Cheese Category Insights - MMI Business Advisors · 2017-11-17 · a year ago. Why is that the case? Please be as specific as possible. 25% report increased consumption vs. year ago

Cheese Category InsightsNovember 2017

The Macro ViewCheese Category Insights

2

7,203.1

12,468.7

19

95

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96

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97

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98

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99

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20

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20

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20

14

20

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16

Total Commercial Sales1

million pounds

Solid Long-term Growth in Commercial Sales of U.S. Cheese

3Source: USDA ERS; USDA commercial disappearance; includes civilian and military purchases of milk and dairy products for

domestic and foreign use, but excludes farm household use and USDA donations of dairy products

1 Commercial Sales = Domestic Use + Commercial Export

Percent Growth

1995-2016

2015-2016

Total Cheese Commercial Sales

+73.1% +3.5

Other-than-American Cheeses Have Been a Stronger Growth Driver than American Style Cheese Varieties

4Source: USDA ERS; USDA commercial disappearance; includes civilian and military purchases of milk and dairy products for



02,0004,0006,0008,000

10,00012,00014,000

19

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20

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20

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20

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20

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20

16

Cheese: Total Commercial Sales1 of Cheese Through All Channels (million pounds)

American Other than American

Note: American style cheese includes Cheddar, Colby, Monterey Jack and others. Other than American includes Italian cheese (including Mozzarella), Cream Cheese, Swiss, Hispanic, Muenster, Blue and others.

Percent Growth

1995-2016

2015-2016

Total Cheese +73.1% +3.5

Other than American

+89.9% +4.2

American Style Cheeses

+51.5% +2.4

Both Domestic Use and Export Have Contributed to Long Term Growth

5

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

19

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20

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20

16

Domestic Use Commercial ExportCommercial Export, % Share of Total

0.7% 0.9% 0.9% 1.0% 1.0% 1.1% 1.3% 1.3% 1.2% 1.4% 1.3% 1.6% 2.2% 2.8% 2.3% 3.6% 4.6% 5.2% 6.1% 6.9% 5.8% 5.1%

Commercial exports have grown in importance to total commercial sales of cheeses

Source: USDA ERS; USDA commercial disappearance; includes civilian and military purchases of milk and dairy products for



2017 Year-to-Date, Export Drives Continued Growth in Total Commercial Sales

6

Total Commercial Sales1 YTD (thru Aug)2016 thru Aug 2017 thru Aug Growth YTD ‘17 vs ’16

Million Lbs. Mil. Lbs. % Chg.

Domestic Use 7,760.3 7,786.3 26.0 0.3%

Commercial Export 410.9 508.4 97.5 23.7%

Total Commercial Sales 8,171.2 8,294.7 123.5 1.5%

YTD, growth has slowed for domestic use compared to previous rate, while exports have seen strong growth

Source: USDA ERS; USDA commercial disappearance; includes civilian and military purchases of milk and dairy products for



2016 Saw Highest Ever Per Capita Cheese Consumption

15.5

23.1

27.1

32.2

36.3

0

5

10

15

20

25

30

35

40

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

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19

92

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93

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Per Capital Cheese Consumptionannual pounds per person

7Source: USDA ERS;

Per capita “available” for consumption is calculated by dividing domestic disappearance by the U.S. resident population plus armed forces

overseas. It is a proxy for actual consumption as it does not account for product waste and thus, tends to overstate actual consumption.

11.7

10.4

4.9

3.9

3.5

2.6

2.1

1.6

1.1

0.8

0.5

0.3

0.01

Mozzarella

American: Cheddar

Processed Cheese

American: Other than cheddar

Other Italian

Cream and Neufchatel

Other Processed (cold pack, cheese foods & spreads)

All Other

Swiss

Hispanic

Muenster

Blue

Brick

2016% Chg. vs. YA

+4%

+2%

+8%

+2%

+8%

+5%

-25%

+6%

+1%

+5%

+3%

-3%

-15%

Mozzarella and Cheddar are the Top Cheese Varieties in the U.S. and Continue to Grow

8Source: USDA ERS;

Per capita “available” for consumption is calculated by dividing domestic disappearance by the U.S. resident population plus armed forces

overseas. It is a proxy for actual consumption as it does not account for product waste and thus, tends to overstate actual consumption.

