Dairy in the US

Dairy in the US

In 2017, different categories within cheese experienced significant growth and declines, dependent upon the particular type of cheese; a dynamic that produced a dip in overall volume sales growth, while value sales growth remained consistent, in a country seeing rising efforts by consumers to reduce their dairy intake. In keeping with current consumer health trends, which place a high value on natural ingredients and the avoidance of processing, growth in cheese in 2017 largely fell along these lines and created a noticeable distinction between processed and unprocessed varieties. The divergent results were clear, as processed cheese saw volumes decline by 3%, alongside a 1% drop in current value terms, whilst unprocessed cheese recorded 2% growth in both volume and current value terms, stemming mainly from the losses from processed cheese. Unlike in milk, US consumers have not demonstrated any noticeable disinterest in cheese; rather, they have demonstrated an increasing distaste for processed cheese, and have instead increasingly flocked to unprocessed, natural cheese, particularly premium varieties.

Competitive Landscape
With a 26% value share of cheese in 2017, Kraft Heinz remained the undisputed leader. Possessing a large brand portfolio which includes a significant number of household brands, including Kraft, Philadelphia and Velveeta, there are few cheese categories in which Kraft Heinz does not have a presence, allowing the company to unquestionably lead the category due to its sheer size. The next largest company within cheese is Sargento Foods, which held a value share of just 6% in 2017. In spite of its enormous footprint, however, Kraft Heinz faced challenges to growth in recent years, with the company experiencing a stable value performance in 2016 and a 2% value decline in 2017. In large part, this stems from the incompatibility of a large proportion of Kraft Heinz’s product offerings with changing consumer health demands. In a world in which consumers are strongly eschewing processed foods with artificial ingredients, Kraft Heinz’s heavy reliance on sales of artificial cheese products from traditionally popular brands such as Kraft and Velveeta did not serve the company well in recent years, presenting obstacles and challenging the company to catch up and adjust to a rapidly changing consumer base in order to achieve further growth.

Over the forecast period, retail volume sales are expected to increase by a 1% CAGR to reach 2.0 million tonnes, whilst retail value sales are expected to increase by CAGR of 2% at constant 2017 prices, to reach USD26.0 billion. Sustained declines are expected for all processed cheese varieties, as consumers increasingly move away from these, whilst moderate to strong growth is expected to continue for unprocessed varieties, particularly premium ones. In addition, a recovery towards healthier and more stable price growth for cheese is expected. As a result, mild volume growth for the category is expected, accompanied by higher value growth.

Following a year of significant struggles in 2016, drinking milk products experienced some mild relief in 2017, as commodity prices began to rebound from the significant declines of 2016 on the back of stabilising supplies, ushering in negligible current value growth for the category, following a 5% decline in 2016. Cow’s milk in particular struggled recently, with the average unit price declining by 6% in 2016, and retail value sales in that year declining by 8%. In 2017, however, cow’s milk saw a return to negligible unit price growth, which helped to limit the current value decline to just 1%. Despite indications of a positive turnaround for the milk industry in 2017, serious obstacles to future growth remain. Intensifying efforts by consumers to limit their dairy intake continue to threaten growth; efforts fuelled largely by personal health concerns and alarm over the environmental impact of the dairy industry. With the notable exception of full fat fresh milk, which has seen a strong resurgence of consumer demand, as perceptions of healthy eating and attitudes towards the consumption of fat evolve, cow’s milk is experiencing significant and sustained declines in consumer demand. In 2017 alone, volume sales of fat-free fresh milk fell by 6%, whilst volume sales of semi skimmed fresh milk saw a 4% decline. Furthermore, as consumers seek to limit their dairy intake, more and more milk alternative products are being developed and hitting the market, providing an array of popular alternatives that are rapidly growing and stealing share from cow’s milk.

Competitive Landscape
With a 15% value share of drinking milk products in 2017, Dean Foods, the long-standing leader of the category by a wide margin, took advantage of 3% value growth to build upon its 14% share in 2016 and further tighten its grip on the category. The company is well-known for its TruMoo flavoured milk brand, as well as milk brands such as Dean’s, Mayfield and Garelick Farms; all three of which Dean Foods consolidated in 2016, alongside its remaining regional brands, under its recently launched Dairy Pure brand, forming far and away the largest brand within drinking milk products. Possessing such large and widely recognised brands, Dean Foods was able to lead flavoured milk drinks in 2017, accounting for a value share of 25%, as well as milk, within which it held a value share of 15% in 2017. At a time when sales of milk are facing significant obstacles, the decision by Dean Foods to incorporate all of its distinct milk brands, many of which were operating regionally and struggling for growth, under the banner of Dairy Pure seems to have paid off. The brand recorded 4% value growth in 2017, to reach USD1.9 billion, helping to drive an increased value share for Dean Foods.

