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Cheap as cheddar: Dairymen British cheese category report 2023

Published in The Grocer

Every variety of British cheese is in decline, except one: cheddar. And own label is the winner as shoppers seek low prices

British cheese used to move at a serene pace. Volumes and values would rise or fall by a few percentage points each year, but sales would largely cruise along at a comfortable rate.

Not any more. Over the past four years, sales figures have careered around dramatically, turbo-boosted by coronavirus before going into reverse as lockdowns ended.

And then, just when things looked to be heading in the right direction, inflation and the cost of living crisis have sent the market into a tailspin.

As prices have risen, traditional British cheeses have taken a hit to volumes. The category is down 1.2 million kg, with the likes of double gloucester, wensleydale and cheshire all in double-digit decline [Kantar 52 w/e 14 May 2023].

In fact, every variety is in volume decline, even in own label.

Except for one: cheddar. The British staple has posted a 0.8% volume increase.

That’s testament to its position as the nation’s favourite cheese – and to its sophistication and adaptability, says Rich Clothier, MD of Wyke Farms.

“Cheddar used to be just lumps of yellow bricks,” he says. “Now it’s much more exciting. There’s huge variety, and stories and provenance.

“There are strong brands, but also an evolution in own label, where provenance is being used in premium-tier products.”

Indeed, own-label cheddar has been the big winner of the past year. Volumes have grown 5.3% – driving a value gain of 28.8% – while branded volumes have plunged 13.6%, leaving value up a mere 0.3% [Kantar].

Price is a crucial factor here. At an average price per kg of £6.64, own-label cheddar is the best value option in British cheese – 21.6% cheaper than branded equivalents.

“Cheddar used to be just lumps of yellow bricks. Now it’s much more exciting and varied”

That demand for cheaper cheddar is reflected in the performances of Aldi and Lidl, which have grown value sales of British cheeses by 41.2% and 40.4% respectively.

All this comes as little surprise during a cost of living crisis. More surprising is the growth elsewhere in the market. Clothier points to “a polarisation in the category and the country” that has resulted in diverse buying habits.

“There are financially stressed shoppers and those who are doing OK. So, value and premium tiers are doing well,” he says.

This ongoing confidence in pricier lines is backed up by Ornua Foods, which owns Pilgrims Choice and supplies private-label cheddar.

While Ornua confirms value own label ranges have been the big winners, commercial director Tom Watson insists brands are vital to the future of the cheddar market.

“Brands have a very meaningful role to play,” he says. “We’ve got a rebasing within retail, where there’s a challenge for brands to go again. The pressure on us is to do things a little bit differently to encourage people back.”

To this end, Pilgrims Choice has launched an adult snacking cheese and will be introducing seasonal packaging in October ahead of Christmas.

And for more price-conscious shoppers, promotions have been an important mechanic to encourage branded sales, Watson says, admitting that “we’ve seen a decline on brand, like all brands have”.

As such, Pilgrims Choice has focused on discounts for supermarket loyalty card holders. At the time of writing, Pilgrims Choice Mature Cheddar and Pilgrims Choice Lighter Mature Cheddar Cheese were in Tesco with a Clubcard price of £3 for 350g – down from £4.20.

In the traditional big four, Assosia data shows 170 promotional periods for the brand in the 52 weeks to 31 August 2023, across 29 SKUs.

Marketing drives

To further drive Pilgrims Choice sales, Ornua launched a £1m TV push in April, focusing on the brand’s flavour credentials.

It’s not the only one turning to marketing. Lactalis has also invested in TV slots to support its Seriously Cheddar brand, with campaigns in the summer and in October for the Seriously Spreadable range that look to highlight its “irresistibility”.

This quality message is also integral to its Orkney cheddar. It trades heavily on its use of 100% locally sourced milk from Orkney farms – and seems to be reaping the rewards. Sales are flying by both value and volume, says Lactalis.

This illustrates the need for brands to have a clear selling point, says Heloise Le Norcy-Trott, Lactalis group marketing & category director.

“There has been a massive shift in consumer shopping behaviour since the pandemic, with monthly household trips to the supermarket reducing from 18 to 16,” she says. “This trend is having an impact on how people are buying and using all foods, including cheddar.