Cheese Per Capita Consumption by Variety, lbs./person

20.1

19.6

19.4

18.3

17.4

13.7

12.6

10.4

9.5

9.3

8.4

8.4

4.4

2.9

1.3

0.7

Chile

Spain

New…

Turkey

Uruguay

Ecuador

Russia

Iran

Egypt

Ukraine

Brazil

Mexico

S Africa

Columbia

Zimbabwe

Tanzania

37.3

36.6

35.9

35.5

34.4

33.5

32.8

30.4

29.5

28.4

28.4

27.6

27.1

26.9

26.7

Israel

Czech Republic

Estonia

Poland

Bulgaria

United States

Belgium

Ireland

Australia

Hungary

Argentina

Canada

Croatia

Slovakia

United Kingdom

U.S. Cheese Consumption has Room to Grow Relative to Many Countries in Europe

9Source: Canadian Dairy Information Centre

Converted reported Kg to pounds

Note: 2015 is the latest year available across countries; Ecuador and Tanzania #s are for 2014

59.1

58.9

57.8

57.5

54.2

53.4

50.3

48.1

47.4

47.4

45.6

44.8

43.0

40.3

40.1

France

Finland

Denmark

Iceland

Germany

Cyprus

Luxembourg

Switzerland

Italy

Austria

Sweden

Latvia

Norway

Lithuania

Netherlands

2015 Cheese Per Capita Consumption by Country (lbs)

The Foodservice Channel is Growing as the Heaviest User of Cheese

10

Foodservice43%

Retail33%

Food Processing

24%

2016 Volume Share by Channel

Sources: IRI Custom WMMB Database (MULO+C); WMMB Foodservice Cheese Tracker, 2017; WMMB Cheese In Food Processing Study, 2017

Note that each channel’s cheese usage has been adjusted (where applicable) to natural weight equivalencies

Total volume = 12.4 billion pounds

+4 percentage point share vs. 2012

-3 percentage point share vs. 2012

-1 percentage point share vs. 2012

Since 2012, foodservice has gained share of cheese usage, mostly at the expense of retail

Almost 70% of Consumers Report Eating Cheese at Least a Few Times per Week – Taste is the Key Driver

11

3% 5% 7%

17%

47%

20%

Cheese Consumption Frequency*Adults % Reporting…

10 Top Drivers for Cheese Consumption

• I enjoy the taste

• It is a good source of calcium

• It is a good snack

• Part of a balanced diet

• Is a good source of protein

• Good for my general health and well being

• It is an ingredient in other foods that I enjoy

• Contains a wide variety of nutrients

• Helps prevent osteoporosis/fractures

• Is essential for strong bones and teeth

Source: DMI Dairy Tracker, 2016

Among Consumers Reporting Increased Cheese Consumption, Cooking is a Major Driver

12

“Great variety that tastes

great and adds to flavor

profile of many dishes.”

“I have found that

a few slices of

cheese in the

evening are

better for me

than potato chips

or crackers. Plus,

I just really like a

wide variety of

cheeses.”

Q17. You indicated that you are consuming [INSERT: MORE / LESS UNDERLINED] cheese now than you did a year ago. Why is that the case? Please be as specific as possible.

25% report increased consumption vs. year ago

“There are more varieties of cheese

available in today's market. They are

more flavorful and serving sizes for

cooking and/or snacks.”

Source: Edelman

“Cheese is the original comfort food, whether cooked in mac ‘n cheese, layered on a pizza, or wedged in a grilledcheese sandwich. With so many varieties of cheese and inspiration from cooking shows, consumers are becomingadventurous. They are looking for new products and trying new recipes.”

– Innova, Innovative Trends in Cheese (Nov’17)

% Respondents

•Using for Cooking 32%•Like It 32%

•Prefer Taste 8%•Healthier Alternatives 6%

•Cheap 5%

•More Options 4%

•Protein 4%

•Diet Change 4%

•Convenient 4%

•Calcium 3%

•Family Member Preference 3%•Other 2%

•Pregnancy 1%

•Don't Like / Buy 1%•Digestion Issues 1%•Allergies / Lactose Intolerance

1%

Diet, Health Concerns, and Taste Changes are Top Drivers for Decreased Cheese Consumption

13

Source: Edelman

16% report consuming less cheese than one year ago

“I’m cutting back

on calories”

“I don't like it. Never

did and now I know

it's not good for my

body.”

“We used to have grilled

cheese a couple of times

a week. We have

stopped buying lunch

meats and don't need

the cheese.”

“Lost interest so

I stopped buying

it”

“I changed my

diet so I cut back

on cheese”

“Too

expensive”

“Trying to lose 10 pounds

and it was recommended

to eat less calories and

cut cheese intake”

“I have cut back a bit

on cheese, and

eating more fish and

vegetables.”

Q17. You indicated that you are consuming [INSERT: MORE / LESS UNDERLINED] cheese now than you did a year ago. Why is that the case? Please be as specific as possible.

