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Want Greek Growth? Eat Some Yogurt

If you want a Greek growth story, forget about waiting on Athens. Just drive three hours north of New York City.

Confused?

We're not talking Greek debt. We're talking Greek yogurt.

Chobani Black Cherry Greek Yogurt
Source: chobani.com
Chobani Black Cherry Greek Yogurt

It happens to be one of the best-selling foods in American grocery stores, and the two biggest brands are made in upstate New York.

The Athens based company Fage brought the Greek trend to the U.S. about a decade ago, but Chobani —only in existence since 2007 —has taken it to another level.

In just four years, it's gone from non-existence to at least $500 million in sales.

But before getting to what might be the best consumer product growth story of this young millennium, let's start with a little "101" on Greek yogurt.

First, texture and taste. It's thicker and tangier than what Americans consider traditional yogurt. Then, there's the health benefit. Greek yogurt is high in protein and low in fat, making it the rage all the way from Hollywood dieters to everyday athletes and stay-at-home moms.

The distinct qualities come from the production process. Chobani uses three gallons of milk for every gallon of yogurt because it separates the whey from the yogurt, which is not done for your everyday Dannon, Yoplait or Columbo. In fact, it's such a proprietary production system that both Fage and Chobani forbid CNBC from filming in almost every area of their facilities.

The companies have to be protective because the major players in yogurt are frantically trying to catch up.

General Mills is making a major push with its Yoplait Greek product. Groupe Dannone has two offerings: Dannon Greek and Stonyfield's Oikos.

Kraft is an interesting component of this story. Several years ago, it closed its plant in South Edmeston, New York where it produced 150,000 units a week under the Breyer's label. Chobani moved in and now produces 1.4 million units —on the same property.

Now, Kraft has re-entered yogurt with a Greek brand called Athenos.

"It's not like they snuck up on some bad marketers," said Terry Bivens, who covers a number of consumer food companies. "In fact, General Mills is pretty good, but I do think Mills is a bit embarrassed."

The numbers are astonishing. According to research service IRI, Chobani is now the country's No. 1 yogurt in terms of revenue. That's not just Greek. That's of all the yogurt brands in the $4 billion space.

In terms of units, Chobani is No. 2 behind Yoplait —and closing.

Want more numbers? IRI also says in their last report, which looked at a 12-week span this spring, Chobani showed revenue growth of almost 140-percent. The next three brands all showed declines.

"We liken it to even greater than what you saw with energy drinks," said UBS analyst David Palmer, who wrote a widely distributed research note entitled "The Rise of Greek", even though the top two names are private.

"The thing that was amazing about the Greek yogurt segment is that it grabbed such significant share right under the noses of some very good companies in a place (the supermarket aisle) where it's not easy to grab share."

It all begs the question as to what Chobani will do next. Sources tell CNBC that several take-out overtures have been made, but the brand is not for sale. An IPO could be a possible route, and if so, it could be part of a larger trend.

"Why is it that some of these companies, whether it's a Green Mountain or a Hansen, why would they be allowed to grow and not be acquired before they get too large," said Palmer.

"Probably, it's as simple as the founders —or early management teams —are having too much fun and believe in their product and their sustainability much more than the would-be acquirers."

And after spending two days in the heart of the "American" Greek Yogurt story, Palmer seems to be spot on.

Follow Brian on Twitter: @bshactman

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