The organic category and innovation in flavors and ingredients are also set to be key drivers for growth, says the report Cultured Dairy Products by Packaged Facts.
Indeed, with consumer data revealing that those people who eat yogurt eat it in large quantities, the new report suggests that if the US market capitalizes on its growth potential, consumption rates in the nation could reach those of Europe, which is currently four to five times higher.
And this growth potential could be set to reverse the dip in market expansion over the past year.
The US cultured dairy market grew by almost 15 percent in 2002, followed by 8 percent growth in both 2003 and 2004. But 2005 saw growth of just 3 percent in comparison. The market, which is made up of cultured fluid, non-drinkable yogurt and non-pourable cultured dairy, was estimated at just under $9.7bn last year.
However, Packaged Facts forecasts that sales will grow to $15.4bn in 2010, reflecting an annual growth of almost 11 percent between 2005 and 2010.
Cultured fluid products are expected to experience the strongest growth, increasing 38 percent per year in the period. In particular, sales of probiotic shots are forecast to soar by 97 percent annually.
Indeed, a general move towards healthier consumption is set to be a driving force for the nation's yogurt market.
"Many cultured dairy products are well placed to be part of the answer to health and wellness problems, such as obesity, type-two diabetes, heart disease, and certain cancers. There are also other areas to develop in such as reduced/non-fat, vitamin-fortified, reduced-cholesterol, reduced-sodium, decaf/caffeine-free (or caffeinated!), sugar-free, and, of course, organic," said the report.
As well as health and wellness, convenience and good taste are two other fundamental consumer expectations that are key to the market's growth. And within these categories, innovation in terms of products and ingredients will remain primary drivers.
For example, single serve is expected to continue to be an important option for consumers. And when it comes to flavors and ingredients, the consumer palate is more adventurous than ever, said Packaged Facts, which suggested that manufacturers should explore alternative flavor options, such as spicy and savory.
Developing products for particular consumer groups also remains important, with the key targets for this market being children, women, baby boomers and Hispanics.
Opportunities for growth in the organic dairy segment should also be tapped, according to the report.
"Organic is a perfect fit for dairy innovation, particularly because it alleviates fear of rBST and operates in conjunction with health and wellness trends, and both are a tremendous part of normal life events, such as parenthood."
In 2005, the yogurt market in the US was dominated by non-drinakable products, which saw sales of $4.9bn and accounted for around half of the total market. Within this category, single yogurt cups were the leader.
The largest cultured dairy products manufacturers remain General Mills and Dannon, which saw sales of $1.1bn and $883m respectively. Stonyfield farm came in third with sales of $199m. Other firms active in the field include CoolBrands, Yofarm Corp and Dean Foods.
But when it comes to pushing their cultured dairy brands through advertising, few of the large marketers have splashed out on marketing campaigns. And although Packaged Facts predicts that the market is set to grow with or without ad spends, it adds that many brands may benefit by increasing their advertising budgets.
However, alternative marketing options often work better for products such as cultured dairy, which operate in the health and wellness arena. Such alternatives include co-branding, sponsorships, sampling and web initiatives.
And these methods of driving consumer interest are already being used by firms. For example, Stoneyfield Farm, which makes organic milk and yogurt for babies and toddles, is underwriting 'Barney and Friends' on PBS. And Horizon Organic recently promoted its low-fat fruit yogurt with sampling programs during the first quarter of 2006.
Other initiatives included Wells' Dairy teaming up with Weight Watchers to develop a line of branded yogurts and smoothies. And Yoplait introduced an interactive website that allows consumers to follow the "journey toward health" of a group of women.
Retail packaging also plays a key role in the success of this product category, according to the report. Single serve and smaller portions are expected to continue being a driving trend. And consumers are also increasingly being influenced by seals, such as the National Yogurt Association's Live and Active Cultures, which identify products made with probiotics.
Other packaging innovation in the field includes a label introduced by French firm Cryolog that allows consumers to trace a product's freshness by turning opaque when the item is no longer fit for consumption.