MAY12,2016

Consumer
INDUSTRYUPDATE

Somethings Up at Chobani
(Potential Repercussions)
Calltoaction

We think a Chobani sale is imminent. In this 13page report we review their business and potential
bidders.

PabloZuanic
pablo.zuanic@sig.com
212 709 5310
SvetozarStefanovic
Svety.Stefanovic@sig.com
212 514 4725

HIGHLIGHTS

Summary: In late April the New York Times reported that Hamdi Ulukaya, founder and CEO
of Chobani, granted company shares to about 2,000 employees equivalent to about a 10%
equity stake. Our interpretation of that move is that a company sale (or an IPO) is imminent.
The timing is right for a host of reasons: sales are growing in the mid-teens again (and have
recovered after a tough stretch in 2013-14), comps get tougher in the back half, innovation
has been taken almost as far as possible in yogurt, and dairy costs are near historical lows.
But we also think that for its next phase of growth it needs a strategic partner/owner (not
just private equity). We estimate the company generated sales of $1.05Bn in 2015 and
could be on track to reach $1.2Bn this year. Based on other comparable transactions we
think 2.5 EV/sales could seal a deal ($3Bn EV, including about $800Mn in debt). With U.S.
yogurt per capita consumption below Argentina and Brazil, and less than half that of Spain
and France, we think the category has great growth potential under the right steward (like
Chobani was for a while, and Danone and General Mills were not), especially someone with
clout to expand the (puny) U.S. yogurt aisle, that could extend Chobani to other good-foryou categories, and grow the brand internationally (where yogurt remains fragmented to
a large extent). We do not rule out bids from KO and PEP (although the move would be a
stretch category-wise and the respective CEOs there may not have the political clout to do
that at present), but think Chobani could fit better a WWAV (and to a lesser extent other
companies trying to grow their health and wellness exposure). We rate WWAV Positive
but we recognize that initial investor reaction could be negative (given such a deal would
probably require equity and would imply a bigger bet in dairy for WWAV than Wallaby).
However, we see several strategic benefits given WWAVs track record in expanding brands,
growing distribution reach, and also think it would bolster its European platform (also, even
25% equity-funded, the deal would be near 20% EPS accretive for WWAV). Yes, we think
something is up at Chobani. See inside this report for a 13-page detailed review of the yogurt
category, of Chobani, and a discussion of potential bidders.
.

IMPORTANT DISCLOSURES AND CERTIFICATIONS.

Susquehanna International Group, LLP (SIG) is comprised of affiliated entities, including Susquehanna Financial Group, LLLP (SFG). SFG is a provider of research and execution
services. SFG is a member of FINRA. SFG does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have
a conflict of interest that could affect the objectivity of this report. Please see important disclosures on page 13.

CONSUMER INDUSTRY UPDATE MAY 12, 2016

U.S. Yogurt Market

The yogurt market in the U.S. expanded by a cumulative 27% over the past five years, or by $1.2Bn
$1.2Bn,, with
Chobani accounting for twotwo -thirds of the absolute growth.
growth. Over the last five years the U.S. yogurt market
expanded by 5% pa, but while the #3 player posted 30% annual growth, the #1 player (Danone) only grew by
1% pa, and the #2 player (GIS) grew by only 3% pa, according to Euromonitor. So in that five-year period the
lions share of growth was driven by Chobani, which accounted for 66% of the industry growth.

During the last five years the U.S. market grew 27% at 5% CAGR.

In absolute terms, Chobani added c$800 Mn of revenues to the industry, which grew c$1.2 Bn.

General Mills, Filippou Group, PepsiCo, and Danone also added to the industry growth, but
together they added less than Chobani alone.

GIS contributed 16% to the industry growth: c$200 Mn

Filippou added 13% (c$160 Mn)

PepsiCo added 10% ($120 Mn)

Danone sales added 7% ($84 Mn)

During the five-year period, Chobani gained 12 points of market share (from 7% to 19%), seven
points from Danone and three points from GIS. In 2015 Danone, General Mills, and Chobani had
33%, 24%, and 19% of total yogurt market share, respectively.

But the bulk of the Chobani growth came between 2010 and 2013, with
with its share peaking at 21% in
2013. In fact, Chobani sales only grew by 1% in 2014 (while the market grew 3.5%) and fell 4% in 2015, while
the overall market grew by 1.4%.
FIGURE 1: U.S. YOGURT MARKET IN MANUFACTURER SALES PRICES TERMS
($ Mn)
Total Yogurt S ales
Danone
Danone Pro Forma
General Mills
Chobani
Filippou Group
Peps iCo
WhiteWave
Grupo Lala S AB de CV
Yakult Hons ha Co
Cacique
Private Label
Other
Market S hare (%)
Danone
Danone Pro Forma
General Mills
Chobani
Filippou Group
Peps iCo
WhiteWave
Grupo Lala S AB de CV
Yakult Hons ha Co
Cacique
Private Label
Other

2010
4,499
1,804
1,871
1,197
297
135
na
126
45
13
9
396
-1,395
100%
40%
42%
27%
7%
3%
na
3%
1%
0%
0%
9%
-31%

2011
4,900
1,710
1,837
1,254
725
181
na
78
39
20
15
421
-1,382
100%
35%
38%
26%
15%
4%
na
2%
1%
0%
0%
9%
-28%

2012
5,199
1,737
1,882
1,201
972
203
16
73
36
21
16
463
-1,419
100%
33%
36%
23%
19%
4%
0%
1%
1%
0%
0%
9%
-27%

2013
5,434
1,858
1,858
1,299
1,125
223
92
87
38
27
16
451
-1,641
100%
34%
34%
24%
21%
4%
2%
2%
1%
1%
0%
8%
-30%

2014
5,623
1,878
1,878
1,321
1,136
264
124
107
45
28
17
461
-1,636
100%
33%
33%
24%
20%
5%
2%
2%
1%
1%
0%
8%
-29%

2015
5,704
1,888
1,888
1,392
1,089
291
125
120
46
29
17
456
-1,637
100%
33%
33%
24%
19%
5%
2%
2%
1%
1%
0%
8%
-29%

Source: Euromonitor; SFG Research

Note: Danone Pro Forma Includes Yo Crunch in 2011 and 2012 (Danone acquisition starting 2013).