% Respondents

•Don't Like / Buy 25%

•Diet Change 14%

•Unhealthy 9%

•Nausea 8%

•Cost 8%

•Not Using as Much 7%

•Fat 6%

•Calories 5%

•Allergies / Lactose Intolerance

4%

•Taste 4%

•Tired / Bored 4%

•Other 3%

•Cholesterol 2%

•Bad Ingredients 1%

•Vegan 1%

•Like It 1%

•Prefer Substitute 1%

•Pregnancy 1%

•Chemicals 1%

•Animal Concerns 1%

Cheese at RetailCheese Category Insights

14

$4.58 $4.62

$4.95 $4.92 $4.82 $4.82

Average Price per Pound

- 1.0% -0.7% 2.3% 2.3% 0.1%

3,535 3,571 3,5483,628

3,710 3,703

3,4003,4503,5003,5503,6003,6503,7003,750

2012 2013 2014 2015 2016 Latest 52WKs Ending

10/8/17

Mill

ion

s

Retail Volume, pounds

15Source: IRI Market Advantage, DMI Custom Cheese Database; Total US Multi Outlet + Convenience

% Chg. vs.PY

2017 YTD Thru 10/8/17

Overall retail sales volume and price are relatively flat vs PY:

• Volume down slightly (-0.3%)

• Price up slightly (+0.2%)

- 0.9% 7.2% -0.7% -2.0% -0.2%% Chg. vs.PY

Overall Retail Sales Volume Growth 2012-16, But Volume Flat More Recently

A significant Price Bump in 2014, caused a pause in overall 2012-16 growth trend

16

NATIONAL BRAND

56%

PRIVATE LABEL44%

Private Label vs National Brand CheeseShare of Volume, Latest 52 Wks. (ending 10-08-17)

2.2%

-0.4%

1.8%0.9%

-3.3%

-0.6%-1.0%

2.9% 4.1%4.8%

2013 2014 2015 2016

Latest 52Wks ending

10-08-17

Volume Trend, % Change vs. PY

NATIONAL BRAND PRIVATE LABEL

National Brand Cheese Continues to Hold a Larger Share, but Recent Growth Favors Private Label

Source: IRI Market Advantage, DMI Custom Cheese Database; Total US Multi Outlet + Convenience


2,703 2,755 2,777 2,895 3,011 3,028

744 732 684 647 618 595

0

1,000

2,000

3,000

4,000

2012 2013 2014 2015 2016 52 Wk Ending 10-8-17

Mill

ion

s

Retail Volume: Natural & Processed Cheese

NATURAL CHEESE PROCESSED CHEESE

1.9%0.8%

4.3% 4.0%

1.2%

-1.6%

-6.6%-5.4%

-4.5% -4.7%

2013 2014 2015 2016 52 Wk Ending 10-8-17

Retail Volume Trend

NATURAL CHEESE PROCESSED CHEESE

Natural Cheese Continues Growth, While Processed Cheese Shows Consistent Losses

18

Processed Cheese Remains Overdeveloped in Some Regions

GREAT LAKESProcessed Cheese - 109Natural Cheese - 104

CALIFORNIAProcessed Cheese – 38Natural Cheese – 75

MID-SOUTHProcessed Cheese - 132Natural Cheese – 105

NORTH EASTProcessed Cheese - 67 Natural Cheese - 98

PLAINSProcessed Cheese - 154 Natural Cheese - 120

SOUTH CENTRALProcessed Cheese - 143Natural Cheese - 85

SOUTH EASTProcessed Cheese - 125Natural Cheese - 106

WESTProcessed Cheese – 62Natural Cheese - 118

Product Development Index* by Region52 Weeks ending 10-8-17


Natural Cheese indexes in average range across all regions

*Product Development Index = sales per capita population compared to total U.S.; PDI > 120 is above average development, PDI < 80 is below average development

Million Pounds

Volume, 52 WE 10/8/17

Volume Change vs. PY

3,028.7 +34.6

594.9 -29.2

45.8 -0.13

34.3 -1.7

19

81.8%

16.1%

1.2%

0.9%

NATURAL CHEESE

PROCESSED CHEESE

UNKNOWN TYPECHEESE

IMITATION CHEESE

% Share, 52 WKs Ending 10-8-17

-4.6%

5.3%

-7.9%

-10.6%

-4.8%

2013 2014 2015 2016

52 WkEnding 10-

8-17

IMITATION CHEESEvolume trend

Imitation Cheese is a Tiny Share of Retail Cheese Volume and Experiencing Declining Sales


