Losses widen for BSM as promos soar

With sales sliding £74.8m, the butters & spreads sector has suffered the eighth greatest loss of the year. Relative to market size, things look even worse; only fresh vegetables (p131) and bread (p94) have had steeper percentage losses. So what’s happening? 

Butters & spreads’ struggle in the supermarkets is nothing new, of course, but in 2015 their decline accelerated. The past year’s loss is more than double the £30.7m decline we reported a year ago and tops the £57m lost in 2013. You have to go back to 2012, when sales rose by £50.4m, to find any growth.

Brands have been the casualties of the year, suffering a 6.8% drop in value to £925.5m, with volumes down 5.9%. In just a year, own label’s share of volumes has jumped from 17.4% to 19.1%, driven by an almost 10% fall in average price. A kilo of own-label butter is now almost 50p cheaper than branded.

The brands that have promoted hardest have weathered the storm; the rest have seen sales washed away in double digits. “This is evidence of economic concerns that continue to dominate consumer shopping behaviours,” says Dairy Crest senior shopper marketing manager Amy Fisher, adding that 76% of shoppers are concerned with controlling their spend on grocery shopping and 44% are actively looking to save money [IGD].

Recent years have “embedded a shopper expectation to buy on deal” adds Fisher, pointing out that 74% of butter & spreads volumes are sold on deal, making this one of the most deal-reliant categories in grocery.

“Naturally brands are having to promote harder to have a more competitive price per kg”

The deals, of course, are driving deflation. But, crucially, they’re not preventing shoppers switching to own label, which has enjoyed a 5.8% spike in volume sales. Price cuts on own-label block butter have “significantly impacted category dynamics” reports Arla senior director for BSM Mike Walker.

Its attractive price point hasn’t only attracted consumers from branded block. Dairy spreads are also losing out, claims Walker, with the biggest gains for own-label block coming from I Can’t Believe It’s Not Butter, Clover, Country Life and Flora Buttery. “Naturally brands are having to promote harder to have a more competitive price per kg,” says Walker. “Brands are having to compete harder for a smaller share of the market.”

Of the top five brands, only Anchor has delivered an increase in value, a paltry 1.7% to £101.2m on volumes up 9.9%. Note the fall in average price, a reflection of Anchor’s reliance on volume-driving deals. Conversely, brands that have cut back on deals - and hence seen average prices stay static or rise - have suffered the greatest volume losses.

In the Dairy Crest stable, for example, Country Life volumes are down 16.2% and Clover is down 11.1%. All four of Unilever’s top brands - Flora, I Can’t Believe It’s Not Butter, Bertolli and Stork - are down in value and volume. All except Flora have seen their average prices rise over the past year.

This is because the company took the conscious decision to promote less, says Unilever brand building director for baking, cooking & spreads Caroline Jary. “We tried to take the lead in driving value back into the category through price and promotional strategies last year,” she says. “However, in such a competitive market, the position of some of our key brands was undermined as a result.”

That’s putting it mildly. With a loss of £19.3m, Flora has taken the biggest hit in butters & spreads, and that’s in spite of the new Gold by Flora - launched in 2014 and our BSM Top Launch last year - generating £3.4m over the course of the year. While still in decline, Bertolli was the strongest spread in the Unilever portfolio, buoyed by the 2014 launch of Bertolli with Butter, which has racked up £6.6m. “Bertolli saw significant penetration gains off the back of a strong first-half campaign,” adds Jary.

With marketing and in-store activity - and not just price cuts - still yielding results for some, brand owners say there’s still cause for optimism. Despite dropping its specialist Lurpak Cooks Range this year owing to poor sales, Arla’s Lurpak (and Anchor) have continued to invest in above and below-the-line activity, says Walker, adding that these brands “have maintained higher average retail prices, helping them to drive value into a declining category”.

There’s more cause for optimism, insists Jary, claiming Unilever’s portfolio has begun to see signs of recovery following a rethink of its deal strategy and renewed marketing support. Flora volumes are up 7.4% for the three months to September, against a market decline of 3.8%, and the relaunch of Stork at Easter, backed by its Bake Someone Happy campaign, has helped it grow penetration by 7.7%, says Jary, adding that Stork With Butter has attracted sales of £1.2m since launching in March and achieved impressive household penetration of 3.8%.

“Bertolli saw significant penetration gains off the back of a strong first-half campaign”

To avoid further losses and drive sustainable, category-wide growth, many experts contend that brands and retailers need to work more closely together over the course of the coming year. “We need a review of the current promotional strategy in BSM to ensure an improvement in promotional effectiveness,” says Fisher. “This could include avoiding running simultaneous promotions on similar products and brands that dilute category value.”

Many point to NPD as key for returning the wider category to growth, with flavoured butters and butters with added ingredients such as chocolate chips (Lactalis unveiled such a product under the Président brand in France earlier this year) a likely area of development in coming years.

While the addition of butter to recipes has to an extent helped mitigate the losses of Unilever’s spreads Bertolli, Flora and Stork, it remains to be seen what can be done for brands such as Dairy Crest’s Utterly Butterly, which has lost almost a quarter of its value, and Unilever’s I Can’t Believe It’s Not Butter. An ‘Utterly Butterly with Butter’ brand extension could prove too much of a stretch.

Instead, Dairy Crest has taken a different tack. The processor has attempted to arrest Clover and Utterly Butterly’s losses - which have totalled an eyewatering £15.1m over the course of the past year - by launching price-marked packs at improved price points to capitalise on the growing convenience sector. Even with such initiatives, Fisher says these “market dynamics naturally make for difficult trading conditions”. She adds: “Spreads’ decline has seen consumers exiting the category and shrinking the market in which we play with the Clover and Utterly Butterly brands.”

The extension of brands into new categories can also help mitigate butter & spreads’ losses, adds Fisher, pointing to the April launch of Clover Cooking Spray (see above). “The BSM category should be looking to alternative avenues of growth in the form of value-adding initiatives and NPD that move away from the current over-reliance on promotional activity,” she insists. “NPD is key to driving cut-through in a saturated market and maintaining shopper interest in what is a relatively low-engagement category.”

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