Susquehanna Financial Group, LLLP

5y
% Ch.
27%
5%
1%
16%
267%
116%
nm
-5%
1%
111%
90%
15%
17%

5y 5y S hare
CAGR of Grow th
5%
100%
1%
7%
0%
1%
3%
16%
30%
66%
17%
13%
nm
nm
-1%
-1%
0%
0%
16%
1%
14%
1%
3%
5%
3%
-20%

5y Abs .
Grow th
1,205
84
17
195
792
156
nm
-6
1
15
8
60
-242

CONSUMER INDUSTRY UPDATE MAY 12, 2016

Indeed,
Indeed , more recently, General Mills and Filippou have been driving growth, while Chobani has stalled
(and even declined 4% in 2015). From 2011 to 2013 Chobani drove the industry growth, but in 2014 its sales
growth slowed to 1% from 16% in 2013, 34% in 2012, and 144% in 2011. In 2015 Chobani sales were down 4%.
In 2015 General Mills took over as the industry leader in absolute growth terms, while Filippou Group (FAGE
yogurt), WhiteWave, and Danone drove the rest of the growth.
FIGURE 2: U.S. TOP YOGURT PRODUCERS
($ Mn)
Abs olute Grow th
Danone
General Mills
Chobani
Filippou Group
Peps iCo
WhiteWave
Grupo Lala S AB de CV
Yakult Hons ha Co
Cacique
Private Label
Other
YoY % Ch.
Danone
General Mills
Chobani
Filippou Group
Peps iCo
WhiteWave
Grupo Lala S AB de CV
Yakult Hons ha Co
Cacique
Private Label
Other
% Contrib. to Grow th
Danone
General Mills
Chobani
Filippou Group
Peps iCo
WhiteWave
Grupo Lala S AB de CV
Yakult Hons ha Co
Cacique
Private Label
Other

2011
401
-94
58
428
46
na
-48
-6
6
6
25
-21
9%
-5%
5%
144%
34%
na
-38%
-13%
45%
63%
6%
-4%
100%
-23%
14%
107%
12%
na
-12%
-1%
2%
1%
6%
-5%

2012
300
27
-53
247
21
na
-6
-3
1
1
41
7
6%
2%
-4%
34%
12%
na
-7%
-7%
6%
6%
10%
2%
100%
9%
-18%
82%
7%
na
-2%
-1%
0%
0%
14%
2%

2013
235
122
98
153
20
77
14
2
6
1
-12
-245
5%
7%
8%
16%
10%
492%
19%
5%
31%
5%
-3%
-53%
100%
52%
42%
65%
9%
33%
6%
1%
3%
0%
-5%
-104%

2014
189
20
23
11
41
31
20
7
1
1
10
24
3%
1%
2%
1%
19%
34%
23%
18%
3%
3%
2%
11%
100%
10%
12%
6%
22%
17%
11%
4%
1%
0%
5%
13%

2015
81
10
70
-46
27
2
13
1
0
0
-5
9
1%
1%
5%
-4%
10%
1%
12%
1%
1%
1%
-1%
4%
100%
12%
87%
-58%
33%
2%
16%
1%
0%
0%
-6%
11%

S ales
% Mix
100%
33%
24%
19%
5%
2%
2%
1%
1%
0%
8%
4%

Source: Euromonitor; SFG Research

Chobani and Yoplait pretty much operate with one brand umbrella, while Danone has a wider range.
Back in 2010 the 40 points of Danone market share were comprised by 21 points by Danone, nine points by
Activia, five points by Stonyfield (organic), three points by DanAnimals, and two points by DanActive. Of the
seven points of share that Danone lost between 2010 and 2015, according to Euromonitor three points came
from Activia (share fell by one-third), Stonyfield lost one point, DanActive (called Actimel in Europe) lost two
points, and the rest was lost by core Danone brand. We observe that the Pepsi/Muller JV managed to get to
three points of market share, but recently that JV exited the market. It would seem looking at the market
share of companies like Fage and Chobani that the heavier, meal-replacement-type yogurts peaked in
2013.

Susquehanna Financial Group, LLLP

CONSUMER INDUSTRY UPDATE MAY 12, 2016

FIGURE 3: U.S. TOP YOGURT BRANDS

($ Mn)
Total Yogurt S ales
Yoplait - GIS
Chobani
Danone
Activia - Danone
Fage - Filippou
S tonyfield Farm - Dan.
YoCrunch - Danone
Danimals - Danone
Horizon Organic - WW
Muller Greek - PEP
Muller - PEP
Yakult
Lala
DanActive - Danone
Brown Cow Farm
Yonique - Cacique
Frus ion - Lala
Mountain High - GIS
Other
Market S hare (%)
Yoplait
Chobani
Danone
Activia
Fage
S tonyfield Farm
YoCrunch
Danimals
Horizon Organic
Muller Greek
Muller
Yakult
Lala
DanActive
Brown Cow Farm
Yonique
Frus ion
Mountain High
Other

2010
4,499
1,197
297
945
400
135
234
67
112
94
na
na
13
22
81
27
9
22
31
0
100%
27%
7%
21%
9%
3%
5%
2%
3%
2%
na
na
0%
1%
2%
1%
0%
1%
1%

