Sector Insight: Yellow fats

Consumer demand for natural ingredients and provenance has driven the butter category to outperform spreads.

Sector Insight: Yellow fats

In the league table of odd advertising combinations, Johnny Rotten and Country Life butter must feature close to the top. Nonetheless, the punk hero was hired to promote the taste of the butter and has helped boost its sales in the process.

The yellow fats sector has always been a major investor in marketing and advertising, as manufacturers seek to boost their brands, promote new products and support the market.

This sector has come on in leaps and bounds over the years, as NPD has resulted in genuine innovation. The days of bread being shredded by rock-hard butter were consigned to the past with the arrival of spreadable variants, and the flavours of spreads and margarines have been refined so that the synthetic taste of earlier products no longer remains.

In addition, developments in formulations mean many products come with added benefits to aid a healthy diet, or have a reduced fat content.

This has been particularly important in continuing to attract health-conscious consumers aiming to reduce their fat intake.

Nonetheless, heavy use of yellow fats is in decline, according to TGI.More than one in three people has cut back on butter for health reasons, and nearly one in five on spreads.

Since 2004, value sales have risen by 40%, driven by innovation and price inflation. However, volumes have stalled, while rising costs have affected all dairy products. The market grew 16% in 2008 to reach a value of £1.1bn, according to Mintel.

Butter sales have been boosted by the trend of cooking from scratch, as well as consumer desire for natural ingredients and transparent provenance. Butter sales increased by 19% between 2007 and 2008 to reach a value of £525m. Butter has outperformed spreads over the past five years, as eating habits have changed.

However, only two in five consumers consider butter to be a 'natural' food. Perhaps as spreadable varieties become more popular, the product has lost some of its natural positioning. Spreadable butter, which surpassed blocks for the first time in 2006, accounts for 54% of butter sales.

In contrast, the market share of active health spreads has fallen off. These spreads, such as Benecol and Flora Pro.Activ, came onto the market claiming to lower cholesterol. They carry a price premium, but their health benefits are not always under-stood, causing sceptical consumers to stay away.

Yellow fats are dominated by brand names, with own-label accounting for only 16% of the market. Three manufacturers - Arla, Unilever and Dairy Crest - account for almost 75% of sales. The major players focus on extensive marketing activity and advertising to promote their brands and the sector as a whole.

Most recently, Dairy Crest backed its relaunched Clover brand with a major drive carrying the strapline

'The middle is the best of both', which refers to the fact that the product is churned like butter yet contains half its levels of saturated fat.

Arla is the leading yellow fats manufacturer and shows what can be achieved with well-supported butter brands. Lurpak's brand share has increased; its sales have risen almost 40% since 2006. Anchor, Arla's other butter brand, has also performed well and increased sales by 18% between 2006 and 2008.

Unilever's spreads portfolio includes I Can't Believe it's Not Butter, Bertolli and Flora. However, butter's resurgence has had an impact on the company and Flora's brand share has fallen, despite a modest sales increase in the past few years.

The yellow fats sector is a mature market, and significant growth will therefore be hard to achieve. However, it is expected to grow by 17% over the next five years, or 6% when inflation is taken into account, according to Mintel. By 2014, sales will have reached £1.4bn. Of these, butter sales will be worth £682m, a 20% increase over the period.

Yellow Fat Brands by Value and Share
Brand200820072006% change
£m%£m%£m%
Arla Foods   32029271292412732.8
Lurpak  23021191201651839.4
Anchor  89879875818.7
Yorkshire Butter  1110
 
Unilever   2872627229263299.1
Flora  1901717719176208
I Can't Believe It's Not Butter  283333303-6.7
Bertolli  45441438418.4
Stork SB  24221219226.3
 
Dairy Crest   22420175181802024.4
Clover  78759668814.7
Utterly Butterly  70658645555.6
Country Life  59540442540.5
St Ivel Gold  61121n/a
Vitalite  81616133.3
Willow  91617128.6
 
Kerrygold Kerrygold  29325320245
McNeil Nutritionals Benecol  1821821820
Kerry Foods   81816133.3
Pure dairy-free spreads  61615120
Kerrymaid  221100
 
Lactalis McLelland President  81615160
Other brands  33333329313.8
Own-label  17416140151301533.8
Total   110110094810089210023.4
 
  Source: Mintel
Yellow Fat Retail Sales by Outlet Type
Outlet Type200820072006% change
£m%£m%£m%
Multiple grocers/co-ops  103594886938309324.7
Independents & symbol grps  353364384-7.9
Other  31329324329.2
Total  110110095110089210023.4
 
  Source: Mintel

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