[0:05]Power. Precision. Performance. Olympic champion Victoria Pendleton dedicates every day of her life to being the fastest woman cyclist on earth.
[0:20]She is sponsored by Pepsico sports drink, Gatorade, which claims to rehydrate her body faster than water. It's a product of the revolution in functional foods, commodities manipulated by science and marketing to promise health and wellness. This is the modern battleground where industry titans are fighting for dominance in the global food business. The whole area of health and wellness has become absolutely central to everything the food industry does. One simple product embodies this modern food revolution. Yogurt. It's the most versatile of all foods. The fantastically useful thing about yogurt from a marketer's point of view, is that it really has been all things to all people. And big business has transformed it into some of the most profitable brands in the world. For manufacturers, the holy grail is always increased margin added value. With some of these specialized, heavily packaged yogurts, you're talking about profit margins of over 15%, 17%. That's what all manufacturers dream of. With exclusive access to the world's most powerful food companies. We reveal the story of yogurt. From hippie food to super food in 40 years. This is the story of the foods that make billions.
[2:09]Early morning in a suburb of Tokyo.
[2:16]A group of women gather together to prepare for their day's work. These are the Yakult ladies. 42,000 of them cycle around Japan selling 8 million bottles of Yakult every day.
[2:37]Like British milkmen, they call door-to-door, delivering a product that is now three-quarters of a century old.
[2:50]Yakult is a fermented milk drink with added bacteria that the company claims will help digestion. Over the past four decades, this Japanese drink has penetrated the global marketplace, and today, worldwide sales stand at £2 billion.
[3:14]28 million people in 32 countries around the world drink Yakult daily.
[3:26]When it landed on British shelves in 1996, it changed forever our understanding and expectations of food, driving a revolution that created a new market of functional and super foods. What those terms have come to mean is foods that have some kind of health benefit. And it can be either an intrinsic and natural health benefit in the way that oats naturally lower your cholesterol or blueberries are full of antioxidants, or it can be something that's been added, so in the sense that yogurt has got a bacteria added to it, which makes it yogurt, but can also have an additional health benefit in terms of supporting your immunity or your digestive health system. By 2013, it's predicted that the functional food market will be worth £180 billion worldwide. And with 250 new entries in the UK market every year, competition is fierce in an already crowded supermarket. You see more new products launched in the UK than any other market in the world, but most of them actually don't succeed because that competitive marketplace it really is natural selection at its best. The driver of the booming health market is increasing consumer awareness of the relationship between food, nutrition and health. And where the consumer goes, the industry jumps in. Nutrition, healthy nutrition, is a door opener for well-being. And therefore, we said that in the future, the food industry has to assure that we offer the best nutrition. So I think that we have definitely gone from a time of 'I'm going to be ill and they're going to give me some medication and I'll be cured' to a time of 'how can I protect myself from getting ill' and in fact if I do become sick my body will be much more resistant and it will be much more able to fight the illness. The consumer today is really looking for more healthy, more nutritious choices. And therefore if we want to be a successful business in 10 or 20 years time, better figure out ways of giving those consumers what they want.
[5:46]The clear undisputed frontrunner in this new market is yogurt. It has proved to be the most versatile of all commodities. Before it became a scientific super food, it first went big in the UK as a fun pudding. Today, 70% of us regularly buy yogurt, but it's a market that 60 years ago simply didn't exist.
[6:15]Yogurt is probably the only real innovation in the food business since the war, the only product which is completely new, which you've gone into a shop before the war, you'd never seen a yogurt. So how did this basic commodity make vast fortunes for the food industry and find its way into our daily lives?
[6:41]Post-war Britain, food rations were coming to an end, but the mainstream British diet was still strictly traditional. Yogurt was weird stuff, sold in obscure health food shops, hidden amongst the lentils. It was sour, sharp and eaten by foreigners. Our dairy industry was always founded on butter, milk and cream and cheese, and if we were going to have milky things that were sour, we might have buttermilk, but certainly not yogurt.