2011
4,900
1,225
725
911
363
181
220
127
127
78
na
na
20
20
59
24
15
20
29
0
100%
25%
15%
19%
7%
4%
5%
3%
3%
2%
na
na
0%
0%
1%
1%
0%
0%
1%

2012
5,199
1,175
972
962
333
203
234
146
135
73
10
5
21
21
47
21
16
16
26
0
100%
23%
19%
19%
6%
4%
5%
3%
3%
1%
0%
0%
0%
0%
1%
0%
0%
0%
1%

2013
5,434
1,277
1,125
913
364
223
223
163
147
87
60
33
27
22
33
22
16
16
22
0
100%
24%
21%
17%
7%
4%
4%
3%
3%
2%
1%
1%
1%
0%
1%
0%
0%
0%
0%

2014
5,623
1,305
1,136
922
360
264
219
174
152
107
84
45
28
22
28
22
17
17
17
0
100%
23%
20%
16%
6%
5%
4%
3%
3%
2%
2%
1%
1%
0%
1%
0%
0%
0%
0%

2015
5,704
1,380
1,089
941
348
291
217
183
154
120
86
40
29
29
23
23
17
17
11
0
100%
24%
19%
17%
6%
5%
4%
3%
3%
2%
2%
1%
1%
1%
0%
0%
0%
0%
0%

5y
% Ch.
27%
15%
267%
0%
-13%
116%
-7%
170%
37%
27%
nm
nm
111%
27%
-72%
-15%
90%
-24%
-64%
nm

5y 5y S hare
CAGR of Grow th
5%
100%
3%
15%
30%
66%
0%
0%
-3%
-4%
17%
13%
-2%
-1%
22%
10%
6%
3%
5%
2%
nm
nm
nm
nm
16%
1%
5%
1%
-22%
-5%
-3%
0%
14%
1%
-5%
0%
-18%
-2%
nm
0%

5y Abs .
Grow th
1,205
184
792
-4
-52
156
-17
115
42
25
nm
nm
15
6
-58
-4
8
-5
-20
0

Source: Euromonitor; SFG Research

Note: Brown Cow Farm is Danones brand.

More Recent Trends Based on Scanner Data Analysis

The IRI data is not 100% consistent with Euromonitor, but it also shows significant deceleration in 2014-15 for
Chobani compared with the 2010-13 period. IRI has it that Chobani sales were flat in 2014 (Euromonitor has
+1%) after 18% growth in 2013 (16% as per Euromonitor), and then were up 3% in 2015 (while Euromonitor
implied -4%). Still, a closer look at the scanner data shows a marked turnaround since 3Q15 for Chobani, with
yoy $ sales growth of 9% in 3Q15, +15% in 4Q15, and +16% in 1Q16, compared with -7% in 1Q15 and -4% in
2Q15.
So, according
according to the IRI data, Chobani sales are growing again,
again , and actually accelerated to +16% in
1Q16 from +3% in 2015 (albeit facing an easy
easy comp from 1Q15). According to IRI, Danone has 24% market
share, General Mills has 22% and Chobani has 18%, which is also similar to the Euromonitor data. Looking at
the most recent trends from 1Q16, Danone and Chobani sales accelerated compared to 2015, but General
Mills sales declined compared to +2% in 2015.

Susquehanna Financial Group, LLLP

Danone sales trends accelerated to 5% yoy in 1Q16 vs. +1% in 1Q15 and vs. +3% for all of 2015.

General Mills sales were down 12% in 1Q16, vs. +9% in 1Q15 and vs. +2% in 2015.

Chobani sales were up 16% in 1Q16 vs. -7% in 1Q15 and +3% in 2015.

CONSUMER INDUSTRY UPDATE MAY 12, 2016

Pretty much since 2014 that the U.S. yogurt category continues to grow at a 2-3% pace, but at the
company level there has been significant variance quarter to quarter.

If we just look at the last eight weeks through 4/10, these trends are maintained: Chobani +15%,
Danone +7%, and Yoplait -14%.

FIGURE 4: U.S. TOP YOGURT PRODUCERS AS PER IRI

($ Mn, RS P)
Total Yogurt S ales
Danone
General Mills
Chobani
Filippou Group
Hain Celes tial
Borden Dairy Co.
Johanna Foods Inc.
Marquez Brothers
Tillamook County
Cabot Creamery
Private Label
Other
YoY % Ch.
Danone
General Mills
Chobani
Filippou Group
Hain Celes tial
Borden Dairy Co.
Johanna Foods Inc.
Marquez Brothers
Tillamook County
Cabot Creamery
Private Label
Other
Market S hare (%)
Danone
General Mills
Chobani
Filippou Group
Hain Celes tial
Borden Dairy Co.
Johanna Foods Inc.
Marquez Brothers
Tillamook County
Cabot Creamery
Private Label
Other

2011
6,074
2,043
1,969
696
213
55
107
54
32
19
14
597
275

100%
34%
32%
11%
4%
1%
2%
1%
1%
0%
0%
10%
5%

2012
6,578
2,210
1,838
1,047
268
81
76
52
29
24
23
656
275
8%
8%
-7%
50%
26%
49%
-29%
-4%
-7%
23%
58%
10%
0%
100%
34%
28%
16%
4%
1%
1%
1%
0%
0%
0%
10%
4%

2013
7,113
2,412
1,775
1,237
300
102
77
48
28
24
21
681
408
8%
9%
-3%
18%
12%
25%
2%
-8%
-6%
3%
-5%
4%
48%
100%
34%
25%
17%
4%
1%
1%
1%
0%
0%
0%
10%
6%