22.2%

10.6%

8.7%

6.0%

6.4%

4.6%

3.4%

2.8%

2.5%

2.1%

1.8%

1.5%

1.4%

1.3%

1.2%

CHEDDAR

CREAM CHEESE

MOZZARELLA

COLBY/JACK BLENDS

OTHER CHEESE BLENDS

STRING MOZZARELLA

MONTEREY JACK

PARMESAN

RICOTTA

SWISS

CHEDDAR/JACK BLENDS

QUESO FRESCO

PROVOLONE

ITALIAN BLENDS

FRESH MOZZARELLA

Latest 52 Week Vol. Share

Latest 52 Weeks Ending 10-08-17 Volume Trend, % Change vs PY

Retail Volume Vol. Chg vs. PY 2015 2016Latest 52 Wks.

End 10-08-172017 YTD

thru 10/8/17

823,663,958 2,707,653 2.7% 4.0% 0.3% -0.4%

391,131,184 6,147,817 2.2% 1.0% 1.6% 2.1%

323,722,908 706,074 5.2% 5.5% 0.2% -0.3%

222,569,287 5,736,786 5.4% 5.3% 2.6% 1.9%

235,568,159 8,252,085 6.6% 8.4% 3.6% 2.8%

171,688,680 383,186 5.4% 0.4% 0.2% 1.0%

125,502,394 -2,941,206 6.7% 3.5% -2.3% -3.1%

104,233,852 2,862,357 3.4% 5.3% 2.8% 2.1%

92,558,627 -3,750,111 0.3% 2.7% -3.9% -4.7%

77,783,634 -4,069,704 1.7% -1.0% -5.0% -5.5%

68,241,499 -2,605,006 4.2% -0.4% -3.7% -3.6%

54,362,764 3,455,492 5.1% 7.4% 6.8% 6.5%

52,008,704 234,757 6.6% 7.2% 0.5% -1.0%

49,482,653 -681,522 0.8% -0.1% -1.4% -1.4%

44,490,824 1,271,398 13.4% 10.9% 2.9% 3.0% 20

Cheddar Remains the Top Selling Cheese Variety

While Other Cheese Blends, Cream Cheese and Colby/Jack Blends Have Contributed the Largest Volume Growth in the Latest 52 Wks.


Latest 52 Wks. Ending 10-08-17Retail Volume % Change vs PY

MEXICAN 3,813,124 110.3%

OAXACA 1,851,887 43.1%

MANCHEGO 527,434 41.0%

COTIJA 4,833,285 31.2%

BUTTERKASE 100,414 21.7%

MENONITA 52,782 21.0%

GOUDA 14,558,998 20.3%

FONTINA 1,176,501 20.3%

GOURNAY 3,557,303 19.2%

PANELA 3,984,076 16.0%

JARLSBERG 912,002 15.8%

HAVARTI 12,721,293 15.5%

QUESO DE FREIR 2,459,331 14.6%

OTHER HISPANIC 5,423,022 12.5%

QUESO DE PAPA 828,880 10.0%

FONTINELLA 201,579 9.9%

BABY SWISS 13,188,251 9.8%

QUESO BLANCO 3,680,337 9.6%

QUESO FRESCO 54,362,764 6.8%

QUESO QUESADILLA 5,892,649 5.9%

21

Hispanic and Hispanic Style Varieties of Cheese are Trending Up at Retail


Over half of top 20 growing cheese varieties are Hispanic/Hispanic style cheeses

% Share

Retail Vol.

Mil. Lbs.

Vol. Chg vs PY,

Mil. Lbs.

840,902,199 -3,485,765

802,675,491 -14,152,561

619,191,209 13,428,583

466,573,315 14,325,687

230,206,487 4,611,669

187,825,368 430,861

121,149,751 -8,363,098

92,576,774 -3,747,818

80,031,707 556,305

62,310,538 2,957,298


Shreds, Spreads and Rounds are Outperforming Other Popular Forms of Cheese

23.8%

20.3%

16.7%

12.7%

6.2%

5.4%

3.1%

2.3%

2.2%

1.7%

SLICED

CHUNK

SHREDDED

SHREDDED FINE

SPREADS

STRING

LOAF

TUB

GRATED

ROUND

Volume Trend, Percent Change vs. Prior Year

2015 2016

Latest

52

Weeks

2017

YTD

0.2% 0.4% -0.4% -1.1%

1.3% 1.5% -1.7% -2.6%

4.3% 5.7% 2.2% 1.4%

5.2% 4.3% 3.2% 3.2%

1.7% 0.8% 2.0% 2.3%

5.6% 0.2% 0.2% 1.0%

-8.6% -1.2% -6.5% -5.6%

0.3% 2.7% -3.9% -4.7%

1.6% 1.0% 0.7% 0.7%

12.7% 6.7% 5.0% 4.0%

Latest 52 Weeks ending 10/8/2017

23

Smoked, Pepper, Mexican and Pimento Flavored Cheeses are Trending at Retail

• Flavored cheeses account for about 12% of total cheese retail volume• Flavored cheese volume was flat (-0.2%) in 52 wk. period vs PY