[7:16]So in Britain, the manufacturers of yogurt were having to start from a position of zero consumption essentially. But in 1963, all that was about to change. Our traditional dairy industry was on the cusp of a revolution, triggered by the launch of an entirely new brand. It was yogurt's major makeover moment.
[7:41]I think that the name Ski instantly summoned up a glamorous world of skiing holidays. And it was a kind of slightly aspirational thing, it it sort of seemed to summon up purity, cleanliness, foreign travel, glamour, health, all in one brilliant monosyllabic word.
[8:06]Ski undoubtedly changed yogurt when it appeared on the market, because it was the first major national brand to appear, and it was really at the forefront of the development of the product.
[8:19]Ski was invented by a Swiss businessman. He added sugar and real fruit to sour yogurt. It was a masterstroke, making it appeal to Britain's sweet tooth. Adding sugar has been a way to get us to try new things and it's been the process which has changed all sorts of bitter things into mass market products. We had to add lots of sugar and fruit, in fact we've got a long way away from the original concept of yogurt, and it became more of a dessert. Young people, and particularly young people with children, discovered yogurt as a really, very nice tasting, very healthy product. And of course that held out the prospect of several decades of market growth. By sweetening yogurt, Ski uncovered the commercial potential of an unloved food. It created a market in the UK that had never previously existed, and provided the industry with a winning formula. In fermenting milk, adding fruit and sugar, they could charge nearly a shilling for a pot of Ski. This was nearly four times the price of milk, the raw commodity. It's a formula that business calls adding value. Added value is where you take something that's a basic, cheap raw commodity product like milk say, and you start processing it or packaging it or marketing it in a way that moves it up the chain so that you can actually add to its value at each point, you can charge more for what you're doing at each point, and you can charge more and more the higher up the value chain you move. If you're selling something with added value, it's something where you have turned the raw material into something that the consumer either couldn't or wouldn't do themselves and they're therefore prepared to pay for it. By the end of the '60s, Ski had driven the UK yogurt market to £10 million a year. And with success, inevitably, came imitators. We finally decided that we needed to have a strong brand up against the ski and the and the in the yogurt market because the market was growing so strongly. The new brand, Prize, was a sweetened fruit yogurt just like Ski. As with so many processed foods, if it tasted the same as the competition, the ad men would have to do the hard work. Prize was fundamentally the same product as Ski, and we differentiated it with an absolutely wonderful advertising campaign. When you're a second brand, you just can't talk about things which the brand leader can. So talking about health and fitness, for example, would have been very nice, that was what what was driving the market so far, but for a second brand you have to be a differentiator.
[11:37]For nearly a decade, Ski and Prize battled it out, but by 1982, Ski emerged triumphant. The battle had grown the market to over 800 million pots of yogurt a year. Beyond the advertising, there was something else about the product that appealed to a changing Britain. The growing acceptance of yogurt from the '70s and '80s onwards goes along with a whole change in attitude of British consumers, kind of opening up of new worlds. People are starting to travel, it's part of a much wider opening up of British tastes and a moving beyond traditional foods.
[12:23]While yogurt advertising appealed to changing attitudes, its packaging could evolve without changing our lives. At the heart of it all, the pot. The pot's crucial, uh, because there's these small little packages give you the idea that you can help yourself any time, it's incredibly convenient, uh, and you can sort of eat in an individual way on the move, whatever. This was an era where the the famous family meal, Mom, Dad, 2.4 children sat down and had together. This was the era where that was breaking down and where kids were coming in and snacking on the quiet. So yogurt played directly into that convenience aspect, a pot of yogurt, a spoon, and, you know, a meal is prepared. Right from the start, yogurt is something that you give to an individual, it's your complete little pudding that you can have just one person, one portion.
[13:30]By 1980, the yogurt business had grown from nothing 20 years before to a market worth over £120 million. But there was a threat looming. The fat in food had become public enemy number one. Suddenly, dairy produce, traditionally the epitome of good health, was now part of the problem. The dairy industry was looking like a bit of a villain. I mean great blocks of fat called cheese, and butter, and cream, and even milk products, let alone yogurts, if you think about it, it's not a very good area to be in at that sort of time.