2014
7,362
2,483
1,820
1,236
343
116
79
48
27
38
25
692
453
3%
3%
3%
0%
15%
14%
3%
0%
-2%
57%
16%
2%
11%
100%
34%
25%
17%
5%
2%
1%
1%
0%
1%
0%
9%
6%

1Q15
1,919
640
501
304
91
32
20
13
7
12
7
173
120
3%
1%
9%
-7%
12%
14%
6%
21%
3%
74%
16%
0%
-145%
100%
33%
26%
16%
5%
2%
1%
1%
0%
1%
0%
9%
6%

2Q15
1,944
655
479
315
98
34
23
13
7
14
7
172
129
3%
3%
6%
-4%
9%
15%
11%
8%
4%
42%
8%
-4%
-94%
100%
34%
25%
16%
5%
2%
1%
1%
0%
1%
0%
9%
7%

3Q15
1,922
646
461
325
97
35
24
12
7
14
7
163
130
3%
2%
-2%
9%
10%
11%
23%
2%
4%
29%
10%
-8%
-89%
100%
34%
24%
17%
5%
2%
1%
1%
0%
1%
0%
8%
7%

4Q15
1,818
614
418
326
88
31
23
12
7
14
6
147
131
5%
7%
-5%
15%
5%
11%
16%
-4%
-2%
25%
6%
-9%
-60%
100%
34%
23%
18%
5%
2%
1%
1%
0%
1%
0%
8%
7%

2015
7,604
2,554
1,859
1,270
374
131
90
51
28
53
27
655
510
3%
3%
2%
3%
9%
13%
14%
6%
2%
39%
10%
-5%
13%
100%
34%
24%
17%
5%
2%
1%
1%
0%
1%
0%
9%
7%

1Q16
1,950
672
439
353
96
36
23
12
6
15
7
157
135
2%
5%
-12%
16%
6%
11%
12%
-9%
-4%
21%
1%
-9%
13%
100%
34%
22%
18%
5%
2%
1%
1%
0%
1%
0%
8%
7%

Source: IRI; SFG Research

Chobani, General Mills, and Danone sales growth rates have been similar for the last two years.
Euromonitor and IRI provide slightly different growth rates for these three companies in the U.S. yogurt
market, but the trends are very similar. Chobani growth slowed in 2014 and for the past two years
underperformed relative to General Mills, according to both sources, and underperformed in 2015 relative to
Danone, according to Euromonitor, and grew in-line with Danone, according to IRI. (The differences between
the two sources of data are due to the fact that Euromonitor data reflects sales to retailers, and IRI shows
retail sales.) 1Q16 trends are encouraging for Chobani, however, because the IRI data implies 16% yoy growth
compared to 5% at Danone and -12% at General Mills.

Susquehanna Financial Group, LLLP

CONSUMER INDUSTRY UPDATE MAY 12, 2016

FIGURE 5: TOP 3 U.S. YOGURT PRODUCERS: EUROMONITOR VS. IRI

($ Mn)
Euromonitor
General Mills
Chobani
Danone
IRI
General Mills
Chobani
Danone

2011
9%
5%
144%
-5%

2012
6%
-4%
34%
2%
8%
-7%
50%
8%

2013
5%
8%
16%
7%
8%
-3%
18%
9%

2014
3%
2%
1%
1%
3%
3%
0%
3%

2015
1%
5%
-4%
1%
3%
2%
3%
3%

Source: Euromonitor; IRI; SFG Research

Greek Yogurt
After a lull, in which Greek yog
yogurt
og urt lagged the overall market in 2014 (and pretty much through 1H15),
non
n -Greek segment. For example Greek grew $ sales by
Greek yogurt is again significantly outpacing the no
15% in 1Q16 vs. -5% for non-Greek, while in 1Q15 Greek was down 2% and non-Greek was up 3%.
Greek yogurt has rapidly grown as a share of total yogurt category (non-liquid) in the U.S. and now accounts
for 37% of the total, compared to 19% in 2011. Chobani has driven this growth, being the largest Greek
yogurt brand, and it accounts for 19% of the total yogurt sales and 53% of Greek yogurt sales. The change in
Greek yogurt trends is very notable in 1Q16. Greek yogurt sales were up 15% after growing 14% in 4Q15. But
before 4Q15 the growth had been sluggish since 2013 (+23%). In 2014 Greek yogurt sales were up 1%, in
1Q15 -1% and in 2Q15 +3%. The real uptick began in 3Q15, when sales grew 9%.
FIGURE 6: GREEK YOGURT TRENDS
($ Mn, RS P)
Non-liquid Yogurt
Greek Yogurt
Danone Oikos
Chobani
Fage
Hain Greek Gods
Tillamook
Cabot
Non-Greek Yogurt
YoY % Ch.
Non-liquid Yogurt
Greek Yogurt
Danone Oikos
Chobani
Fage
Hain Greek Gods
Tillamook
Cabot
Non-Greek Yogurt
As % of total
Greek Yogurt
Danone Oikos
Chobani
Fage
Hain Greek Gods
Tillamook
Cabot
Non-Greek Yogurt
As % of Greek
Danone Oikos
Chobani
Fage
Hain Greek Gods
Tillamook
Cabot

