Dairy processors are either enjoying delightful sales or they’re facing some category dilemmas within the supermarket. In part, it depends on where they compete—the dairycase or the freezercase—and how they respond to consumer taste trends, eating habits and health concerns.
No matter what, there are several intriguing storylines involving the largest categories of milk, cheese, ice creams, novelties and yogurt, according to several reports from Mintel, a global market intelligence agency.
Dollar sales growth in the yogurt and yogurt drinks category has been strong, gaining 46% between 2009 and 2014 to reach estimated sales of $8.0 billion.
The introduction of Greek-style products led to strong year-over-year growth in 2011 and subsequent years. Although the pace of growth is expected to slow as the new product novelty fades, continued product positioning that falls in line with consumer interest in both health and indulgence will allow for continued positive performance.
Looking at the category more closely, Greek yogurt continues to dominate, but brands will look to differentiate in 2015. Information Resources’ multi-outlet data (MULO) show sales of yogurt and yogurt drinks grew by 6% in the 52 weeks ending May 18, 2014, largely due to continued consumer interest in Greek yogurt.
The category’s top three companies—Groupe Danone, General Mills (Yoplait) and Chobani—collectively account for 73% of the market. Groupe Danone represents nearly one-third of dollar sales across MULO. The company’s sales increased 6% during the period; while the majority of Dannon’s sales were from its Oikos and Light & Fit lines, in March 2014 the company announced plans to shift focus from Greek yogurt and to improve the nutritional profiles of all of its offerings by reducing total sugar and fat content and increasing nutrient density.
Yogurt and yogurt drinks have thrived in recent years due to a combination of health positioning and product innovation that meets consumer demand for convenient, responsible, and snackable offerings. Although Mintel forecasts continued dollar sales growth for yogurt, it will come at a slower pace. This will be due in part to the expansion of other health-focused food and drink offerings, and the shift of Greek-style products from attention-getting newcomers to category mainstays.
Another growing category is cheese, which continues to benefit from high household penetration due to its relative affordability, versatility, and variety of flavors and formats.
For the record, cheese sales increased 14% from 2009-14 to reach $21.4 billion in 2014, at current prices. The category continues to grow as a result of interest in snacking, gourmet and natural cheeses, and consumer interest in healthy eating.
Cheese’s versatility and greater product varieties, flavors, and formats helped maintain interest in natural cheese. Consumers’ concerns about the nutritional value of processed cheese have not impacted segment sales dramatically.
Mintel predicts cheese category sales to increase an additional 24% from 2014-19, reaching $26.5 billion in sales in 2019, at current prices. The category is well-positioned for future growth especially as snacking occasions overtake standard meals and more than a third of consumers buy cheese specifically because they are snacking more frequently. Many consider cheese a great snack and category innovations including single-serve varieties are making it easier for Americans to enjoy cheese whenever and wherever they please.
Cheese category sales are driven by sales of natural cheese, which represents 73% of the overall category. Natural cheese sales increased 7% from 2012-14, reaching $15.6 billion in 2014 as a result of its perceptions as a versatile, high-protein, healthy food.
It’s also important to note that as consumers are continually exposed to various types of cuisines, their flavor preferences and profiles are expanding. Interest in imported, gourmet, or artisan cheeses with unique flavors and product origins may be partly due to this exposure.
Kraft remains the category leader for the 52 weeks ending July 13, 2014, with 28% market share; Kraft brands, including Philadelphia Cream Cheese, Kraft All Natural, and Kraft Singles lead the cream cheese, natural cheese, and processed cheese segments, respectively. Another leader, Sargento, saw sales increase 6% in the 52 weeks ending July 13, 2014, as the brand spotlighted its flavor and natural ingredients. The brand also appealed to snackers with the launch of the Sargento Tastings line, which featured a line of unique options positioned toward flavor enthusiasts.
Private label sales collectively increased 3% and account for 37% of the market; private label brands also drove sales by expanding their flavor profiles.
Speaking of private label, there are several interesting and important shifts in the milk market.
