Yogurt Nation

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Yet the category's growth is also being propelled by studies that suggest the nutritional benefits of eating dairy products as part of a low-calorie diet. And yogurt, as a predigested, cultured dairy product, can be an alternative source of calcium for people who are lactose intolerant. Nonfat and low-fat dairy foods contain seven nutrients of which American diets generally fall short: calcium, potassium, fiber, magnesium and vitamins A, C and E. Three servings of yogurt daily help prevent osteoporosis and contribute to weight loss. Of course, not every yogurt product is as healthy as its image. An average 6-oz. cup can have as many as five teaspoons of sugar--about 80 calories--the same amount as in a 1.5-oz. Hershey's milk-chocolate bar. And artificial sweeteners such as aspartame are the subject of vigorous debate as more studies investigate potential health risks.

Dannon believes that healthy yogurt can fit comfortably under the convenience umbrella, and it is spending $60 million in advertising to educate consumers about the health and digestive benefits of probiotics--and make them more aware of Dannon's Activia and probiotic drink DanActive. Dairy groups in Europe, where probiotics are well established, see the segment as a major driver of growth over the next few years. "Yoplait will understand the success of Activia and follow soon," says Dannon CEO Juan Carlos Dalto. It's not every CEO who invites competition, but here's his logic: "You don't need only one company doing the job--you need the two or three leading brands."

That includes Gary Hirshberg, the "C-E-Yo" of Stonyfield Farm, based in Londonderry, N.H., whose seven-cow farm has since 1983 become a company with $211 million in sales. Stonyfield Farm has tripled sales in five years, helped no doubt by Groupe Danone's distribution muscle. The French company completed its purchase of 85% of the firm in 2003.

Hirshberg's passion for organics as a way to health and a better environment led him to start the company. Now he can't keep pace with the trend. "Organic demand has gone absolutely bonkers," he says. To keep up, Groupe Danone recently approved $66 million over three years for Stonyfield to expand its New Hampshire plant, built for $592,500 in 1989.

Organic-yogurt sales are limited only by the growth in organic-milk production, which is climbing 20% to 30% annually. "It's the 10,000-lb. cow in my life," says Hirshberg. To find enough organic milk, Stonyfield Farm subsidizes farmers as they convert to organic production and offers price guarantees on the milk it buys. "Conventional-milk pricing has fallen to levels not seen since the 1970s," says Hirshberg. "It's a disastrous situation for farmers with a cost structure based on 2006 energy costs." The only silver lining, he says, is that it has helped some dairy farmers recognize that organic is the way to go. But many are daunted by the time it takes to switch to organic production: three years for a farm and one year for a cow.