Dairy – butters & spreads 2021: omens good for BSM after sales slide

Whichever way you slice the stats, the butters, spreads and margarines category (BSM) is on solid ground. Covid gave it a much-needed boost following a flat few years, with value sales surging 10.4% in last year’s report.

So, in that context, a dip of just 1% over the past 12 months is a strong performance. Some decline was inevitable as lockdowns eased, resulting in consumers cooking less and the home baking boom petering out. But certain behaviours that were adopted as a result of the virus seem to be sticking.

“The overall category continues to see a benefit from pre-pandemic levels as people continue to work from home,” says Laura Butler, senior brand manager at Lurpak (up £10.6m). “In-home lunchtime occasions remain strong vs pre-pandemic levels.”

“As the number one brand in the category, Lurpak is benefiting from this as shoppers and consumers continue to buy into their trusted favourite brands.”

Canny innovation – something of a rarity in BSM in the past 18 months – has helped Lurpak drive that 2.8% growth.

The brand “continues to launch NPD such as Slightly Salted Block Butter, which is helping category growth and should help maintain its performance” says NielsenIQ client manager Mathew Fleming. It’s also looking to tempt health-conscious consumers with a lighter proposition (see Top Launch, below).

Like Fleming, Kerry Alexander, brand director at Kerrygold, believes BSM can still thrive post-lockdown. “Although there has been a decline in some of the behaviours witnessed at the height of the lockdowns that helped increase butter consumption such as in-home cooking and baking, they still remain important drivers,” she says.

That said, a full post-pandemic picture of the category is yet to reveal itself. “There are signs of movement in the behaviour and buying patterns of consumers as they adjust to the new normal, but how this pans out in relation to the BSM category remains to be seen,” Alexander adds.

 

What is clear is that pre-Covid consumption trends continue to shape the sector. Before the pandemic, block butter was successfully positioning itself as a healthier alternative to dairy spreads – a move that continues to reap rewards.

Alexander sees Kerrygold’s 4.7% value growth as evidence shoppers have “fallen back in love” with block butter, perceiving it as a natural, tastier option.

Apart from Lurpak and Kerrygold, the rest of the top 10 bestselling brands have lost sales. That’s partly due to the switch away from spreadables, which has seen Country Life, Bertolli and I Can’t Believe it’s Not Butter fare the worst of the front-runners – down 13.8%, 12.5% and 12.1% respectively.

But on a wider note, shoppers are increasingly moving from brands to own label, which has gained £6.1m.

This is down to pricing strategies over the past year, says Fleming. “Both Country Life and Bertolli have seen big declines as a result of a reduction in promotions.” He points to Country Life’s average pack price of £2.63 (up 6.1%) as “pretty high, so a reduction in promotions has affected consumer demand”.

On the flip side, this dearth of in-store deals from brands has been a gift for own label. The sector has seen its value market share inch up from 24.8% a year ago to 25.5%. It stands to make further gains, too. Rising input prices, inflation and creaking supply chains are set to see butter prices rise, meaning cash-strapped consumers could be on the lookout for deals.

But Alexander at Kerrygold isn’t worried about pricing. She believes brand appeal remains all-important for the category. “In an inflationary environment, we believe strong brands that have relative price inelasticity and are still capable of maintaining their sales and price premiums are central to the wider performance of categories such as butter,” she says.

Within brands, however, traditional BSM suppliers also face growing pressure from plant-based rivals. According to a survey from Flora owner Upfield, more than a third of shoppers made the switch from butter to margarine and non-dairy spreads during lockdown. It also found a tenth of the UK adults surveyed had tried to increase the number of plant-based products they purchased. This figure almost doubled to one in five for the 18 to 24 age range.

Plant-based advances

Although this isn’t reflected in Flora’s 2021 value sales – which have slipped by 5.0% – the brand is still up on where it was in 2019, having posted growth of 8.5% in last year’s Top Products report. “The importance of leading a healthy lifestyle has been a growing trend amongst consumers,” Damian Guha, general manager at brand owner Upfield told The Grocer in September.

“It is one of the key factors that creates new customer demand for dairy alternatives: 70% of consumers worldwide say their long-term health is a crucial reason for wanting more plant-based nutrition.”

According to Guha, demand is also growing for products with the same functionality as regular butter as the market matures. Hence the 2020 launch of Flora Plant Butter, which Upfield says “cooks, fries, bakes and spreads” just like the real thing.

Like Flora, other vegan brands are making advances. Pure has grown 4.1% in value, for instance, while health store favourite Naturli’ is up 60.9%. If it continues at the same pace, it could start to rival the big names.

But considering plant-based prices are often higher than dairy, these brands won’t be immune from mounting cost pressures.

“For manufacturers operating within dairy-free, there is a need to face into pressure on input costs while at the same time continuing to deliver good value for money for consumers,” says Emilie Grundy, marketing controller for butters, spreads & plant-based at Saputo Dairy.

As an overall outlook, BSM could still do well in 2022, suggests Lurpak’s Butler. “Ongoing working from home, and potential higher unemployment in 2022, will mean more in-home occasions, with dairy continuing to win at lunchtime and the snacking occasions,” she predicts.

“If we do see recessionary pressures start to bite, we will see increases in scratch cooking again, especially in batches for later consumption. This will in turn impact the BSM category as consumers reach to it more for recipes and cooking.”

So another golden year of sales could lie ahead for butters and spreads.