Adding Value to Yoghurt

In Tesco a pack of 4 ‘Ski’ strawberry yogurts is priced at £1. Each pot contains 120gm of yoghurt. The effective
price paid by the shopper is 21p per 100gm. Or you could buy a pack of 4 strawberry ‘Yollies’ for £2. Each Yolly
weighs 25gm and therefore the effective price is 200p per 100gm.

So Nestle is selling Ski yogurt for 21p per 100gm while Kerry Foods is selling Yollies for 200p per 100gm.
Charging ten times more for the same thing is an extraordinary achievement of added value. It’s as if Samsung
charged £600 for a phone and Apple charged £6,000. Not even Apple ….

So how has this been achieved? There’s no difference in the flavour, which is strawberry. Nor is there a
difference in the nutrition, i.e. it’s not that Yollies are better for you. So how has it been done?

100gm of strawberry 100gm of Ski strawberry 100gm of unsweetened,

Yollies yoghurt fullfat yoghurt
Calories 180kcal 95kcal 61kcal
Fat 5.7gm 2.7gm 3.3gm
Sugars 12.8gm 13.2gm 4.5gm

The answer is a combination of convenience and a unique selling point (USP). Kerry Foods had already enjoyed
a £50 million a year success with Cheesestrings – a lunchbox filler. Now its understanding of kids’ eating habits
enabled Kerry to come up with Yollies.

Kerry Foods benefited from working with a packaging

designer caller Amcor. The supplier was asked to come up
with a lolly container that could survive a morning in a
lunchbox, then be converted unmessily into a yogurt on a
stick. Amcor’s design solution was clever, effective and
fun. It would have cost Kerry a design fee, but led to a
product that is cost-effective to manufacture. And for
parents? A lunchbox filler that is fun but with the
‘healthy’ tag given to yogurt (despite all the added sugar).

To achieve added value requires clever product design and strong marketing – all focused on matching the
product to a clear market ‘need’. In this case the need is to create a more interesting, healthier lunchbox, with
no effort involved. Yollies are the ultimate convenience product, and convenience is a hugely important way to
add value for UK consumers.

For Kerry Foods the rewards are clear. Launched in 2014, Yollies enjoyed a 228% sales increase in 2015 to £4.8
million. In 2016 Yollies recorded ‘further strong growth’ according to Kerry Foods. Yollies has a long way to go
to catch Petits Filous Kids with £92 million of sales, but it can enjoy extraordinary levels of profit per pack sold,
based on charging such a high price per dollop of yogurt.

Questions (15 marks; 20 minutes)

1. Analyse two factors that have allowed Kerry Foods to charge ten times more for yogurt than Nestle. (6)

2. If Kerry Foods focused strongly on business ethics, evaluate whether the company should make any changes
to its approach to selling yogurt. (9)

eBus17/18 www.a-zbusinesstraining.com
 Answers/marking

1. Analyse two factors that have allowed Kerry Foods to charge ten times more for yogurt than Nestle. (6)

 Clever design has achieved a unique selling point (USP). It has created a yogurt lolly that would truly
seem special compared with the vast number of yogurt pots in shops and school canteens. The
unique look and shape of the packaging makes it harder to realise that in fact Yolly yoghurt is being
sold for 10 times the price of a normal pot.
 The second factor is the convenience that Yollies provide. It’s small and can be popped into the
lunchbox without a spoon. Because it’s fun to eat, it’s likely to be welcomed by the kid, whereas other
lunchbox contents may lead to lengthy rows. Better to buy Yollies and take a bit of stress away from
the day. This again makes the price worth paying, as long as the customer doesn’t drill down to the
mental arithmetic

2. If Kerry Foods focused strongly on business ethics, evaluate whether the company should make any
changes to its approach to selling yogurt. (9)

 A strong focus on ethics means thinking about – and acting on – any concerns about whether
outsiders would regard the company’s actions as morally right or wrong. One issue relates to the price
being charged. If you’re charging ten times the price of rival brands, it could be argued that you’re
providing one tenth of the value they’re giving; if so, you’re hitting the household budget of your
customers. On that basis, a cut in price would be fairer to customers. But is what they’re charging
‘unethical’? It would be a clear yes if the item was a life-saving drug that people couldn’t afford
because it was 10-times overpriced. But yogurt prices? The term ‘ethics’ seems a bit too weighty for a
Yollie, so I don’t see any ethical reason for them to change their pricing.
 A bigger issue is the health-con involved. It’s highly likely that parents give their kids a yogurt on the
assumption that it’s a healthy lunchbox item. But Yollies are relatively high in calories and in fat
compared with other yogurts. So perhaps this is an ethical question for them to consider. Unilever
recently astonished us all by telling consumers not to eat their Dolmio pasta sauces more than once a
week. Perhaps Kerry Foods should do the same, i.e. market Yollies as a once-a-week treat rather than
a daily lunchbox item.
 So should the company makes any changes to its approach to selling yogurt? I think they’re sailing
close to the ethical boundaries, but perhaps just about staying within them. It’s perhaps more of an
issue for consumers. The classic underpinning to every purchase is ‘caveat emptor’, or ‘let the buyer
beware’. Buyers need to think more about what they’re buying, being careful to look beyond the
packaging and imagery to see what’s really being sold. If the purchaser was a young child, the same
wouldn’t apply, but in this case the Yollie buyers are surely adults, not kids.

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