Müller’s recent entrance into the Spanish yoghurt market has resulted in fierce confrontation with Danone, the market’s leading yoghurt manufacturer. Euromonitor International reports.
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The very end of 2002 saw the entry of Germany’s Müller (Molkerei Alois Müller GmbH & Co KG) into the Spanish yoghurt market. This German-based multinational dairy manufacturer launched its line of premium yoghurt including brands of Duo, Cappa, Deleite and Blanco Nieve in December.
A market driven by value
The group’s intention to expand its presence in Europe through Spain is understandable. Yoghurt enjoys a well-established reputation as a healthy product that is digestion-friendly and appropriate to be consumed at any time of the day, except it is not so popular during breakfast.
Furthermore, it has performed well in the last few years, with sales set to achieve growth of 8% in value and 4% in volume in 2003, driven by added-value products such as probiotic lines in drinking yoghurt and cream and mousse-enriched lines in solid/spoonable products.
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By GlobalDataA twin-track strategy for Danone
Danone’s strategy in recent years has revolved around two pillars. On the one hand, the company has invested heavily in the introduction of premium lines as a way to increase differentiation from private labels and to capitalise on demand for added-value, premium products. In 2002 alone, the company introduced as many as 15 new products, and a further 13 will have been launched by the end of 2003.
Just as significantly, the group has managed to forge strong distribution agreements with supermarket chains such as Carrefour, El Corte Ingles and Eroski, which has ensured the presence of Danone’s new products all over Spain.
Consequently Danone accounts for more than half of total value sales, and its five Spanish dairy plants have a combined production capacity of 437,000 tonnes.
The clash: a mere question of time
With a common target market, the consumer of premium lines of yoghurt, along with the financial capacity of both groups to sustain a long campaign, the clash between Danone and Müller was only ever a question of time.
Both groups launched ferocious campaigns on television and in the press to support their products during the first months of 2003. The battle, however, reached a climax when in March 2003 Danone presented two new yoghurt lines, Maxifruit and Duetto. Both brands bear a striking resemblance in format, formulation and packaging to Müller’s own premium line of yoghurts, Capa and Duo. Capa is a line of creamy fruit-enriched yoghurt and Duo a product combining yoghurt and cereals.
Müller takes Danone to court
The reaction of Müller was immediate: the group filed a lawsuit against Danone in Tribunal de la Competencia (the Spanish high court intended to ensure free competition among companies), accusing the French group of ‘abuso de posicion de dominante’ (abuse of dominant position).
According to Müller, Danone would have prevented the introduction of Müller’s products in key sections of the distribution network, especially in chains dependent on Danone’s comprehensive range of dairy products and offers. It contends Danone’s launch of Maxifruit and Duetto was timed to offer the company’s existing distributors such similar products to Capa and Duo that they would be less inclined to stock the new Müller alternatives.
Danone has denied any sort of misconduct, and according to company sources is determined to contest the claims in court.
Far reaching implications
There is speculation that if Müller fails at the Spanish high court, the issue might be taken to the tribunal in Brussels, which has a long tradition of imposing heavy fines on companies charged with dominant position abuse. Moreover, Müller’s reaction might be to take the fight to other European markets, where Danone’s position is weaker, possibly sparking fiercer competition on a wider regional level.
However, opinion within the industry suggests the most likely outcome will be a compromise between the two parties, with Danone loosening its grip on the distribution network and ceding some of its ground in the premium yoghurt segment.
This is also likely to pave the way for other companies into the premium yoghurt segment in Spain. As a result, price competition in the added-value segment should intensify, reducing margins and the current gap between volume and value growth of these products, which will be more in line with the trend recorded in other Western European markets.
Related research from Euromonitor
The Market for Packaged Food in Spain
