Why did Whole Foods drop Chobani?

Breakups between brands and the companies that sell them are always interesting. Heinz and McDonalds, for example, split after a competitive spat over trading executives. Starbucks and Kraft broke things off because the coffee company didn't think the grocer was displaying its wares well enough -- and the relationship cost $2.75 billion to end.

Whole Foods' decision to no longer sell Chobani yogurt, however, is somewhat more puzzling.

The reason suggested by the Wall Street Journal: Whole Foods wants to move towards disclosure of all genetically modified ingredients. Chobani uses milk from cows that eat genetically modified corn and soybeans, which Chobani says is the only way it can produce enough yogurt to supply the burgeoning market. But Whole Foods doesn't say all its products are GMO-free now either, and Chobani says it wants to move in that direction as well, so that rationale doesn't hold up.* (Whole Foods has not responded to a request for clarification. UPDATE: Whole Foods says that Chobani did not intend to rid its products of genetically modified content, but declined say whether its other Greek yogurt suppliers had promised to do so or not. Full statement below.)

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The reason the New York Times came up with: Whole Foods just wants to make room for more exclusive, niche, special brands and had "asked all of its Greek yogurt suppliers to devise new products and flavors that would distinguish what Whole Foods offers." That makes some sense, given that Whole Foods' value proposition is having stuff that you wouldn't find in your average grocery store.

But even without Chobani, the yogurt aisle still features widely-available brands like Stonyfield Farms, Nancy's, and Fage (as well as less prevalent ones like Siggi's, Wallaby and Skyr). And besides, Chobani hasn't exactly been a slouch in the innovation department: It's pumping out all kinds of flavors and formats from its new factory in Idaho. Ultimately, the company says Chobani had to go, just because. "This happens all the time in retail," spokeswoman Liz Burkhart wrote in an email. "We make room for new and innovative products." *

Fine, that's their prerogative. It's true that shelf space is precious -- and Greek yogurt is a valuable segment. Per capita yogurt consumption has grown by 400 percent over the past three decades, according to IbisWorld, and Greek yogurt has rocketed to 29 percent of the market since Fage introduced it to the United States in 1998. Chobani now has 12.5 percent of the overall yogurt pie, which brought in $4.2 billion in revenue in 2013.

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But the best way for Whole Foods to cash in on that fashionable, high-margin product? Make the stuff itself. The grocer has been gradually expanding its private label products, which seem to take up half its aisles these days. That way, it can offer all the custom new options it wants, without asking a global company to tailor its offerings (Whole Foods may be growing, but it still has nowhere near the market-bending buying power of a Wal-Mart or even a Kroger). It's also easier to control pricing on private label stuff, which Whole Foods is finding increasingly important as it enters more urban areas, and is more profitable to begin with. It's the Trader Joe's model: Mostly store brand items that can't be found anywhere else.

Sure, Whole Foods might also want to make room for the boutique, local brands. But it's a good bet that it's also trying to make room for more of itself.

* Corrected to reflect the fact that Stonyfield Greek Yogurt -- as distinct from its parent company Dannon's Oikos brand -- is GMO-free. 

Whole Foods added this statement in response to a question about why it's keeping Oikos and dropping Chobani:  

This is exactly the reason why we are frustrated with the original Wall Street Journal story. While we will be phasing Chobani Greek yogurt out of our stores, it is not because of the line’s possible GMO content. The story was inaccurate. [UPDATE: Whole Foods clarifies that only the headline was inaccurate, and has since been corrected] Whole Foods Market strives to offer the widest variety of products possible, including items shoppers simply can’t find anywhere else. As the national demand for Greek yogurt has grown, so has the number of conventional Greek yogurt options. As is the case with any saturated product category, Whole Foods Market challenged our Greek yogurt suppliers to create unique options for shoppers to enjoy – whether it be exclusive flavors, organic choices or non-GMO options. At this time, Chobani has chosen a different business model, so we will be phasing Chobani Greek Yogurt out of our stores in early 2014 to make room for choices that aren’t readily available on the market.

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