|Title:||United Kingdom take-home share of butters and spreads by category in pounds sterling, kilograms, and percent change for year ending April 15, 2012|
Start of full article - but without data
TAKE HOME SHARE
Butters & spreads: XXw/e XX April 2012
[pounds sterling]m y-o-y % kg (m) y-o-y %
Standard butter XXX XX.X XXX.X X.X
Dairy spread XXX XX.X XXX.X -X.X
Pufa/mufa XXX XX.X XX.X -X.X
Low-fat spread XXX X.X XX.X -X.X
Other margarine XX XX.X XX.X XX.X
Packet margarine XX XX.X X.X -X.X
Flavoured butter X XX.X X.X XX.X
TOTAL X,XXX XX.X XXX.X -X.X
The butters and spreads category contains no shortage of powerhouse brands. But with the economy the way it is, being big is not in itself a guarantee of success. And as the threat from own-label substitutes has intensified, none of the three brand leaders--Lurpak, Flora and Anchor--has escaped a dip in volume sales [SymphonyIRI].
A quick glance at the topline value figures suggests the butters and spreads category is in rude health. But growth of XX.X% [Kantar Worldpanel XX w/e XX April 2012] is a red herring--the increase has been driven almost exclusively by retail price inflation. It is the volume figures that present a more illuminating picture. They show an overall inertia in category sales, but within this a striking dichotomy between the strong performance of own label and the weaker showing from branded butters and spreads.
Volume sales for total yellow fats have fallen by X.X% in the past year, yet despite this marginal decline, own label has grown volumes by X.X%. Brands, which represent around XX% of the market, have seen volume sales dip X.X%, suggesting unwillingness on the part of some consumers to keep paying a premium for their favourite brands. Not even increased promotional intensity--seven of the nine most-promoted brands have upped the number of featured space promotions year-on-year [Assosia]--has helped.
Naturally, there are exceptions. In spreadables, for instance, branded share is holding up well. Indeed, in dairy spreads and margarine spreads--two of the largest sub-categories--own label has actually seen its share decline significantly. But in categories populated by block products--such as packet margarine and standard butter--own label is making significant inroads into branded share, prompting the brand owners to push ever-more-inventive NPD in an attempt to win back consumers.
Matt Lothian, business insight director at SymphonyIRI, believes the growing ranks of consumers who use block butters for baking and cooking are increasingly asking, "Do I need a brand for that?". In many cases, the answer is no. "People are reassessing their choice as a result of category inflation so it's important to look at where they are reassessing. The biggest area is block butter," he says.
Lothian's analysis is borne out by sales data that shows brands with a strong presence in block formats struggling to maintain volume sales. Anchor has seen sales fall XX.X% [SymphonyIRI XX w/e XX April 2012] while Country Life has suffered a X% decline The other subcategory where Lothian says own label is outperforming brands is olive spreads, where Bertolli volume sales have declined X.X%. "Where there's less emotion in the category there's a higher level of substitution," Lothian explains.
So what do brand owners make of the threat of own label and how do they plan to fight back? Stuart Ibberson, senior director of BSM & shopper marketing at Arla Foods, concedes that "over the past year there has been a stronger performance from own label" but adds that the longer-term trend is of brands outperforming retailer brand products. He also points to the poor performance of own label in dairy spreads, where volume sales have fallen by XX.X% compared with X.X% growth for brands. "It's a bit of a sweeping statement to say that own label is outperforming brands," he contends.
In areas of the category where own label is making headway there are a number of drivers. Growth in own-label baking and cooking butters and margarines has been helped by "increased space at the fixture for own label", says Ibberson.
Price and promotional mix can also play a big part, particularly in own-label everyday block butter, says Louise Pike, Dairy Crest head of marketing, BSM. "Here we have seen higher volumes on promotion and favourable non-promotional prices, driven by inflation on branded lines, making this one of the biggest contributors to own-label growth."
Unilever, too, acknowledges the strong performance of own label but believes brands are still playing a "huge role" in the performance of the category. "What we've seen over the last year is a number of factors around own label, not least of which is the fact that retailers, most notably Tesco, have recently revamped their own label ranges across the board and from a volume perspective those revamps seem to have delivered well," says Adrian Adams, UK senior category manager, chilled foods. "But putting it into context, I don't think we should be sounding the death knell for brands because we are still looking at a category that is XX% branded value share and XX% volume share."