“This highlights the importance of understanding what value really means to consumers, as well as the need for reframing propositions as a saving and not a cost. For example, in the case of convenient formats like grated and sliced, communicating the time and money saved from not eating out are key,” she adds.

Cheddar’s use as an ingredient is another benefit, says Neil Stewart, head of marketing for cheese at Saputo, owner of Cathedral City. “This presents an opportunity for brands. As more people make their meals at home, quality is key,” he says.

“For some shoppers, this will mean spending a bit more on ingredients they can trust, such as Cathedral City cheddar, as a cost-efficient way of elevating the everyday and trading up on their budget-friendly meals.”

In anticipation of this trend, Cathedral City refreshed its branding last year and introduced eye-catching, side-opening packs to reduce packaging. It also launched a Lighter Extra Mature 350g block.

“Retailers will want to reduce reliance on basic cheese and get Brits trading up again”

But, arguably, the biggest development of the past 18 months was the brand’s first venture into vegan cheese in September 2022 : Cathedral City Plant Based. Made from coconut oil and potato starch, it was introduced in block, sliced and grated formats. A spreadable option was added in May 2023.

Stewart says it was designed to tap demand for cheddar-style products, which account for upwards of 70% of plant-based cheese volumes.

And the market leader’s vegan foray certainly looks to be a hit. Kantar analyst Ben Roberts notes the brand has done “particularly well in the plant-based space, outperforming releases from dedicated plant-based brands”.

Territorials’ travails

Aside from cheddar, the picture isn’t quite so positive. Territorial cheeses have had a tough time. Value has increased 15.8%, but that’s entirely due to a 25.6% rise in average price per kg; volumes have dropped 7.9%.

Once again, brands have taken the brunt. Their value is down 7.6% and volumes have fallen 21.2%. Wensleydale, red leicester and lancashire have all performed particularly badly.

Still, some suppliers remain bullish. Cathedral City is so confident that it’s just added its first-ever red leicester.

That optimism is echoed at Belton Farm. Senior account manager Mike Hutchins says its Red Fox red leicester brand is buoyant – and it’s set to be further invigorated by a new pack design to target younger consumers.

“Red Fox is still performing well,” he says. “It’s not at the same growth volumes as last year but, because it’s got that point of difference and adds value to the category, there is an appetite among retailers to continue backing it.

“Retailers will want to reduce the reliance on basic cheese and get their mid and premium tiers more prominent to get people trading up again.”

It’s a point also made by Matthew Hall, owner of Butlers Farmhouse Cheeses. “Cheddar has robust volumes because of versatility, but people still want to buy into something interesting and exciting.

“It’s the lipstick effect: little luxuries that consumers are happy to buy to deliver moments of joy during challenging times, and this is where British speciality comes into its own.”

Hall says Butlers is seeing this come through in demand for “our more complex, aged Lancashire cheeses like Sunday Best or Parlick sheeps milk cheese – both similar in style and versatility to cheddar and increasingly on the radar of retailers and consumers”.

Future challenges

Parlick, which won listings with Sainsbury’s, Waitrose, Morrisons and Booths this year, was bought in 2022 by Butlers from Singletons, after the latter collapsed into administration due to Covid-19 and steep milk price rises.

Milk prices have since fallen 30% – from a record high of 51p per litre in December to 36ppl in June. But cheesemakers still face a squeeze.

A key challenge is the lag between milk prices and cheese prices, caused by maturation times. It means, for instance, mature cheddar made last December with expensive milk will be hitting the shelves in coming months. At the same time, suppliers are facing elevated energy prices, while rising interest rates are adding to maturation costs because cheesemakers often finance stock through working capital borrowed from the bank.

“The cheese made at those higher prices is now being sold on to a market that has collapsed, resulting in significant losses to the processors if they are not selling on formula prices,” Kite Consultancy recently warned.

At the same time, retailers will be demanding price decreases as inflation eases.

In Kite’s words, it’s a “perfect storm” – one that could blow British cheese sales off course once again.

Published in The Grocer, 25th September 2023