52 Weeks ending 10-8-17

Top Selling Flavors Flavors Contributing Largest Volume Growth

MEXICAN FIESTA BLEND

PEPPER SMOKED

FIESTA BLEND SMOKEHOUSE

JALAPENO PEPPER SMOKED GOUDA PIMENTO

SMOKED PIMENTO


24

050

100150200250300350400

2012 2013 2014 2015 2016 Latest 52Weeks

Ending 10-08-17

Mill

ion

s

Cheeses Labeled for Sharpness, million pounds

SHARP

MILD

EXTRA SHARP

MEDIUM

Among Cheese Labeled for Degree of Sharpness, Consumer Preference for Sharper Cheeses Growing

Mild Cheeses Have Seen Long Term Declines

Volume Trend: Percent Change vs. PY

2013 2014 2015 2016Latest 52 Weeks Ending 10-08-17

SHARP 7.0% 4.0% 6.1% 6.7% 3.1%MILD -0.8% -4.0% -3.5% -0.5% -3.6%EXTRA SHARP 2.9% 2.9% 3.6% 5.2% 3.0%MEDIUM -2.9% -4.9% -0.2% 3.0% 3.9%



Cheese Sales Peak at Major Holidays and at Superbowl

New Year

Superbowl Easter July 4th

Thanksgiving

Christmas

New Year

SuperbowlEaster

July 4th

Thanksgiving

Christmas

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

WE

01

-04

-15

WE

01

-25

-15

WE

02

-15

-15

WE

03

-08

-15

WE

03

-29

-15

WE

04

-19

-15

WE

05

-10

-15

WE

05

-31

-15

WE

06

-21

-15

WE

07

-12

-15

WE

08

-02

-15

WE

08

-23

-15

WE

09

-13

-15

WE

10

-04

-15

WE

10

-25

-15

WE

11-

15-1

5

WE

12

-06

-15

WE

12-

27-1

5

WE

01

-17

-16

WE

02

-07

-16

WE

02

-28

-16

WE

03

-20

-16

WE

04

-10

-16

WE

05

-01

-16

WE

05

-22

-16

WE

06

-12

-16

WE

07

-03

-16

WE

07

-24

-16

WE

08

-14

-16

WE

09

-04

-16

WE

09

-25

-16

WE

10

-16

-16

WE

11

-06

-16

WE

11

-27

-16

WE

12

-18

-16

Weekly U.S. Cheese Volume at Retail, pounds

2015 2016

2015 - 2016

Average Weekly Sales

Average Holiday Lift*

(pounds)

Average Holiday Lift (percent)

Year Round 70,573,677 - -

Christmas 106,775,399 36,201,722 51%

Thanksgiving 86,161,920 15,588,243 22%

Superbowl 79,837,747 9,264,070 13%

Easter 77,371,698 6,798,021 10%

New Years 76,141,580 5,567,903 8%

July 4th 72,702,556 2,128,879 3%

26

Christmas Shows the Largest Holiday Lift in Cheese Sales, Followed by Thanksgiving and the Superbowl

Source: IRI Market Advantage, DMI Custom Database; MULO+C

Christmas

Top 10 Selling Cheese Varieties

Varieties with Greatest Holiday

Lift

• CHEDDAR • BRIE

• CREAM CHEESE • GRUYERE

• CHEESE PRODUCT • MASCARPONE

• MOZZARELLA • STILTON

• COLBY/JACK

BLENDS• GOURNAY

• OTHER CHEESE

BLENDS• EDAM

• RICOTTA • RICOTTA

• MONTEREY JACK • BUTTERKASE

• PARMESAN • CAMEMBERT

• STRING

MOZZARELLA• CREAM CHEESE

Retail Cheese Buyer ProfileCheese Category Insights

27

28

PENETRATION 97.9% Households Buy Cheese

VOLUME INDEX* BY GENERATION

Millennial: HH born 1976+ 112

Gen X: HH born 1965-76 115

Yngr Boomer: HH born 1956-64 100

Older Boomer: HH born 1946-55 87

Retiree: HH born 1936-45 73

Senior: HH born b4 1936 57

Notes: Penetration based on household/buyer purchase at least once in the 52 weeks.*Volume Index greater than 120 = above average, less than 80 = below average.

