|Title:||United Kingdom annual cheddar cheese retail sales by brand-name and private-label cheeses in pounds sterling and percent change for 2009 to 2011|
Start of full article - but without data
BRANDED VS X-L VALUE
Value ([pounds sterling]XXX)
VALUE (XXw/e) XX/XX/XX XX/XX/XX XX/XX/XX 2009v2010 2010v2011
Branded XXX,XXX XXX,XXX XXX,XXX; XX.X% X.X% Own XXX,XXX XXX,XXX XXX,XXX -X.X% X.X% label Total X,XXX,XXX X,XXX,XXX X,XXX,XXX X.X% X.X% Cheddar
Once upon a time, brands were little more than a novelty presence in the Cheddar fixture, such was the dominance of own label. In recent years, however, more and more brands have launched, to the point where they now account for almost half of all Cheddar sold in the mults.
But with growth has come competition - and duplication. As the fixture reaches saturation point, and the mults carry out ever tougher range reviews, the battle to stay on shelf has never been fiercer.
The process of rationalisation has already begun. In March, Waitrose stripped out duplicate cheeses in a major layout review that saw it introduce new mid-tier and upper mid-tier own-label products to create stronger points of difference.
Sainsbury's, meanwhile, has reduced the number of its Cheddar SKUs from XXX to XXX [BrandView.co.uk XXw/e XX August 2011] and axed the Wyke Farms and Collier's Powerful Welsh Cheddar brands as part of an overhaul of its Cheddar fixture.
Growing demand for new formats such as sliced, grated and spreads, as well as new reduced-fat cheeses, means more brands are likely to fall out of the fixture in the coming months. "We haven't got elastic shelves," says Bryan Burger, Morrisons category director for dairy. "There are quite a few 'me too' brands on the shelf at the moment, and with the emerging trends in sliced and grated, we'll have to make space."
So what will it take for brands to survive the next round of category reviews? And which brands are likely to find themselves in the line of fire?
The party line offered by retailers is that, in order to survive, brands need to offer a point of difference and add value to the Cheddar category. "They need to have a great brand strategy, and they need to be prepared to communicate both above and below the line, through promotion but also by telling customers why their cheese is better than anybody else's," says Burger.
Every brand owner can offer a persuasive argument for how their brand fulfils this, but talk is cheap, and in many cases the evidence doesn't stack up. The latest pricing data shows that, in the past year, just two of the leading five Cheddar brands-Cathedral City and Wyke Farms - traded at an average retail price above own label [Kantar XXw/e XX June XXXXX.
One of the mults reportedly requested recently that its suppliers fix the price of their Cheddar for a year and agree to fund cheap promotions - a tender process in all but name, suggesting remaining on shelf has less to do with adding value to the category and more with brands' willingness to pour money into cheap promotions.
Part of the issue is that shoppers are far less brand-loyal now than they were in the past. "Customers continue to tell us Cheddar is Cheddar, and they will buy what is on promotion at the time," says Asda cheese buyer Alex Bradbury.
Sainsbury's buyer Peter Lyons agrees. "We are seeing a great deal of promiscuity as customers are happy to switch in and out of brands," he says. "There are a lot of promotions in the market right now, and with the economic climate as it is, everyone is on the lookout for a great deal, particularly on branded lines."
With brand loyalty on the wane, Cheddar makers have to show they're able to invest behind their brands, says Richard Hollingdale, commercial director of First Milk. "The retailers are looking to put value on shelf, and the consumer is looking to take value off the shelf; if you sit on the sidelines you're going to fall out," he says. Brands that want to play in the mainstream have to be able to accommodate promotional activity in their cost model, he adds. "If you can't do that, there's no point moaning - that's the rules of fmcg."
Despite the importance of low prices and promotions, the three mainstream Cheddar brands that have been trading below own label over the past year - Lactalis McLelland's Seriously Strong, Adams Foods' Pilgrims Choice and First Milk's The Lake District Cheese Co - all insist they offer a point of difference beyond price.
Alastair Jackson, marketing director at Adams Foods, says the ability to grade and select the best Cheddar is what gives Pilgrims Choice its USP. "It's not what we put into Pilgrims Choice, it's what we don't put into it," he says. The brand has recently diversified into branded territorial cheeses, and is now looking to get into sliced and grated Cheddar in a bigger way - all in a bid to ensure the Pilgrims Choice brand remains relevant to consumers. "You have to ask yourself, why wouk consumers buy my brand over other brands, what is the USP and do you command a premium?" says Jackson.
Yet Jackson is candid enough to admit that, when it comes to average retail price, Pilgrims Choice is not currently ticking all the right boxes-. In 2012, Adams Foods will therefore be doing a mini relaunch of Pilgrims Choice to address issues around its positioning. "We've not got it right yet, but we're certainly not the worst and we're moving forward in the right way," says Jackson.
Meanwhile, The Lake District Cheese Co is pushing provenance. "Everyone knows the Lake District, so the food cues and food sourcing dynamic is there," says Hollingdale. "After that you've also got a very good product."
And Lactalis McLeiland points to its media spend as evi dence of its premium positioning. "Of the brands advertising at medium weights on TV nationally, we are the second largest," says marketing director Martin Rickenback.
