distribution for perishable foods, would not trust delivery of its product to anyone else.

To broaden its customer base, Dannon added rock ‘n’ roll shows to its radio outlets and distributed “Go Yogurt” buttons to schoolchildren. An airplane-borne streamer spread the message, “Yannon Dogurt—oops /Dannon Yogurt” to crowds at Brooklyn’s Coney Island. Dannon later shot the first American television commercial made in the Soviet Union. It featured an 89-year-old native of the Caucasian republic of Georgia eating Dannon yogurt while a background voice said, “And this pleased his mother very much. She was 114.”

By 1981 U.S. yogurt sales had reached 1.3 billion containers a year, with Dannon accounting for one third. There were plants in New Jersey, Florida, Ohio, Texas, and California as well as New York City. The number of flavors had grown to 15, including apricot, Dutch apple, boysenberry, and coffee, although strawberry remained the most popular. Frozen yogurt and a premixed yogurt called Melange had also been successfully introduced. In 1981, however, Dannon reluctantly abandoned direct delivery to West Coast stores, because retail chains there insisted the product be sent to their refrigerated warehouses.

In 1981 Dannon was acquired from Beatrice by BSN-Gervais-Danone, a Paris-based company that partly stemmed from the original Carasso yogurt venture and had grown into one of France’s largest conglomerates. BSN paid a hefty $84.3 million in cash for the company, which earned about $3.7 million on sales of about $130 million in fiscal 1981, but a BSN spokesman told Advertising Age, “To buy back the name we own around the world, all over Europe, in South America and Japan, is something we were prepared to pay for.”

By 1985 the U.S. yogurt market had grown to about $1 billion, but Dannon’s share had fallen to about 21 percent. For three years the company’s advertisements had been urging the public to “Get a Dannon body,” but now it was adding new, richer yogurt products to stay ahead of the competition, which now consisted of 125 other brands. During 1984 and 1985 the company brought to market a French-style blended yogurt called Dannon Extra Smooth, another French-style breakfast yogurt with nuts and raisins, and the extra-fruity Dannon Supreme, a dessert yogurt with higher fat content and more sugar. Dannon’s president told a Wall Street Journal interviewer, “We’ll never grow if we’re only a medicine for diet nuts,” while the president of its advertising agency said, “Dannon sat back on its heels for a long time; now we plan at least three new products a year.”

These new products, aided by a doubling of the advertising budget to $12 million in 1985, lifted Dannon’s market share to 26 percent in 1986. For the first time the company began advertising on network television and doing trade promotion, as well as consumer advertising, in order to make sure it received enough shelf space in supermarkets. Minipacks of six cups were introduced in 1985. By Dannon’s silver anniversary in 1992 the company was selling two million cups a day in dozens of varieties and flavors.

Consumption of yogurt dropped in 1989 and recovered only marginally in the following years. To stimulate sales, Dannon in 1992 began test-marketing Sprinkl’ins, a yogurt for children filled with fruit, sugar, and mix-in candy bits. An employee at Grey Advertising, Dannon’s agency, told a New York Times reporter, “Yogurt hasn’t been very kid-friendly in the past because the taste was too sour. This is a way of creating a new generation of yogurt eaters.” The inside of the package holding four small cups of Sprinkl’ins was printed with games and puzzles.

Nutritionists had nothing good to say about Sprinkl’ins; one compared it to junk food because of its high sugar content. Children, however, responded enthusiastically. Nationally introduced in 1993, Sprinkl’ins had sales of $43.9 million that year. In 1994 the company introduced Dannon Danimals, a new yogurt line decorated with pictures of wild elephants and bears. Dannon promised to donate 1.5 percent of the sale price to the National Wildlife Federation.

At the same time Dannon was increasing the sugar content in its product line, it was running print ads encouraging people to substitute yogurt for oil, sour cream, milk, or eggs in preparing food. These ads included recipes for lower-calorie versions of desserts like brownies and included a toll-free number. It was also testing Instead, a sour-cream alternative, and was considering expansion of its own branded yogurt cheese into other areas.

Dannon introduced no fewer than 23 new products in 1994 and 11 more in the first part of 1995. Its share of the $1.6 billion U.S. market for refrigerated spoonable yogurt reached 37 percent in early 1995. In April of that year the company won two Edison Awards for product innovation: a silver for its new Pure Indulgence frozen yogurt and a bronze for Sprinkl’ins. Grey Advertising won an award from the Advertising Research Foundation for a campaign that, according to the foundation’s president, “clearly moved the needle on sales.” The campaign, introduced in July 1994 with the theme “Taste Why It’s Dannon,” showed spots with such scenes as a woman watching the fattening treats on a dessert cart transformed into their Dannon Light counterparts.

Among the new 1994-95 products were Tropifruta, aimed at the Hispanic market, Dannon Light dessert flavors like creme caramel and banana cream pie, and Double Delights, which combined fruit toppings with Bavarian cream or cheesecake yogurt. “For years it was ‘health, health, health,’ with consumers,” Dannon marketing executive Robert Wallach told Brandweek. “Now they’re swinging back to moderation, looking to balance taste with health.”

In 1994 the Dannon Co. was 89.32-percent owned by Groupe Danone, the new name adopted by what had been BSN-Ger-vais-Danone. Dannon’s corporate headquarters moved from New York City to White Plains in the 1980s and to Tarry town in 1994. The streamlined manufacturing system consisted of only two production plants: in Minster, Ohio, and Fort Worth, Texas. The research-and-development center, in Minster, was scrutinizing freshly made yogurt for quality, developing new products, and selecting and studying the bacteria used in making yogurt for optimum taste and texture. Dannon’s distribution network carefully timed delivery to store shelves for optimal freshness and quality.