One possible reason for the resurgence of own label is the impact of price inflation in the category, which has forced suppliers to push through double-digit price increases in some cases. Dairy Crest chief executive Mark Allen recently noted in the company's annual results presentation that a small reduction in volume sales of butters and spreads had been more than offset by significant price increases. "Input costs, most notably cream and vegetable oils, continued to rise in the first half of the year and we had to increase our selling prices as a result," he added.
Adams, however, rejects the assertion that it is a simple case of price inflation driving consumers out of brands and into cheaper own label. "Consumer confidence is low and whatever the category, people are trying to eke things out a bit further than perhaps they were previously. But I don't think that's in any way connected to price or unique to spreads."
Own label is advancing particularly strongly online. On mySupermarket, the online shopping comparison site that covers Sainsbury's, Tesco, Ocado, Waitrose and Asda, own label accounts for XX.X% of sales [XX w/e XX June 2012]--a significantly higher proportion than its XX.X% offline share [Karitar Worldpanel]. One reason for the discrepancy, suggests Lothian, is the active role sites such as mySupermarket play in flagging up promotions and cheaper alternatives.
Pike adds that it can be harder for brands to deliver branded messaging online as there is no physical pack. Additionally, shoppers tend to impulse-buy more when they are in store, she points out, which can limit the perception of choice for the online shopper. "The challenge for brands is to overcome these constraints and create an environment online as close to in-store as possible."
Sainsbury's, in particular, overtrades in own-label butters and spreads both in-store and online, where own label accounts for XX.X% of value sales. "We have over-performed in online in this category for both brand and own label. It has been supported with activity online, which will help the whole category," says Louise Dolan, Sainsbury's butter and spreads buyer.
Brands that feel threatened should focus on offering something to the consumer that own label cannot replicate, according to Alison Palmer, brand marketing controller for the Adams Foods-owned Kerrygold brand. The brand has reason to celebrate its popularity among consumers--after being delisted in September 2011, its tub-format Softer Butter was back in Sainsbury's and Morrisons by March after "customers got in touch" with the retailers to ask for its return.
"What we've focused on is bringing new products that are not available in own label to the market that meet genuine needs," adds Palmer. "We're asking ourselves, what can we bring to the market that nobody else is doing? Then you can mitigate against people downtrading."
A year ago, Kerrygold started interrogating everything about block and spreadable, trying to scrutinise unmet consumer needs. The result was the recent reformulation of its block butter to Kerrygold Real Butter Now Softer, which Palmer says is tackling the problem of hard-to-spread block butter. "It delivers on indulgence and purity but addresses that key frustration--softness."
Another key innovation for Kerrygold has been the recent launch of Lighter Salted block butter. The shift towards healthier options has been a key trend in the butters & spreads category for some years, but not at the expense of taste, claims Palmer. "The product is XX% less fat--much lower than that and you start to compromise on the taste, but at XX% you can still achieve a really good taste match with the full fat products."
The balance between taste and health was also fundamental to arguably the biggest launch in the butters and spreads category this year--from a brand that, tellingly, has historically been strongest in block butters. Aria Foods' Lurpak launched a Lightest Spreadable variant in January that has since racked up [pounds sterling]Xm in sales, the majority of which has been incremental to Lurpak, according to Ibberson. "[Health and taste] are the key purchase drivers in this market and there's always been a trade-off between a healthy product and a tasty product. What we've got with Lightest is a product that we believe delivers on both of these things."
Striking the balance between taste and health is important because there's little evidence to suggest the market is moving towards lower-fat products per se. In fact, low-fat spreads, which typically contain over XX% less saturated fat than standard butters, have actually seen sales fall back by X.X% in volume over the past year [Kantar Worldpanel].
Adams accepts that "the move to diet products has to be coupled with outstanding taste delivery, otherwise shoppers will not move their behaviours. It's not health at all costs". Flora has tried to marry the two demands in its recent relaunch of Flora Original and Flora Light with a new formulation that preserves the natural goodness in their canola, linseed and sunflower oil. But despite research showing consumers preferred the taste of the new blend, there has been a considerable backlash against it, with commentators on The Grocer's website claiming Unilever has "ruined the taste" and threatening to switch to rival brands.