[14:20]While calorie counting weight watchers grew in numbers, British dairy was staring down the barrel of a gun. As with all successful parts of the food business, dairy could adapt and innovate to capitalize on changing tastes. Yogurt would prove to be the savior for the sector. It was a blank canvas. Just as it made a good pudding, it could also be low-fat and healthy. Consumers were beginning to be concerned about healthy eating. And we took a long hard look at where consumer trends were going. And identified an opportunity to launch a very, very low-fat yogurt. Yogurt, like the sort of best of processed foods, is has succeeded because it manages to reinvent itself. And in the '80s, you've got an increasing concern about diet-related diseases really coming to the fore. And the industry manages to reinvent yogurt to tap into those concerns as something that's going to help you in this great fight. By taking out both the fat and sugar from the yogurt and replacing it with a sweetener, St Ivel appeared to have come up with the answer to the nation's concern over fat.
[15:43]Shape, perfect for the new British family.
[16:01]Within a year, it had won 10% of the business. The next phase of the market was to have a lighter, lower-fat product, and that's reflected in the word Shape and the brand Shape. And that represents the next generation if you like, the next phase of the yogurt market where health, active health, is a more prominent feature. Some manufacturers in that part of the industry realized that if they continued to nail their colors to high-fat, pretty bland products, that they had no future. And so that was the spark if you like, to the innovation that we've then seen in the last 20 years.
[16:49]Yogurt was now firmly established as the flexible friend to business. It was versatile enough to be quickly redeveloped by the food processors and rebranded by the ad men.
[17:04]For British dairy, the little pot of yogurt was turning into a little pot of gold. But in the food business, getting consumers to love your product is only half the battle. Delivering it to them is another matter. Inserting itself between the yogurt makers and their customers was a new rising power. The supermarket. If you were to go back to the 1950s, the average supermarket would have been only two or 3,000 square feet, about the size of a tennis court or so. The average supermarket today is more like 40,000 square feet, about the size of a football pitch or or thereabouts. The way we shopped was changing rapidly, but the untold story of the rise of supermarkets is the dramatic changes they implemented behind the scenes that would transform the food industry forever.
[18:00]To keep their stores fully stocked, supermarkets forced changes to distribution, which stripped control away from manufacturers and exposed them to far tougher competition.
[18:16]Up to the early 1980s, the manufacturer had some sort of power. The manufacturer distributed directly to every individual store in the country, and therefore had some control over stock-taking and shelf space in the chiller cabinet.
[18:46]And then suddenly that all changed. The retailer decided to go to central distribution, which means that the manufacturer was asked to deliver his products to a very large central depot, and no longer to have any sort of relationship with the store.
[19:07]New players, for whom distribution had previously been a barrier, could now enter the market.
[19:15]Yogurt was very much a product that was delivered by refrigerated trucks on behalf of the yogurt manufacturer. The big change in the market came when deliveries were centralized and shops were able to buy a range of products rather than being really be supplied by one manufacturer. The UK market with the change in distribution with the retail trade was wide open for almost anybody to come in.
[19:56]The biggest threat came from overseas. First in line was a German dairy giant, Müller. It would change the landscape of the industry. Their innovation and ambition would uncover highly lucrative new markets. In 1986, armed with their twin pot fruit corner, the company secretly approached a British dairy businessman. The then managing director came over with this fruit corner in his suitcase, not even chilled, but in his in his suitcase and he thrust it at me and he said, what do you think of that? And it was absolutely fantastic, it was like nothing I'd ever tasted. Ken Wood thought the product and its packaging were so innovative that he was prepared to take a risk. It would prove to be a textbook case in how to expand a market and would leave homegrown companies in tatters. I think I was a frustrated yogurt here, I found the industry amazingly starchy and stuffy and full of lots of old men in smoke-filled rooms talking about the demise of the Milk Marketing Board and how complex it would be in the future. There was always a good reason why they couldn't do things. While Ken Wood began preparations for Müller's UK launch, the competition had sniffed around but decided the product had one fatal flaw, the price. I went to Germany, and we were actually taken around the Müller factory and shown the twin pot being produced.
