Lurpak soars but home baking craze fails to translate as BSM sales fall £57m

The Great British Bake Off looked like a huge opportunity for the BSM category. And yet, given the category’s 4.3% value decline – undoing last year’s 3.9% growth – and the 3.8% decline in volumes, it’s an opportunity that, with a couple of notable exceptions, has largely been missed [Nielsen 52 w/e 12 October].

“The butters & spreads category is non-expandable and falling volume suggests an overall drop in usage,” argues Dairy Crest shopper controller Adam Mehegan. He has every reason to be downbeat: Dairy Crest’s three top 10 BSM brands have lost a combined £20.5m in the past year. That’s 35.9% of the category’s £57m net sales decline.

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It’s not alone in finding it tough out there. Unilever has seen its four top 10 brands lose £33.3m (58.4% of the category’s £57m net sales decline).

The pain has been shared across the category, with own label down 2.5% against the 4.7% slump of the brands.

And yet, not all brands are reaching for the butter knife. So confident is Arla Foods of the opportunity presented by the home baking craze, this year it’s launched a new TV ad for its ongoing Good Food Deserves Lurpak campaign and launched unsalted blocks of Anchor to appeal to home bakers. It’s even licensed a ready-made pastry under the Anchor brand to compete with Jus-Rol.

Such tactics seem to have paid off. Both Lurpak and Anchor are in volume growth, with the former posting a category-leading £11.5m increase, and the latter having grown by £2.4m. But, of course, their success is down to much more than just the Mary Berry effect.

“We have consistently supported our brands over a long period and this has resulted in strong consumer engagement and loyalty for both Lurpak and Anchor,” says Stuart Ibberson, business unit director at Arla Foods, pointing to the Anchor Tastes Like Home campaign and the impact of a full year of sales of Lurpak Lightest, launched in 2012, as other examples of factors that led to these market-beating performances.

There’s another factor that’s perhaps even more important in the current climate: price. Promotions on both Arla brands have been ramped up, says Ibberson, contributing to a 4.1% decline in the average price of Lurpak (although it’s worth noting that at £5.23 a kilo, the average price of Lurpak is the second-highest) and a 1.7% decline for Anchor. In contrast, the average price of Dairy Crest’s Country Life has shot up 4.2% to £4.94 a kilo.

The reduction of volume sold on deal made necessary by increases in the cost of cream was to blame for the rise in Country Life’s price, says Mehegan, with reduced marketing support and promotions taking their toll across the Dairy Crest portfolio.

“Utterly Butterly has been impacted by reduced marketing support versus last year, as well as tough trading conditions and competitors maintaining investment,” he says of Utterly Butterly’s 18.5% value decline. “Compared with last year, Utterly Butterly and Country Life have reduced the percentage of overall volume sold on deal.”

“With The Butterman, Kerrygold has seen a significant increase in brand loyalty”

Adams Foods

The competition has been quick to cash in. While Country Life, Dairy Crest’s second-biggest brand after Clover, was haemorrhaging £9.5m in sales (a fall of 12.9%), Arla claims its Anchor unsalted blocks (launched in October 2012) were busy racking up sales of £5.5m for its first year and Adams Foods’ Kerrygold brand was enjoying a 5.9% surge in value, bringing its full-year sales to £25.2m for the year.

In February, it supported its softer block butter with the return of TV ads featuring The Butterman – a mythical Irish farmer hero created by Adams Foods. “Following the launch of The Butterman campaign, Kerrygold has seen a significant increase in brand loyalty and market share,” claims an Adams Foods spokesman.

Heavyweight investment, particularly in marketing, has been Unilever’s answer to a dismal year of trading in BSM. Having seen its four top 10 brands lose an eyewatering £33.3m – £25.3m of that was lost by Flora – over the past year, Unilever has been getting out the cheque book in recent months.

In September, Unilever launched a £12m campaign to turn around sales of Flora – which have declined 12.2%, to £181.9m – following its 2012 reformulation, which had prompted a major consumer backlash. The campaign, which encompasses a pack redesign, centres on the sunflower oil used in the product and Unilever has reintroduced its sunflower logo to packs following an absence of 15 years.

Unilever is confident the campaign will help to stop Flora from sliding any further. As the “iconic brand in the chilled aisle”, Flora’s campaign will “drive value growth back into the butters & spreads category”, says Adrian Adams, senior category manager for chilled food at Unilever. It’s worthy of note that the new TV ads for Flora Buttery centre on the product’s value as a baking ingredient.

While marketing investment will not do any harm to the category, it’s unlikely to solve its ills on its own. With margarine particularly struggling at present as it labours against consumer mistrust and health concerns over synthetic ingredients, many major players are looking to innovate their way back into growth.

For example, in September, Dairy Crest launched Clover Additions, a new range of three fortified Clover spreads containing added vitamins and minerals (two months later the dairy giant also announced a £7m campaign to turn around the 2.4% decline of Clover in November). Available in Strong Bones, Daily Boost and Immunity Support, the range hit Asda, Sainsbury’s, Morrisons, The Co-operative and Nisa in October.

Dairy Crest could well be on to a winner with its new focus on functionality. Many players suggest that price is slowly becoming less of an issue in butters & spreads as brands seek to improve value perceptions through a range of health, quality and provenance claims.

Examples include the July launch of Dales Butter by the Wensleydale Creamery, as well as Wyke Farms’ February launch of Salted Butter for Heroes, in conjunction with the charity Help For Heroes.

Added value is also an area in which Arla has its gaze firmly set, with the launch of Lurpak Slow Churned, a premium butter for spreading, which is sold in an aluminium container (our Top Launch of the year for the category, see p109). Slowly churned for five hours, the block butter is targeted for use on premium baked goods such as scones and sourdough bread.

“Not only do we want to grow the Lurpak brand but we also want to grow the butter category,” says Lurpak brand manager Danielle Leck. It would give new customers a reason to purchase Lurpak butter and existing shoppers the opportunity to trade up, she adds.

But it’s not all been plain sailing for Arla in the past year. In October, it admitted that Yum – the five-strong exclusive-to-Tesco BSM and soft cheese brand launched in July 2012 – had been delisted by Tesco. Sales amounted to just £1.7m in the past year, which a spokeswoman attributed, with more than a whiff of irony, to “increased sales in BSM, particularly Lurpak”.

It seems it’s not just Lurpak’s rivals that have had to pay for its whopping £11.5m growth in the past year.

Read The Grocer’s full Top Products Survey.