Jun 07 2016
Consumer preferences have led companies in the cheese manufacturing industry to adjust their product mixes. Manufacturing has been moving away from traditional cheeses, such as cheddar, towards specialty types, such as feta and goat’s cheese. Supermarkets have been taking advantage of these trends, ramping up marketing for private-label specialty cheeses. This trend is increasing competition among cheese manufacturers, which must compete for lucrative private-label contracts to maintain demand.
Despite domestic cheese consumption falling marginally over the past five years, demand for specialty cheeses has provided an opportunity for cheese manufacturers. Healthy eating and gourmet food trends have helped drive changing consumer preferences. This has resulted in fresh cheese, which includes many specialty cheeses, enjoying strong growth in demand over the past five years. Specialty cheeses tend to attract higher profit margins than traditional cheeses, encouraging manufacturers to focus on producing these products. In early 2015, Lion sold its everyday cheese business to the Warrnambool Cheese and Butter Company so it could focus on its faster growing specialty cheese business.
Supermarkets have also noticed these changing cheese trends and have moved to increase marketing for their private-label cheese products. Private-label products have become more popular in recent years. For example, in the supermarkets and grocery stores industry, ALDI’s revenue has increased strongly over the past five years, on the back of a variety of private-label products. Alongside ramped up marketing, supermarkets are also expected to introduce new value tiers for private-label cheese ranges over the next few years. An increasing number of private-label products is heightening competition and encouraging consolidation among cheese manufacturers. It is also resulting in cheese manufacturers requiring these private-label contracts to ensure consistent demand and secure their position in the supply chain.
Murray Goulburn was recently awarded a lucrative contract to produce private-label cheese for Coles, effective January 2017. Bega Cheese had held this contract since April 2012, but the end of this relationship was announced in February 2016. The new deal is expected to be worth $130.0 million for Murray Goulburn over five years and will boost the company’s market share in the cheese manufacturing industry.
Despite cheese consumption trending downwards alongside revenue for cheese manufacturers, specialty cheese has been a growth area. Manufacturers that can obtain contracts to provide private-label cheese to supermarkets will have a better chance at increasing profit margins and maintaining demand. However, competition for these contracts will remain fierce, encouraging mergers and acquisitions among cheese manufacturers over the next few years.