KANSAS CITY, MO -- Take a stroll down the dairy aisle of any large grocery store in the United States and look at how much shelf space is devoted to yogurt, and then look at the variety. Arguably yogurt has been the fastest evolving and most diverse dairy product in America over the past 20 years. Greek style, whole milk, low fat, drinkable, in pouches, glass jars, whipped, and in as many flavors as you can imagine.

From 1994 to the peak in 2014, US yogurt production increased 242%. By comparison, cheese production only grew 71% over that time. But the impressive growth has flattened out since, which is part of the reason we see so much diversity in the yogurt case. Yogurt makers are constantly looking for the next big iteration that will reignite the consumption growth, or at least an iteration that will boost their market share in a crowded yogurt market.

Sometimes the gears of government turn slowly, and other times the pace can only be described as glacial. Sometimes a slow pace is a good thing, but when it comes to a market that is evolving and innovating as fast as the yogurt market, rules proposed 10 or 20 years ago no longer match the commercial reality. 

In the United States. the US Department of Agriculture (USDA) and the Food and Drug Administration (FDA) set standards of identity for food products, specifying what qualifies as cheese versus cheese-like product or maple syrup versus pancake topping. In February 2000 the National Yogurt Association filed a petition with the FDA to update the standard of identity for yogurt. It took until 2009 for the FDA to issue the proposed changes to the standard of identity, and it took until June 2021 to issue the final language.

A lot has changed since 2009 and some yogurt makers, now represented by the International Dairy Foods Association (IDFA), are unhappy with parts of the new standard of identity and they have filed a formal objection that will trigger a hearing. As it stands now, the new standards will go into effect on Jan. 1, 2024, unless they are amended or delayed even further.

Putting aside the standard of identity issues, the outlook for the yogurt market is mixed. Production was up 3.2% during 2020 after falling in five of the previous six years. Yogurt consumption benefited from consumers making more meals at home. Retail yogurt sales were up for most of 2020, but consumers shifted from buying smaller individually packaged yogurt cups toward larger bulk containers of yogurt.

On top of stronger retail sales, there was likely a lot of yogurt moving through the USDA Food Box program. In the early stages of the pandemic the drop in food service sales resulted in a glut of agricultural commodities at the same time that the food service supply chain went idle and laid off consumers were facing tighter budgets. The Food Box program attempted to remedy all three of those problems by contracting with food service companies (or any company that wanted to bid) to procure commodities and distribute them to people in need. 

In the early stages of the program the rules on what could or should be in the boxes were loose, but in the second half of 2020 and the first five months of 2021 the USDA had tighter requirements and they were more focused on keeping the cost per box low. The specifications varied a little in different rounds of the program. They varied based on whether the company was producing a box with a mix of different commodities (dairy, meat, fruits and vegetables) or whether they were producing just a box of dairy products, but in general the boxes contained about 5 to 6 pounds of dairy products.

With bulk cheese prices running north of $2/lb for large stretches in 2020 and yogurt running less than $1/lb, if you wanted to minimize the cost of your dairy box you went light on cheese and heavy on yogurt. That helped to boost yogurt production during the second half of 2020 and the first half of 2021, but with the Food Box program ending on May 31, 2021, yogurt production could drop off a bit in the second half of the year and leave us with about 1% growth at the annual level.