Source: IRI; SFG Research

Susquehanna Financial Group, LLLP

2011
5,658
1,061
64
696
213
55
19
14
4,597

2012
6,129
1,812
371
1,047
268
80
24
23
4,317

2013
6,640
2,231
550
1,237
300
99
24
21
4,409

2014
6,869
2,263
509
1,236
343
112
38
25
4,606

1Q15
1,786
575
131
304
91
31
12
7
1,211

2Q15
1,808
604
138
315
98
32
14
7
1,204

3Q15
1,784
614
137
325
97
33
14
7
1,170

4Q15
1,679
598
134
326
88
29
14
6
1,082

2015
7,058
2,391
540
1,270
374
125
53
27
4,667

1Q16
1,809
663
158
353
96
34
15
7
1,146

8%
71%
477%
50%
26%
47%
23%
58%
-6%

8%
23%
48%
18%
12%
23%
3%
-5%
2%

3%
1%
-8%
0%
15%
13%
57%
16%
4%

2%
-2%
-5%
-7%
12%
13%
74%
16%
3%

2%
2%
7%
-4%
9%
15%
42%
8%
2%

2%
9%
7%
9%
10%
11%
29%
10%
-1%

4%
14%
18%
15%
5%
10%
25%
6%
-1%

3%
6%
6%
3%
9%
12%
39%
10%
1%

1%
15%
21%
16%
6%
10%
21%
1%
-5%

19%
1%
12%
4%
1%
0%
0%
81%

30%
6%
17%
4%
1%
0%
0%
70%

34%
8%
19%
5%
1%
0%
0%
66%

33%
7%
18%
5%
2%
1%
0%
67%

32%
7%
17%
5%
2%
1%
0%
68%

33%
8%
17%
5%
2%
1%
0%
67%

34%
8%
18%
5%
2%
1%
0%
66%

36%
8%
19%
5%
2%
1%
0%
64%

34%
8%
18%
5%
2%
1%
0%
66%

37%
9%
19%
5%
2%
1%
0%
63%

6%
66%
20%
5%
2%
1%

20%
58%
15%
4%
1%
1%

25%
55%
13%
4%
1%
1%

22%
55%
15%
5%
2%
1%

23%
53%
16%
5%
2%
1%

23%
52%
16%
5%
2%
1%

22%
53%
16%
5%
2%
1%

22%
55%
15%
5%
2%
1%

23%
53%
16%
5%
2%
1%

24%
53%
15%
5%
2%
1%

CONSUMER INDUSTRY UPDATE MAY 12, 2016

Chobani is driving
driv ing most of the recent growth, but Oikos and Fage are not far off. Greek yogurt drove
68% of the total yogurt growth in the U.S.in 2015, up from 14% in 2014 and 82% in 2013. In 2015, Chobani,
Oikos, and Fage drove equal share of the total growth (18%, 17%, and 17%, respectively). Greek yogurt sales
grew 34% in 2015, and Chobani drove most of the growth, 27%, while Oikos (Danone) drove 25% of the Greek
yogurt sales growth and Fage drove 24%. But as we show below, in 1Q16 Chobani drove more than half of
the Greek yogurt segment growth compared with 27% for all of 2015.
FIGURE 7: GREEK YOGURT GROWTH DRIVERS
($ Mn, RS P)
% S hare of Total Grow th
Greek Yogurt
Danone Oikos
Chobani
Fage
Hain Greek Gods
Tillamook
Cabot
Non-Greek Yogurt
% S hare of Greek Yogurt Grow th
Danone Oikos
Chobani
Fage
Hain Greek Gods
Tillamook
Cabot

2012

2013

2014

1Q15

2Q15

3Q15

4Q15

2015

1Q16

nm
nm
nm
nm
nm
nm
nm
nm

82%
35%
37%
6%
4%
0%
0%
18%

14%
-18%
0%
19%
6%
6%
1%
86%

-27%
-17%
-58%
24%
9%
13%
2%
127%

32%
24%
-33%
20%
11%
10%
1%
68%

123%
20%
64%
22%
8%
8%
2%
-23%

110%
30%
65%
7%
4%
4%
1%
-10%

68%
17%
18%
17%
7%
8%
1%
32%

381%
118%
213%
25%
14%
11%
0%
-281%

41%
47%
7%
3%
1%
1%

43%
45%
8%
4%
0%
0%

-132%
-3%
138%
41%
44%
11%

65%
217%
-90%
-34%
-49%
-9%

73%
-102%
61%
33%
31%
4%

17%
52%
18%
6%
6%
1%

27%
59%
6%
3%
4%
0%

25%
27%
24%
11%
12%
2%

31%
56%
6%
4%
3%
0%

Source: IRI; SFG Research

Estimating the Size (and Valuation) of Chobani

We estimate Chobani 2015 sales to have been around $1.05 Bn,
Bn , at wholesale.
wholesale. According to General Mills
presentations, its FY15 U.S. yogurt net sales were $1.4 Bn. Looking at Euromonitor data, sales to retailers of
Chobani were 78% of those of General Mills yogurt sales in the U.S. market. So, if we conservatively estimate
that Chobani sales are 75% of those of General Mills in yogurt, we arrive to $1.05 Bn in revenues for Chobani
in 2015.
Between 2007 (the year Chobani was introduced) and 2013 the total yogurt market grew by a cumulative 9%
while Greek grew by 77% (so the non-Greek, or traditional, segment grew by only 2% pa). By 2013 the market
size was about $6.5Bn, with Greek amounting to $3.1bn. By 2013 Chobani had sales over $1Bn, and total
growth since then has been minimal (see prior tables). But taking the 1Q16 growth rate of mid-teens for the
rest of the year could imply 2016 sales for Chobani of $1.2Bn.
M&A deals in the goodgood -forfor-you space are normally done on an EV/sales basis. We think a 2.5x multiple
would be reasonable for Chobani, which would imply about a $3Bn valuation:

Plum Organics 2.7x (5/13), Dymatize 2.0x (12/13), Kind Bar 3.7x (4/14), Skinny Pop (7/14), Annies 3.9x
(9/14), Boulder Brands 1.9x (11/15).