For the record, national brands now own more than 36% of the market share in the milk category, closing the gap with private label. This performance reflects national brands’ success in the non-dairy, milk alternative segment. While private label may be the leader in the dairy milk segment, it has not been able to catch up with national brands in the non-dairy segment. WhiteWave Foods Co. and Prairie Farms Dairy both reported strong growth in the measured period between 2012 and 2013, indicating a rise in popularity in organic milk, milk alternatives, and unique flavor offerings.
Consumer interest in health and the desire for delicious nutritional drinks are allowing the milk category to refresh itself. In an attempt to respond to consumer preferences, the industry is putting a new spin on a classic beverage to stay relevant with current trends and revive awareness.
The milk, creamer, and non-dairy milk category experienced a decline of 12.5% in 2009 as the economic recession took hold of consumers’ disposable personal income. As the economy began its recovery, category sales increased through 2013, led by the success in the non-dairy segments.
From 2014-18, Mintel finds that dairy milk’s focus on health attributes will help encourage market growth. If consumers take to dairy milk’s recent health push, combined with the continued success in the non-dairy market, Mintel forecasts that the category will reach $30.4 billion in retail sales by 2018.
While dairy milk continues to dominate sales, consumers also are showing an interest in dairy alternatives, including flavored offerings. Once under threat for their high sugar and fat content, flavored milks are gaining positive attention as milk’s nutritional benefits are highlighted and carbonated soft drinks are continuing to come under fire, fueling the need to replace them with other drinks that are healthier but just as flavorful.
The experimentation with health and flavor has helped to lift sales of dairy and non-dairy products, but sales are not yet an obvious threat to segment leader skim/low-fat milk, which dominates the category with more than 45% of the market share. However, the overlap between consumer purchases of dairy and non-dairy milk products suggests that most respondents buy multiple varieties of milk for different usage occasions or members of their households.
The alternative milk category has been the fastest growing for the past two years, while cow’s milk has been in gradual decline through 2013. With the exception of the skim/low-fat milk segment, each of the tracked milk segments reported positive sales increases between 2011 and 2013, with the other segment and coffee creamers reporting the most impressive gains. However, both segments remain a small part of the overall milk category, which is led by the skim/low-fat milk segment.
Ice cream and frozen novelties make up another dairy category with high household penetration. Nevertheless, a higher percentage of consumers say they are eating less in this category during the past year—compared to those saying they are eating more. Although the category has managed to ward off steep sales declines, frozen treats players will need to stem future declines in participation.
Mintel estimates total US retail sales of ice cream and frozen novelties will stay at $11.9 billion in 2014. While sales in the category have increased by 8% since 2009, these gains are wiped out when adjusted for inflation to reflect a 3% dip during that time.
The category is driven by sales of ice cream, which represents half of market share. Gelato (sales of which are counted among the ice cream segment) has kept the segment, and thus the category overall, afloat in recent years. Appealing to consumer interest in flavor innovation and product quality, the higher price point of these offerings has kept dollar sales steady even despite decreased consumption. Mintel forecasts more of the same in coming years, as consumers manage their desire for indulgence alongside an interest in healthful living.
An interest in healthy eating presents a significant challenge to sales in the category. Despite the fact that frozen treats are generally seen as an indulgence, 68% of consumers consider health-related attributes in their purchase decision. When asked about health-related purchase drivers for ice cream and frozen novelties, close to a third of consumers said they look for products that are all natural.
Meanwhile, although more than half of frozen treat buyers express the importance of product price in their purchase decision, flavor still rules. A further interest in quality and specialized products can be seen. All of this indicates that providing products that allow for responsible indulgence (including smaller package size, the use of natural ingredients, and an expansion of dairy-free product lines) should be considered.
Source: Yogurt and Yogurt Drinks-US-August 2014
Source: Ice Cream and Frozen Novelties-
Source: Cheese-US-October 2014
Amanda Topper is a food analyst at Mintel.
Beth Bloom is a food and drink analyst
Elizabeth Sisel is a beverage analyst at Mintel.