Flora brand manager Ali McKerrow admits the response "has not been encouraging" but adds he is "hopeful that when we get out there and tell people the positive part of why we've changed it, it will help people adjust to the change". In the meantime, Flora commissioned new research to find out just how broad opposition to the new blend really is. "There are always some people that are really vocal and the worry is that it will transfer on a big scale into people changing their future purchasing habits, but actually the research we've done really reassured us that isn't the case," says McKerrow.
Better news for Flora is to be found in the performance of Flora pro.activ, which has grown volume sales X.X% and is now worth [pounds sterling]XX.Xm. The cholesterol-lowering spreads market is insulated from the threat of own label because own label has a negligible presence on shelf, says a Benecol spokesman. Kerry Foods did launch a Smart Health brand exclusive to Tesco last autumn, but the tertiary brand lost its listing in May.
"The economy continues to be a threat as consumers are tightening their belts and turning to own brand products or cheaper, non-functional varieties," adds the spokesman, "but Benecol was the first cholesterol-lowering spread on the market and its XX-year heritage and proven efficacy remain very important to consumers."
Last year's biggest category launch, Flora Cuisine, is also "really resonating with consumers and driving growth for the category", according to McKerrow. Rather than cannibalising sales of butters and spreads, Cuisine is gaining most of its sales from outside the sector, notably from oils, he adds.
Following the success of Flora Cuisine, Unilever recently launched Stork Easy to Mix Baking Liquid--a liquid margarine designed for easier mixing and blending that represents the brand's first NPD since the 1970s. The Stork brand, which has delivered a marginal increase in volume sales in the past year, is benefiting from the growing popularity of home cooking and baking, says Adams--a trend widely acknowledged throughout the industry. "I think there's a general baking trend driven by the media and celebrity chefs," says Ibberson. "Baking has become trendy again."
Unsurprisingly, block butters--most often used for cooking and baking--have seen significant innovation in recent times as suppliers seek to capitalise on this trend and, crucially, add value over own-label alternatives. While Adams has brought out Kerrygold Real Butter Now Softer and Lighter Salted, Dairy Crest took its Clover spread into a block format at the beginning of the year, WeightWatchers recently launched a half-fat block butter and French dairy company Isigny Sainte-Mere is poised to introduce new brick salted and unsalted butters and unpasteurised crystal salt and unsalted butters into selected Waitrose stores (see right).
But Palmer warns that anyone who believes consumers are using block butters purely for cooking and baking should think again. "We did a big usage and attitude survey back in September that found only XX% of block is used for cooking and XX% is for spreading," she says. "We were really surprised because we thought more would be for cooking. A lot of people are saying, yes I bake, but it's really more like once a fortnight whereas you're having toast every day, which means the spreading occasions are more frequent."
Continued innovation will be key if brands are to resist the march of own label. "The BSM category is a high-penetration, non-expandable category and all involved must focus on innovation," says Pike. "Only by giving the consumer new and exciting reasons to trade up, increase usage or add another BSM product to their repertoire can we grow this important category."
To this end, some suppliers are looking to overseas markets for inspiration. Following the success in France of a St Hubert spread with edible seeds, Dairy Crest is launching Clover Seedburst (see pXX). The spread contains over XX% less saturated fat than butter and "perfectly aligns with the growing health and wellbeing trend", claims Pike.
Kerrygold's softer block butter, meanwhile, is firmly established in the German market where ease of use is important to consumers. "I think you can get ideas from other markets, but then you have to research them with your own consumers," says Palmer. "We've all got different attitudes to dairy and what works in Germany doesn't necessarily work here."
Those sentiments rang true earlier this year when Kerrygold Honey Spread was axed after less than a year on the market. Sweet dairy spreads are well established on the Continent, but Palmer says the product never gained the distribution in the UK that would have allowed Adams Foods to support it with a national campaign.
"It was really frustrating because it was a lovely product," she says. "If you can't do national marketing you're constrained in terms of what you can communicate."
Kerrygold Honey Spread is proof that no new product is bullet-proof. But with own label making a grab for market share, brand owners know they must continue to innovate if they are to maintain their dominant position in yellow fats--particularly when it comes to block butter.
* The yellow fats market has grown in value by XX.X% year-on-year, but in volume terms it has decreased by X.X%, indicating that value growth has been driven by price increases of, on average, XO per kilo.