Dairy - butters & spreads 2024: price drops can’t prevent BSM squeeze

Inflationary pressures on butters & spreads are finally melting away. After two years of soaring prices, the category enjoyed an ease in inflation in 2024.

Overall, average price per kilo is down 2.7%. own label lines are 5.4% cheaper and branded products have fallen 1.1%. That’s due to a combination of falling farmgate milk prices and an increase in promotions.

But that’s only part of the category’s story. In spite of those lower prices, many suppliers continue to experience major sales declines. The category as a whole has lost £63.7m and 2.9 million kilos – due in part to concerns about the ultra-processed nature of spreads.

Brands have made up the lion’s share of those losses. Just five in the top 20 have delivered value growth over the past year, and only six have risen in volumes.

Spreads giant Flora has suffered the biggest absolute value decline, of £16.9m. Its volumes have slumped 10.2%, despite a 6.6% fall in average price per kilo.

Unlike other brands, it’s reduced promotional activity, despite being “traditionally very much promo-driven”, says NIQ analyst Veena Venkatesan.

Flora owner Flora Food Group – which rebranded from Upfield in September – is keen to stress the brand’s market penetration is up on last year against the broader BSM category. It’s also seen “positive momentum” in sales over autumn. The supplier also points to 2024 innovations “that complement our core range”, such as Flora Plant Butter and Flora Garlic, which have “created incremental growth opportunities while maintaining our commitment to our established products”.

Furthermore, Flora ProActiv was a star performer, adding £2.6m on volumes climbing 11.1%, it says. This performance “showcases how our brands resonate when we focus on delivering superior functional benefits to consumers”.

Other Flora Food Group brands have also had a tough 12 months. Bertolli’s value has plunged 15.2% on units down 9.5%. I Can’t Believe It’s Not Butter hasn’t fared much better: down 6.1% in value and 2.1% in volumes.

Despite 2024’s challenges, “all our brands maintained their number one positions in their respective need-states, with brand power indices exceeding direct competitors”, Flora Food Group insists.

The supplier’s portfolio has also undergone “significant product reformulations” over the past year, which is “now translating into volume growth”.

Flora isn’t the only giant to have experienced tough trading. Arla has suffered a £5.4m loss with its Anchor brand, while Saputo Dairy UK has shed £7.5m with  Clover.

Arla director of BSM Holly Murray points to a 4.9% cut in average price per kilo as the key reason behind Anchor’s fall in value. Its 0.9% rise in volumes, on the other hand, is down to its “focus on bringing new shoppers into the brand”.

That focus drove the launch of Arla’s Anchor Squeezy in May, touted as providing a “faster, easier route to more buttery bakes, with just a squeeze” (above). Murray says it’s “an innovative new product to challenge traditional baking butters and spreads”.

For Saputo, the challenges are thrifty shoppers and a growing taste for flatbreads. “Although inflation has slowed, shoppers are still feeling the lingering effects and continue to be price-sensitive,” says Georgina Thomas, head of marketing for butters, spreads & oils.

“We’re also seeing a shift in consumer preferences, with many moving away from traditional ambient bread loaves and towards alternative options like wraps and pittas, where butters and spreads aren’t commonly used,” she adds.

Still, Clover still outperforms its direct competitors, Thomas stresses, while Vitalite saw solid growth. “That’s despite up-weighted marketing and promotions investment from our competitors this year.” Our NIQ data, however, shows the two brands are down a combined £9.4m.

Bucking the downward trend

Not all BSM brands have struggled this year. Some have bucked the downward trend, like Ornua Foods’ Kerrygold. The category’s sixth-largest player is up 25.8% in value on volumes that have rocketed 28.4%.

The premium Irish butter brand is 2.1% cheaper than it was last year as the result of promotions and loyalty programmes. They “have offered consumers a golden combination of value and Kerrygold’s inherent values”, says Nicola Blackmore-Squires, Ornua UK’s marketing director. That momentum has continued through this autumn, she adds, and Kerrygold is planning a “pipeline of innovative NPD and marketing support” for 2025.

The brand’s £7.6m gain is second only to Lurpak in absolute terms. Arla’s category leader is worth an extra £23.8m on volumes up 10.2%.

The 3.8% fall in average price per kilo tempted existing customers, who are “purchasing our products more frequently”, says Murray. Lurpak also attracted new shoppers, who are trading up from own-label dairy spreads. For her, it’s another sign of cost of living pressures easing for some.

Lurpak has also been more visible due to the impact of its major ad push, ‘When In Doubt Just Cook’, which launched last summer and continued into 2024.

Arla is now banking on the recent addition of Lurpak Plant Based to build on its success. Early signs are good, based on customer and shopper feedback, and a rate of sale that “continues to build”, says Murray.

But it won’t be all plain sailing in 2025. Lurpak and the rest of the BSM category look likely to face continuing headwinds.

In November, AHDB reported wholesale butter prices had risen by almost 21% in a month, following a tightening in supply of milk and cream. That points to future dairy commodity inflation and higher retail prices.

As such, shoppers “are likely to continue seeking better deals, making promotions essential for brands”, says NIQ’s Venkatesan.

Otherwise, they risk seeing their sales melting away.

Read more: Dairy - butters & spreads 2023: BSM suffers volume blow as prices rise