[21:50]And I rushed back to the UK saying, I've seen this really, really exciting product. And we took it out to market research. And the response from consumers was twofold, some of them loved it. But when we then showed consumers the price at which it would need to be retailed, most of them held up their hands and said, look, really, that is too expensive. So we did nothing. At the time, a pot of Shape cost 22p. While the Müller fruit corner was to retail at 35p, over 50% more expensive. There was only one thing that could justify this difference, the price of luxury. It was undoubtedly a risk for Müller to come in at a significantly higher price point, but there were extra costs involved. And the success of brands is to price at the point you think consumers will value what you're offering and a premium price can be justified if there is an added benefit to consumers. And in this case, they added theater to the experience of eating a yogurt in a way that hadn't been seen before. Müller Fruit Corner is, of course, a masterpiece. A generous measure of thick cream yogurt and a separate helping of whole Piedmont cherries. As ever, the burden of selling the product would fall to the ad men. They set out to persuade the women of Britain that they deserved a bit of a treat. Because of the taste of Müller and the fact that it perhaps didn't tick all the health boxes in the way that some of the other products did, we almost had to find an excuse for people to buy in to the Müller proposition. So that was what really gave rise the was the thinking behind uh Joanna, Joanna Lumley, saying in that very seductive manner that only she can. And asks to appreciate fully what is pure, one must also have tasted what is wicked. And it was a piece of magic. Two tempting tastes, one delicious yogurt. The twin pot was indeed wicked. With more calories in a fruit corner than a Cadbury's Creme Egg, but it was right for its time, an age of decadence, luxury and spoiling yourself. Part of the appeal of yogurt had always been these little individual pots, but Müller by adding that corner of something jammy in the corner had taken it a stage further. Müller were packaging it as something that was an outright treat, and it really just opened up the market to a whole lot of consumers who wouldn't otherwise have seen themselves as yogurt eaters. Müller Fruit Corner so appealed to Britain's taste buds that within four years it was the biggest selling yogurt in the UK. In business, one is ruled by a number of emotions, and one of them is fear. And the fear is that your competition will get to the next big idea before you. And I didn't feel that fear when the Müller market share rose to 3%. But I did feel a sort small frisson of anxiety. In the global food industry, Yakult is small fry, but its big success didn't go unnoticed by the industry's titans.
[25:33]Enter Danone.
[25:40]Danone is the largest fresh dairy company in the world. They sell over 5 million tons of dairy worldwide for nearly £8 billion a year. With this might, Danone was about to take functional food into the mainstream.
[26:30]Danone was probably the only company in the whole of Europe to see the potential of this wacky daily dose bottle. They were big enough internationally to see how successful Yakult had made it. So they quickly came out with their own alternative to it, which was called Actimel. Actimel improved the immune system.
[26:55]The goal was to conquer the UK probiotic market. The mission would be run with military precision. What we did is to create an, as we called it, an acceleration unit around Actimel. And there were people from marketing, from sales, from R&D, specifically focused on Actimel and trying to put Actimel into the UK market. It wasn't long before they accelerated past Yakult.
[27:19]In just three years, Danone grew the market from a tiny £3 million to £62 million. Actimel improved the immune system. Yogurt as a market developed in continental European countries well ahead of the UK, and therefore there have been very much larger dairy companies in France, in Germany, um than we managed to actually create um in the UK.
[27:57]Actimel is a big success in the UK. Actimel has been launched in '97 in the UK and has really built is its credibility, its the quality of the relation with the consumers was was able uh to be uh sold in in very different outlets for kids, for adults, for uh any type of of target group. So I think it's it's a very important drink in in the UK and uh everybody loves Actimel and uh we love the UK.