Almost All U.S. Households Purchase at Least Some Cheese During the Year

While almost all U.S. households purchase cheese, millennials ad Gen X households are a little more likely to purchase cheese and volume purchased trails off as household generation ages. Seniors are 43% less likely to purchase cheese compared to the average U.S. household.

Source: IRI Consumer & Shopper Insights Advantage Database, 52 WE July 9, 2017

29Source: IRI Consumer & Shopper Insights Advantage Database,52 WE July 9, 2017

NOTES: Products shown in box over-index vs national average and have shown growth in latest 52 weeks vs. prior period + growth < 10%++ growth ≥ 10%

There are Regional Preferences in the Varieties Purchased

GREAT LAKESColby ++Italian Blends +

CALIFORNIAQueso Fresco +Cotija ++

MID-SOUTHProvolone +Cheddar ++

NORTH EASTRicotta ++Fresh Mozzarella ++Italian Blends +

PLAINSParmesan ++Colby +Pasteurized Processed +Cheese Food +

SOUTH CENTRALPasteurized Processed +Cheese Food +Cheese Product +

SOUTH EASTCheddar +Cheese Food +Cheese Product +

WESTCheddar +Muenster++Monterey Jack+

New Product Trends at RetailCheese Category Insights

30

31Source:

New Cheese Product Introductions Reflect Trend Toward Natural Cheese and Away from Processed

41.4%43.5%

47.5%

26.0%

20.8%22.9%

15.4% 15.8%14.7%

16.8% 17.6%

9.6%

0.4%

2.3%5.4%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2014 2015 2016

Cheese – Semi-Hard & Hard

Cheese – Soft & Semi-Soft

Cheese – Fresh & Cream

Cheese – Processed Cheese

Cheese – Soft Cheese Desserts

Cheese Introductions, Total Number

708 956 853

• Natural Semi-Hard and Hard Cheeses are seeing growth as share of total cheese intros, while processed cheese saw a large drop between 2015 & 16

• Soft cheese desserts are a small but growing segment of cheese introductions

Cheese Intros by Sub-Category, as share of total

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Convenience is the Top Claim for New Cheese Introductions

2 YR end Oct 2017

ClaimNumber of Intros

Bearing Claim% Share of Total Intros

Share, Point Change vs Prior 2YRs

Convenience - Ready Prepared 888 53% -5

Allergy1 533 32% +8

Gluten Free 390 23% +6

Natural 333 20% -7

Kosher 322 19% +1

Ethical - Packaging 300 18% +5

Traditional 295 18% +3

No Additives/Preservatives 205 12% +2

High/Source Of Protein 198 12% +4

Top 10 Claims for New Cheese Introductions

Total cheese introductions for this 2yr period = 1,675

1Allergy claims may indicate presence or absence of allergens

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Claim Growth Favoring Free-From and Ethical Claims

2 YR end Oct 2017


bearing claimShare of total

Intros

Share, Point Change vs Prior

2YRsNatural 333 20% -7

Gluten Free 390 23% +6GMO Free 110 7% +2No Additives/Preservatives 205 12% +2

‘Free-from’ claims seeing growth, while non-specific claim of “natural” declining

2 YR end Oct 2017


bearing claimShare of total

Intros


2YRsEthical - Packaging 300 18% +5Ethical - Human 78 5% +2Ethical - Animal/Fish & Bird 54 3% 1Ethical - Environment 22 1% 1

The top and fastest growing ethical claim is for packaging, which are almost always related to recyclability

• Human ethical claims typically refer to farmers or other causes supported

• Cow care is the typical element in Animal/Fish/Bird ethical clams and frequently refer to no hormone or antibiotic use

• Ethical Environmental claims typically refer to care for the environment in general terms

“Cheese hits the mark of what today’s consumer is looking for. It’s natural. It’s

label is clean… it may have a story associated with it that consumers will

buy” - Innova, Innovative Trends in Cheese

(Nov’17)

Source: Innova New Product Database

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Other Notable Growing Claims Include “High/Source of Protein” and “Traditional”

2 YR end Oct 2017


bearing claimShare of

total Intros


2YRs

Allergy1 533 32% 8

High/Source Of Protein 198 12% 4

Convenience - Consumption 86 5% 3

Traditional 295 18% 3

Organic 109 7% 2

Economy 102 6% 1

Low Sodium 23 1% 1

• The protein claim is by far the most commonly nutrient related claim associated with cheese products

Other Growing Claims

1Allergy claims may indicate presence or absence of allergens

• “Traditional” is on trend as consumers continue to seek authentic foods

• The convenient consumption claim, typically associated with products packaged for on-the-go portability, is growing

“Consumers are increasingly reaching for low carb, high protein foods.