Publicly-traded stocks trade lower, with some exceptions. For example, PF (bought Boulder Brands)
trades at 2.5x, WhiteWave (bought So Delicious, Vega, Wallaby) trades at 2.2x, Hain at 1.7x, Post
Holdings is at 1.6x (bought Dymatize)

The long term upside of the U.S. market

market should also be taken into account, with perper-capita
consumption below Brazil and Argentina, and less than half that of Spain and France. U.S. yogurt percapita consumption was 6.8 kg in 2015, which is below UK (8.6), Germany (13.9), France (16.4), and Spain
(16.4). Per-capita consumption in Latin American countries Brazil and Argentina is above U.S. as well (7.9 and
8.0, respectively). But U.S. yogurt consumption is above Asian countries like China and India (4.7 and 0.7,
respectively), although the yogurt consumption there is growing in the high teens compared to the flat U.S.

Susquehanna Financial Group, LLLP

CONSUMER INDUSTRY UPDATE MAY 12, 2016

market. U.S. yogurt consumption is similar to South Korea (6.6); South Korea may serve as an indicator of how
high yogurt consumption could become in China and India.
FIGURE 8: YOGURT PER-CAPITA CONSUMPTION
(Kg Per Capita)
Per Capita Cons umption
China
India
S outh Korea
Aus tralia
Argentina
Brazil
US A
France
Germany
S pain
United Kingdom
YoY % Ch.
China
India
S outh Korea
Aus tralia
Argentina
Brazil
US A
France
Germany
S pain
United Kingdom

2010

2011

2012

2013

2014

2015

2.5
0.3
6.5
8.5
8.7
5.8
6.3
16.7
14.9
17.0
9.2

2.8
0.4
6.7
8.9
8.9
6.4
6.2
17.1
14.7
17.0
9.1

3.1
0.4
7.0
10.5
8.6
6.8
6.6
16.8
14.3
17.0
9.1

3.5
0.5
7.0
10.8
8.4
7.3
6.8
16.6
14.0
16.5
9.2

4.1
0.6
6.8
11.0
8.1
7.7
6.7
16.5
13.9
16.4
8.9

4.7
0.7
6.6
10.9
8.0
7.9
6.8
16.4
13.9
16.4
8.6

12%
33%
3%
5%
2%
10%
-2%
2%
-1%
0%
-1%

11%
0%
4%
18%
-3%
6%
6%
-2%
-3%
0%
0%

13%
25%
0%
3%
-2%
7%
3%
-1%
-2%
-3%
1%

17%
20%
-3%
2%
-4%
5%
-1%
-1%
-1%
-1%
-3%

15%
17%
-3%
-1%
-1%
3%
1%
-1%
0%
0%
-3%

Source: Euromonitor; SFG Research

We think a deal would be done based on revenues, although we are less certain about Chobanis
profitability. We understand gross margins were only 20% back in 2013 and EBITDA margins 5%. We assume
margins have improved since then (lower dairy costs, expertise brought it by a strategic investor). In fact, the
companys higher prices should be conducive to higher margins. Chobanis average price per pint is above
average, and just below Fage. Chobanis average price per pint is 40% above the industry average, Danone is
5% above the average, and General Mills is 20% below industry average.
FIGURE 9: AVERAGE YOGURT PRICES (PER OUNCE)
($ Price)
Total Yogurt
Danone
General Mills
Chobani
Filippou Group
Hain Celes tial
Borden Dairy Co.
Johanna Foods Inc.
Marquez Brothers
Tillamook County
Cabot Creamery
Private Label
YoY % c h.
Danone
General Mills
Chobani
Filippou Group
Hain Celes tial
Borden Dairy Co.
Johanna Foods Inc.
Marquez Brothers
Tillamook County
Cabot Creamery
Private Label

Source: IRI; SFG Research

Susquehanna Financial Group, LLLP

2011
1.9
2.0
1.7
3.2
4.0
2.8
1.7
1.4
2.0
1.6
2.0
1.2

2012
2.0
2.1
1.8
3.1
3.6
2.7
1.7
1.4
2.0
1.6
2.1
1.3
7%
5%
4%
-1%
-11%
-5%
-1%
4%
2%
0%
3%
8%

2013
2.1
2.2
1.8
3.0
3.4
2.7
1.7
1.4
2.0
1.5
2.1
1.4
4%
5%
0%
-4%
-5%
-1%
-2%
1%
2%
-4%
1%
7%

2014
2.2
2.4
1.8
3.2
3.4
2.6
1.7
1.5
2.0
1.9
2.1
1.5
4%
6%
1%
7%
0%
-1%
2%
7%
-2%
20%
-1%
7%

2015
2.2
2.4
1.8
3.2
3.4
2.6
1.7
1.6
2.0
2.0
2.1
1.6
1%
0%
0%
-1%
1%
0%
0%
2%
3%
5%
1%
4%

1Q16
2.2
2.4
1.8
3.1
3.4
2.6
1.7
1.5
2.1
2.0
2.1
1.5
1%
-2%
-1%
-2%
0%
-2%
-1%
-8%
3%
5%
0%
-3%

vs .
Avg.
0%
5%
-20%
40%
52%
15%
-24%
-34%
-7%
-9%
-7%
-32%

CONSUMER INDUSTRY UPDATE MAY 12, 2016

In hindsight 2013 was a perfect storm, as Chobani faced start-up challenges with its Idaho plant (29%
utilization vs. 89% for the New York plant; the Idaho plant has a capacity 1.5x the New York plant), milk prices
reached all-time highs, and intensified competition less higher A&P spending (TPG estimates the combined
media spend of Danone-Yoplait-Fage grew 2.6x in 2013).
Greek yogurt prices are 18% above industry average, and the highest price premiums are at Fage and
Chobani. Fage brands carry the highest price premium in the U.S. market (28% above Greek yogurt average),
and Chobani is second (charging a 17% premium). Danone Oikos is 6% above the average and the other
brands are below average.
FIGURE 10: PRICES PER OUNCE OF TOP GREEK YOGURT BRANDS
($ P rice)
Non-liquid Yogurt
Greek Yogurt
Danone Oikos
Chobani
Fage
Hain Greek Gods
Tillamook
Cabot
YoY % Ch.
Non-liquid Yogurt
Greek Yogurt
Danone Oikos
Chobani
Fage
Hain Greek Gods
Tillamook
Cabot