Drinking milk products is projected to maintain consistent dynamism over the forecast period. With minimal growth expected for milk commodity prices, and the expectation of continued strong sales of higher-priced milk alternatives, average unit prices are expected to stagnate or decline in most categories at constant 2017 prices. At the same time, cow’s milk categories are expected to see further significant struggles for growth as demand continues to wane, with the exception being full fat fresh milk, as Americans become more accepting of consuming certain natural types of fat. These dynamics should fuel low positive growth for drinking milk products going forward, with the category projected to see 1% value growth overall over the forecast period. This represents an improvement over the negative value CAGR of 2% recorded from 2012 to 2017, which was fuelled largely by the growth in milk alternatives and the beginning of a decline in dairy demand.

Since its introduction to the US a decade ago, Greek yoghurt has been a major growth driver. It emerged as an ultimate health food, given its versatility, high protein content and modest calorie count. Retailing at a significant price premium compared with traditional yoghurt, Greek products also drove value sales, as yoghurt grew by 44% from 2009 to 2016 in value terms. In 2017, however, the momentum of Greek yoghurt faded. Almost every major brand now has a Greek variety, and Greek products have become ubiquitous in the dairy aisle. Having achieved mainstream status, Greek yoghurt was no longer a driving force, and actually declined in 2017, as consumer interest waned. This slowdown caused a value sales decline of 2% in yoghurt and sour milk products in 2017; a result significantly at odds with the CAGR of 3% seen between 2012 and 2017.

Competitive Landscape
In April 2017, Groupe Danone completed its acquisition of WhiteWave Foods and its health-centric portfolio of organic and dairy alternative brands. This move prompted the company to change its name to DanoneWave Co, which was the leader in yoghurt with a share of 31% in 2017 (33% inclusive of its YoCrunch and Wallaby Yogurt subsidiaries). This new company combined The Dannon Co’s strong portfolio of leading brands, such as Dannon Light ‘n Fit, Dannon Oikos, Activia and Danimals with WhiteWave’s yoghurt portfolio, which is much smaller but has a distinct focus on health and wellness. This includes rapidly growing non-dairy brands Silk and So Delicious, which are made from soy or coconut milk and appeal to emerging vegan trends in the US, as well as Wallaby – an organic Australian-style yoghurt brand. Whilst small at the moment, these brands now have access to additional resources for growth following the merger. In June 2017, for instance, DanoneWave announced a new advertising campaign for the So Delicious brand featuring the tagline “Nothing Compares.”

Yoghurt and sour milk products is projected to see a negative value CAGR of 1% between 2017 and 2022 at constant 2017 prices. The market for convenient and healthy food is more competitive than ever. On the one hand, meal kits such as Blue Apron and HelloFresh have seen dramatic growth by delivering pre-portioned ingredients and easy-to-prepare recipes directly to consumers, making it easier than ever to cook a healthy meal at home. At the same time, supermarkets and convenience stores continue to innovate with freshly prepared foods and foodservice offerings, providing shoppers with an instant meal which is healthy and perfect for grab ‘n’ go occasions. Since high-protein yoghurt is often used as a quick and healthy meal replacement, manufacturers will need to innovate to keep yoghurt top-of-mind against these rapidly-growing competitors.

In 2017, other dairy was defined by two markedly different stories. On the one hand, chilled and shelf stable desserts continued to experience significant struggles in the face of growing consumer health-consciousness and a rejection of largely processed and artificially flavoured food products, recording 3% declines in both volume and current value terms. On the other hand, growth was quite strong for coffee whiteners, the fastest growing category in 2017, as well as cream. Coffee whiteners recorded 4% volume and current value growth in 2017, whilst cream saw volume growth of 2% and current value growth of 3%. Growth for these two categories was continuous in recent years, with both posting strong CAGRs over the review period. This reflected growing coffee consumption in the US, particularly amongst millennials. Beyond the widening consumer demand for coffee, however, growth for coffee whiteners and cream was also helped in 2017 by stabilising dairy commodity prices; a development that also exerted a positive influence on the value of drinking milk products.