But he admits conveying the message that "quality is worth paying for" can be tough. "It's difficult to achieve loyalty, but you can't buck the marketplace," he says. "If there's promotional activity going on, we're inclined to say we don't want to miss the opportunity for people to try our product, or lose customers - so we'll roll up our sleeves and participate."
For the time being, this willingness to fund deep-cut promotional tactics is enough to keep most of the established brands on shelf. "The guys that are purely trading on price are holding their own at the moment; they're serving the customer," says Burger at Morrisons.
But for how long cheap prices will be enough to survive is unclear. Own label is enjoying a renaissance, and last yearincreased its share of Cheddar sales for the first time in two years. It now accounts for XX% of volume sold [Kantar]. Volume sales of branded Cheddar fell X.X%.
As in other dairy categories, retailers are putting renewed emphasis on the development of their own-label offers in Cheddar. Tesco recently announced a deal to source [pounds sterling]XXXm worth of British Cheddar - which will go into its own-label block, grated and sliced lines - and is tipped to be following its Yoo yoghurts brand with a tertiary Cheddar brand called MU.
Waitrose's review of its prepacked cheeses made space for an extra XX lines, including four own-label artisan Cheddars, which cheese buyer Chris Dawson says are showing "good growth". And Morrisons is working on a mini range review that will centre on more own-label Cheddars.
At Asda, Bradbury says he's seeing a "resurgence" in mid-tier own label, with sales of Chosen By You Cheddar up X% year-on-year. It's in this middle-market segment where Bradbury senses real opportunity for own label to gain ground on brands. "As brands continue high/low strategies, the category and consumers need a brand and product they can trust to have great value, week in week out, without compromising on quality. This is something our Chosen By You cheese will do," he says.
It's this kind of reasoning that makes smaller brands feel they're right to stay away from the most aggressive promotions. "Any brand can give the product away, but you're only as good as your low price, and once you come off deal, there's another brand waiting to go on," says Phil Ponsford, market intelligence director at Milk Link. The company's Tickler brand has been on the market for four years, and has reached a level of distribution of around XX% without chasing overnight volume, he adds. Milk Link is investing [pounds sterling]XXX,XXX in an ad campaign for Tickler this year and has recently won a new listing in Morrisons, adding to existing distribution in Tesco, Sainsbury's and Waitrose.
The brand, which currently only comes in an extra-mature variant, has also benefited from growing interest in stronger Cheddars.
Waitrose's Dawson says he is looking for "really interesting products with good flavours". "Consumer tastes are changing, and people are now looking for stronger flavours," he adds ('How Cheddar is getting sweeter', pXX).
Despite losing its Sainsbury's listings, which he describes as a "bitter blow", Wyke Farms MD Richard Clothier says he, too, is pleased with the health of his brand. Wyke recently picked up a number of listings with The Co-operative Group and has seen a "huge bounce" in sales in Waitrose since the brand dropped out of Sainsbury's.
Like Ponsford at Milk Link, Clothier claims he is no longer willing to play the promotional game to the long-term detriment of his brand. "As a provenance cheesemaker, our job is to try and add value to the cate-gory," he says. "If I'm going to be different from Dairy Crest and the other guys, X should be trading above them and convincing the consumer we're worth paying for."
So what of the market leader, Dairy Crest? Its Cathedral City brand is widely acknowledged as the one bulletproof brand in Cheddar - the one all supermarket buyers know they can't do without. Despite its reputation as an aggressive promoter, Cathedral City achieved the highest average price per kilo over the past year, trading at a XXp/kilo premium over own label and XXp/kg above the second-highest brand, Wyke Farms. It also had the highest base share of branded non-promotional sales, selling XX.X% of its volume at the full retail price [Nielsen XXw/e XX June 2011].
Tim Dummer, Dairy Crest customer marketing controller, is adamant that while "there are currently some brands that rely too heavily on promotional sales to drive share", Cathedral City isn't one of them. He points to the numerous ways in which Cathedral City is adding value to the category. The brand is comfortably the biggest TV advertiser of the top five and this year will spend [pounds sterling]Xm bringing new innovation to Cheddar. Most notable recently is its introduction of Chedds, a kids snacking range (Focus On Kids, Processed & Soft Cheese, pXX).
Last year, Dairy Crest launched Davidstow Cheddar-previously a retailer own-label product - as a brand in its own right, securing listings with both Sainsbury's and Tesco. This summer, the Davidstow brand created an integrated marketing campaign focusing on its Cornish roots. As to promotions, Dummer says they will always play a part in the marketing mix, but warns "any brand that relies on promotions alone will simply destroy category value".
As retail buyers are increasingly questioning which Cheddar brands to keep on their shelves, brand owners are faced with the prospect of devising a strategy that optimises their chances of making the cut, while inflicting the minimum damage on brand equity.
"If brands are to say, 'we can no longer sustain the promotional fight', they're going to have to have a clear point of difference compared to anybody else," says Morrisons' Burger. Those who stay and slug it out at an average price below own label, though, "have to question their usefulness going forward," suggests Clothier.
This conflict of long-term sustainability versus shortterm survival is likely to come to a head in the near future. With milk prices due to increase for the remainder of the year, pressure on margins will intensify. For Cheddar brands that survive the next range review solely on account of their willingness to freeze prices and promote heavily, it may in the end prove a pyrrhic victory.
BRANDED VS X-L VAXUE
Value ([pounds sterling]XXX)