2011
1.9
2.8
3.0
3.2
4.0
2.8
1.6
2.0

2012
2.0
2.7
3.0
3.1
3.6
2.7
1.6
2.1

2013
2.1
2.6
2.9
3.0
3.4
2.6
1.5
2.1

2014
2.2
2.7
2.9
3.2
3.4
2.6
1.9
2.1

2015
2.3
2.7
2.9
3.2
3.4
2.6
2.0
2.1

1Q16
2.3
2.7
2.8
3.1
3.4
2.5
2.0
2.1

8%
-4%
-2%
-1%
-11%
-5%
0%
3%

5%
-3%
-2%
-4%
-5%
-2%
-4%
1%

5%
3%
0%
7%
0%
-2%
20%
-1%

-1%
0%
1%
0%
0%
0%
-2%
1%

0%
-1%
-2%
-2%
0%
-2%
4%
0%

vs .
Avg.
0%
6%
17%
28%
-5%
-24%
-22%

Source: IRI; SFG Research

Potential Bidders
We think Chobani is attractive. Yogurt in theory remains an attractive category in the U.S., particularly when
comparing per-capita consumption with other countries. True, growth of 2-3% in the last two years is not
stellar, but we believe that is more a one-off than a trend (i.e., industry leaders Danone and GIS have done
little to drive category growth and have not lobbied, or succeeding in lobbying, to expand the refrigerated
aisle for yogurt, and Chobani faced its own problems for a period of time), and think the initial first years of
Chobani (with disruptive innovation, for the sector) demonstrate how consumers can respond to the right
strategies from the supply side.
Who can add value to
to Chobani? And where? But before we think of potential bidders, we should outline
what Chobani would need to garner sales growth acceleration.

Susquehanna Financial Group, LLLP

Better distribution coverage in the U.S. Back in 2013 we understand Chobani reached only about
half of the distribution points covered by Danone and by General Mills. While there may have been
improvement (especially after the Idaho plant came on stream), we believe there still are regional
gaps.

Clout and wherewithal to expand the yogurt aisle If you are a food geek (a foodie) you would
think of the yogurt section at a Carrefour in France as a revelation (one full aisle, and often one-anda-half to two aisles). Oddly, Danone (France HQ) had little success in having the section expanded.
Could a KO or PEP do better? One would think they have more clout than Danone, no?

International expansion Globally, yogurt remains fragmented (see table below), so we think
Chobani with the right distribution could tap into international. Of course, Yoplait and Danone being

CONSUMER INDUSTRY UPDATE MAY 12, 2016

10

the largest players could offer a good fit. But due to antitrust reasons, they could not bid. So then
the buyer would have to be a company that can offer global distribution (either one already
operating in the refrigerated aisle or not).

Someone that could extend the Chobani

Chobani brand into adjacent categories.
categories Here we are thinking in
various formats, not just spoonable yogurt say, RTD beverages. Does Chobani only stand for
Greek yogurt? Or for protein? Or more? Plant-based protein also? Surely KO and PEP could extend
the brand into RTDs, but we think WWAV has been more astute in diversifying product range for a
specific brand (think Horizon mac & cheese).

Cost synergies A company with a larger scale could easily absorb the Chobani overheads,
especially one in overlapping industries.

FIGURE 11: TOP GLOBAL PLAYERS IN YOGURT: SNAPSHOT

Yogurt
$ S ales Mn
Danone
Yakult
General Mills
Bright Food
China Mengniu Dairy
Lactalis
Inner Mongolia Yili
Meiji Holdings
Chobani
Nes tl
Other
% Mark et S hare
Danone
Yakult
General Mills
Bright Food
China Mengniu Dairy
Lactalis
Inner Mongolia Yili
Meiji Holdings
Chobani
Nes tl
Other
Geo S ales Mix %
Danone
Yakult
General Mills
Bright Food
China Mengniu Dairy
Lactalis
Inner Mongolia Yili
Meiji Holdings
Chobani
Nes tl

World
57,697
10,789
4,096
3,116
2,366
2,366
1,500
1,385
1,327
1,269
1,154
28,329
100%
19%
7%
5%
4%
4%
3%
2%
2%
2%
2%
49%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

As ia
Aus tralas ia
Pac ific
19,729
1,144
572
39
3,196
35
118
166
2,289
0
2,328
0
39
158
1,361
0
1,282
0
0
111
138
60
8,404
576
100%
100%
3%
3%
16%
3%
1%
15%
12%
0%
12%
0%
0%
14%
7%
0%
7%
0%
0%
10%
1%
5%
43%
50%
5%
78%
4%
97%
98%
3%
98%
97%
0%
12%

0%
1%
5%
0%
0%
11%
0%
0%
9%
5%

Eas tern
Europe
2,859
849
0
0
0
0
86
0
0
0
0
1,924
100%
30%
0%
0%
0%
0%
3%
0%
0%
0%
0%
67%
8%
0%
0%
0%
0%
6%
0%
0%
0%
0%