Competitive Landscape
Nestlé USA, the long-standing leading company within the largely stable other dairy category, maintained its strong hold in 2017, posting current value growth of 2% to solidify its 19% share, with sales of USD1.6 billion. The majority of Nestlé’s sales and value growth in 2017 were fuelled by its Coffee-mate brand; a highly recognisable household name that held a 51% share within coffee whiteners in 2017, driven by 2% value growth, as Americans largely remained creatures of habit in their choice of coffee whiteners. Maintaining a stronghold on second place within the category, due to its highly popular International Delight brand, DanoneWave continued to see sustained growth in 2017, with International Delight’s value sales increasing by 8% to reach USD903 million.

Over the forecast period, other dairy is largely projected to retain the current growth trends, although some changes are expected for specific product categories. Other dairy is projected to see a value CAGR of 1% at constant 2017 prices over the forecast period, reaching sales of USD9.4 billion in 2022; a slightly better performance than the review period CAGR. This is expected to be fuelled by the continued diminishing demand for chilled and shelf stable desserts, as consumers are not expected to move away from the trend towards greater health-consciousness and the aversion to foods with a high sugar content and artificial ingredients. Furthermore, it is not expected that more natural and comparatively healthy products will be seen in the near future within this space, which could stimulate significant consumer interest and stem losses.

Butter and Margarine
Drinking Milk Products
Other Dairy
Yoghurt and Sour Milk Products
Dairy in the US - Company Profiles
ConAgra Foods Inc in Packaged Food (USA)
Summary 1 ConAgra Foods Inc: Key Facts
Summary 2 ConAgra Foods Inc: Operational Indicators
Summary 3 ConAgra Foods Inc: Competitive Position 2017
General Mills Inc in Packaged Food (USA)
Summary 4 General Mills Inc: Key Facts
Summary 5 General Mills Inc: Operational Indicators
Summary 6 General Mills Inc: Competitive Position 2017
Kraft Heinz Co in Packaged Food (USA)
Summary 7 Kraft Heinz Co: Key Facts
Summary 8 Kraft Heinz Co: Operational Indicators
Summary 9 Kraft Heinz Co: Competitive Position 2017
Packaged Food in the US - Industry Overview
Packaged food faces new challenges
Trade agreements top of mind as political climate creates uncertainty
Slow growth spurs merger and acquisition activity
E-Commerce explodes as consumers prioritise convenience
Despite obstacles to growth, opportunities still remain
Shifting political and trade policies fuel economic uncertainty
Convenience trends impacting demand
Merger and acquisition activity intensifies amidst challenges
Product reformulations increasingly seen as avenues for growth
Trends: Sales to Foodservice
Trends: Consumer Foodservice
Category Data
Table 1 Foodservice Sales of Packaged Food by Category: Volume 2012-2017
Table 2 Foodservice Sales of Packaged Food by Category: % Volume Growth 2012-2017
Table 3 Forecast Foodservice Sales of Packaged Food by Category: Volume 2017-2022
Table 4 Forecast Foodservice Sales of Packaged Food by Category: % Volume Growth 2017-2022
Table 5 Sales of Packaged Food by Category: Volume 2012-2017
Table 6 Sales of Packaged Food by Category: Value 2012-2017
Table 7 Sales of Packaged Food by Category: % Volume Growth 2012-2017
Table 8 Sales of Packaged Food by Category: % Value Growth 2012-2017
Table 9 GBO Company Shares of Packaged Food: % Value 2013-2017
Table 10 NBO Company Shares of Packaged Food: % Value 2013-2017
Table 11 LBN Brand Shares of Packaged Food: % Value 2014-2017
Table 12 Penetration of Private Label by Category: % Value 2012-2017
Table 13 Distribution of Packaged Food by Format: % Value 2012-2017
Table 14 Distribution of Packaged Food by Format and Category: % Value 2017
Table 15 Forecast Sales of Packaged Food by Category: Volume 2017-2022
Table 16 Forecast Sales of Packaged Food by Category: Value 2017-2022
Table 17 Forecast Sales of Packaged Food by Category: % Volume Growth 2017-2022
Table 18 Forecast Sales of Packaged Food by Category: % Value Growth 2017-2022
Summary 10 Research Sources

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