Cheese fits the bill, plus it’s rich in calcium.” - Innova, Innovative Trends in Cheese

(Nov’17)


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Several New Cheese Products Target the Snacking Occasion by Stretching Beyond Traditional Formats

Sargento Sweet Balanced Breaks Monterey Jack Natural Cheese, Dried Cranberries and Dark Chocolate Covered Peanuts

Kroger Snack Medleys Cheddar Cheese, Salted Roasted Cashews And Dried Cranberries

Recent Product Examples:

Cow Candy Jack Cheese: Robots In Disguise Prime Punch

Yooli Bar: Farmer's Cheese With Strawberry

Trader Giottos Oven Baked Cheese Bites

Dadu Chocolate Dessert Cheese Bar is a curd based product

“New formats of cheese are emerging to meet the demand for on-the-run foods. Because cheese is

satiating, it keepsone fuller until meal time.”

- Innova, Innovative Trends in Cheese (Nov’17)


36

Yogurt Competition Emerging with Quark and Farmers Cheese Products

Elli Creamy German Style Quark: Sea Salt Caramel

Yooli Farmer's Cheese Creme With Honey Lemon Zest

Lifeway Small Batch Organic Farmer Cheese Dessert: Blueberry-Lavender

Misha Vanilla Bean Coconut Quark

Examples:


Cheese on Restaurant MenusCheese Category Insights

37

38

143

149 148 150 148146

100

110

120

130

140

150

160

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017

Tho

usa

nd

s

Number of Menu Items w/cheese - Total Restaurants

The Number of Menu Items Featuring Cheese Saw a High in 2015, but Has Since Trended Down Slightly

However menu items with cheese have not declined as steeply as menu items overall in this 2 year period

2017 vs. 2015, % Change

Total Menu Items - 3.6%

Menu Items w/Cheese -2.5%

Source: Technomic MenuMonitor

Mature

Mainstream

Introductory

Growth

Cheddar 70.2%

Parmesan 56.6%

Blue Cheese 52.8%

Mozzarella 49.6%

Feta 34.3%

American Cheese 32.2%

Provolone 31.9%

Swiss Cheese 28.8%

Cream Cheese 27.5%

Monterey Jack 24.2%

Pepperjack Cheese 23.3%

Ricotta 14.8%

Queso 13.3%

Romano 11.7%

Cottage Cheese 10.9%

Fresh Mozzarella 10.7%

Goat Cheese 9.8%

Asiago 9.3%

Gorgonzola 8.1%

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Fine-Dining

Independent Concepts

Upscale &

Contemporary CDRs

Fast -Casual &

Traditional CDRsQuick-Service &

Midscale Concepts

White Cheddar 8.5%

Brie 8.0%

Cotija 7.4%

Smoked Gouda 6.4%

Ranchero 6.0%

Gouda 5.6%

Fontina 5.2%

Mascarpone 5.0%

Queso Fresco 4.7%

Gruyère 4.3%

Havarti 4.3%

Segments tend to adopt flavors from the preceding stage

Burrata 18.7%

Pecorino 10.6%

Parm. Reggiano 9.1%

Manchego 8.6%

Grana Padano 7.1%

Danish Blue 4.5%

Buffalo Mozz. 4.0%

Ricotta Salata 4.9%

Muenster 3.1%

Boursin 2.6%

Chihuahua 2.6%

Cheese Curd 2.3%

Comte 2.3%

Roquefort 2.1%

Percentages represent cheese penetration (share of operators in relevant segment offering this type of cheese)

While Some Cheeses are Maturing at Foodservice, Many New Varieties are Emerging

Source: Technomic MenuMonitor, Q3-2017

Cheese Flavor Lifecycle at Restaurants

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Menu items with Cheese More Prevalent at Limited Service Restaurants than at Restaurants Overall

19.5%

29.3%

19.5%

30.7%

0.0%

10.0%

20.0%

30.0%

40.0%

Total Restaurants Limited Service*

Share of Total Menu Items that Include Cheese as an Ingredient

Q3 2016 Q3 2017

In Q3’17, menu items with cheese accounted for:• 20% of total restaurant

menu items• 31% of limited service

menu items

At limited service restaurants, the share of menu items featuring cheese has seen recent growth, but flat at restaurants overall

*Limited Service includes quickserve restaurants and fast casual

Source: Technomic MenuMonitor

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Pizza Restaurants offer the Largest Share of Total Menu Items that Include Cheese