Latin
Middle
Americ a
Eas t & Afric a
7,968
4,745
2,231
1,267
677
5
215
85
0
43
0
0
335
81
0
0
0
0
0
0
916
52
3,593
3,212
100%
100%
28%
27%
9%
0%
3%
2%
0%
1%
0%
0%
4%
2%
0%
0%
0%
0%
0%
0%
12%
1%
45%
68%
21%
17%
7%
0%
0%
22%
0%
0%
0%
79%

12%
0%
3%
2%
0%
5%
0%
0%
0%
5%

North
Americ a
7,156
2,397
29
1,732
0
0
193
0
0
1,081
0
1,725
100%
34%
0%
24%
0%
0%
3%
0%
0%
15%
0%
24%

Wes tern
Europe
14,096
3,383
99
691
0
0
663
0
0
0
0
9,261
100%
24%
1%
5%
0%
0%
5%
0%
0%
0%
0%
66%

22%
1%
56%
0%
0%
13%
0%
0%
85%
0%

31%
2%
22%
0%
0%
44%
0%
0%
0%
0%

Source: IRI; SFG Research

Bidders like GIS and Danone would likely face regulatory obstacles, while KO, PEP, WWAV, and K
would likely not face hurdles if they were to bid for Chobani. In terms of market shares, Danone and
General Mills would not be able to buy Chobani due to antitrust issues (see market share tables in previous
pages). The combined market share of Chobani and Danone would be 52%, and the combined share of
General Mills and Chobani would be 44%, according to Euromonitor (according to IRI the combined market
shares are 53% and 41%, respectively). On the other hand, the combined share of Chobani and WhiteWave
would be only 20% (Euromonitor has the Whitewave share at 2%, while IRI estimates it at 0.7%), and Kellogg,
KO and PEP have no yogurt businesses, so they are likely takeover candidates, in our opinion. We would put
them in three groups:

Susquehanna Financial Group, LLLP

Those facing antitrust issues: Danone and General Mills

CONSUMER INDUSTRY UPDATE MAY 12, 2016

Susquehanna Financial Group, LLLP

Global Beverage companies facing slower growth in core categories PEP and KO come to mind,
but we are not sure either CEO has the political capital at present to venture into a not-so-adjacent
category. Size-wise Chobani is doable (at a take-out multiple we think $2.5B, or thereabouts), but it
would be somewhat of a stretch for KO, although maybe less so for PEP (given its temporary inroads
into yogurt in the U.S. with the Muller JV, and the Russian WBD business).

Nestle Hard to predict, but their yogurt business is small and mainly handled by Lactalis (a French
dairy coop)

Other large global dairy companies? Fonterra, Lactalis (France), Friesland Campina (Holland),
Parmalat (doubtful). We do not rule them out but we think are more focused higher the supply chain
(in dairy) and yogurt could be too value-added for them.

U.S. companies growing in good for you categories. Here we can mention WhiteWave Foods, Post
Holdings (bought Dymatize), Pinnacle Foods (bought Boulder Brands), and Hain Celestial. Given its
recent moves into yogurt (Wallaby), European presence (Alpro), and ever-growing plant-based
protein platform, we think of these companies WhiteWave could be the better fit.

11

CONSUMER INDUSTRY UPDATE MAY 12, 2016

12

Appendix I: WWAV Buying Chobani

FIGURE 12: WHAT-IF SCENARIO OF WWAV BUYING CHOBANI

WWAV buying Chobani

$ Millions

$USD

$USD

$USD

$USD

Price

WWAV

CHOB

Both

Savings

paid

New Co

NewCo Financials (FY16)

Sales
EBITDA
EBITDA margin
EBIT
EBIT margin

4,353

1,200

5,553

583

96

679

13.4%

8.0%

12.2%

453

60

513

10.4%

5.0%

9.2%

5,553
96
96

Net debt (cash)/EBITDA

609
11.0%

Synergies as % of tgt co rev

Net debt (cash)

775
14.0%

8%
2,024

800

3.5

8.3

$ Millions

2,200

4,224
5.5

Deal

FY16

Deal

Mkt Cap

Net debt

EV

Syn +
EBITDA

EBITDA

Valuation
Target Co valuation

2,200

800

3,000

96

192

31.3

15.6

No. of shares (Mn)

Share price
Deal EV/Sales

2.5

Deal EV/EBITDA
EV/EBITDA post synergies
if all

if 25%

if 50%

if 100%

debt

equity

equity

equity

Incremental EBIT

156

156

156

156

Incremental funding cost

-77

-58

-29

+ net debt

2,200

1,650

825

int rate %

3.5%

3.5%

3.5%

3.5%

5.5

4.7

3.7

2.6

79

98

127

156

-33.5%

-33.5%

-33.5%

-33.5%

53

65

84

103

$ Millions
Accretion and IROIC

resulting net debt/EBITDA

Pre-tax impact (+/-)
tax rate
After-tax impact (+/-)
New equity raised
price for shares issued
new issued shares
So total shares post deal (Mn)
new shares % of b ase

550

1,375

2,200

$39.93

$33.27

$28.84

13.8

41.3

76.3

182.3

196.1

223.6

258.6

0%

discount for the new issue

8%

23%

42%

-10%

-25%

-35%

So post deal net income

303

316

335

354

Post deal EPS

1.66

1.61

1.50

1.37

+/- EPS impact ($)

0.29

0.23

0.12

-0.01

base EPS sans deal FY16

1.38

1.38

1.38

1.38

accretion/dilution

21%

17%

9%

-1%

new NOPAT / new inv K

3.5%

3.5%

3.5%

3.5%

Source: IRI; SFG Research

Susquehanna Financial Group, LLLP

CONSUMER INDUSTRY UPDATE MAY 12, 2016

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13