Pizza28%

Sandwich19%

Burger14%

Mexican13%

Bakery/Cafe8%

Specialty6%

Family Casual3%

Chicken3%

Other(1)6%

Limited Service Restaurants(2): Cheese Item Distribution by Restaurant Cuisine Type

(1) Other includes: Coffee Café, Asian/Noodle, Other Beverage/Snack, Frozen Dessert, BBQ & Seafood(2)Limited Service includes quickserve restaurants and fast casual in top 250 Chains

Source: Technomic MenuMonitor, Q3 2017

Menu Category Count Percentage

Add-on 327 6.6%

App/Starter 393 8.0%

Dessert 134 2.7%

Ent/Main Dish 3,616 73.2%

Kids Menu 201 4.1%

Side/Extra 270 5.5%

Limited Service Restaurants(2): Cheese Item distribution by Menu Category

On limited serve restaurant menus, over 73% of menu items mentioning cheese are entrees

42

Trending at LSR Burger: Flavored Cheeses

What’s Trending

• Cheeses infused with spicy and smoky flavors

Why?

• Customers are willing to order a wide variety of cheeses on their burgers

• Instead of elevating proteins, operators are looking for less expensive ways to offer premium burgers by upscaling other ingredients, such as cheese

• Two in five consumers think specialty cheeses make a burger “premium”*

Where?

• White Castle brought back its Ghost Pepper Cheese Slider in September that features a slice of ghost pepper-infused cheese with onions and beef

• Jack in the Box launched the Smoky Jack Burger in August made with smoked cheddar Cheese and a choice of beef or breaded chicken

• Wendy’s offered a Bacon Queso lineup this summer that featured a burger, chicken sandwich and fries all topped with bacon and poblano-infused queso

What’s Next?

• Operators will continue raising the bar for unique cheeses on burgers, perhaps even experimenting with sweet infusions—such as adding honey or maple syrup to cheese—to differentiate their burger offerings

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Trending at LSR Pizza: Entree-Inspired Cheesy Pizzas

What’s Trending

• Pizzas inspired by indulgent entrees such as bacon cheeseburgers, grilled cheese sandwiches and Philly cheesesteaks

Why?

• Operators are going beyond traditional pizza varieties not only to differentiate their selection from competitors but also to spark conversation on social media

• Over a third of consumers—including nearly half of 18- to 34-year-olds)—are more interested now in trying pizza with unique ingredients or toppings compared to two years ago*

• This aligns with the mashup trend that appeals particularly to younger consumers

Where?

• Papa John’s brought back its Philly Cheesesteak Pizza in October and also debuted a Chicken Bacon Philly Pizza

• Pizza Ranch offered a Bacon Cheeseburger Fries Pizza for a limited time this summer

• Cicis also offered a limited-time indulgent pizza variety this summer, a Grill’d Cheese Stuffed Crust Pizza that featured a roasted crust filled with a blend of cheddar and mozzarella

What’s Next?

• Expect some pizza chains to take mashup pizzas to the next level by developing novelty LTOs topped with highly nontraditional pizza ingredients, such fried cheese curds, cheese-stuffed meatballs and mac and cheese

Source: Technomic

44

Trending at LSR Mexican: Focus on Queso

What’s Trending

• Mexican operators calling attention to their queso or adding new variations of their queso

Why?

• While queso has always been a fixture at Mexican restaurants, operators have recently ramped up promotion of their queso to combat the hype surrounding the long-awaited introduction of Chipotle’s queso

• Restaurants are also calling attention to the quality of their queso, emphasizing the use of real cheese and natural ingredients

Where?

• Chipotle Mexican Grilllaunched its queso in September after testing it this summer. It features aged cheddar cheese, tomatillos, tomatoes and several varieties of peppers

• Del Taco replaced its Nacho Cheese Sauce with Queso Blanco (made with real cheese and real milk) at the end of August

• Taco Bell this summer tested two Queso LTOs—Queso Beef Burrito and Queso Beef Nachos—in Tennessee

What’s Next?

• Look for restaurants to continue innovating with indulgent queso by adding flavor through smoky peppers and hot spices

Source: Technomic

Key Takeaways

• Cheese is a growth driver for dairy

• Domestic use and exports have both contributed to cheese growth

• Consumers continue to be heavily engaged with cheese

• Consumer trends and preferences driving growth include:

• Convenience

• Home Cooking, Taste & Culinary Exploration

• Natural/Clean label

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Documents

Cheese Category Insights - MMI Business Advisors · 2017-11-17 · a year ago. Why is that the case? Please be as specific as possible. 25% report increased consumption vs. year ago