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The shaping force of megatrends: an overview of the Western European cheese market

Total volume consumption of cheese per capita in Russia has stagnated. In 2015 it stands at 5 kg per capita – the same as in 2010.

It is clear, however, that worse macroeconomic conditions make up a major part of the explanation for the slowdown, and with an expected improvement in the economy over the coming five years, per capita consumption of cheese is forecasted to start growing as well. This means that the Russian cheese market will gradually become more developed, more diversified and more mature.  As time passes, it will therefore become increasingly relevant to learn from markets, which matured earlier to see how cheese manufacturers manoeuvre under such conditions. That gives us a good argument to examine how the Western European cheese market is developing. So let’s have a look…


Surviving in a mature market

Western Europe is truly a mature market. This we can see alone from the fact that the total volume consumption of cheese per capita has been stable for decades around 11 kg per capita. At the same time, the retail value of cheese per capita in Western Europe is increasing in current value terms, but in constant prices, the trend is declining. In part, the declining constant value per capita points to a certain degree of commodification in the lower end of the market, where a growing share of private label puts pressure on prices.

On the other hand – racing towards the lowest possible price is obviously not the right strategy for all players. At the higher end of the market, branded players fight to bring value growth to cheese, despite the competition from private label and the high degree of maturity. How can this be done? How do manufacturers achieve value growth in the Western European cheese market?

The answer to this is both simple and complex. The simple variant goes like this. Cheese manufacturers in Western Europe target a number of well-known megatrends, which are currently impacting packaged food in the Western world in general: Health and wellness, premiumisation and convenience. In the more complex version, we will have to understand exactly how these overarching trends manifest themselves within cheese and point out the most efficient ways in which cheese products can target them.

Healthy living becoming fragmented  

It’s hardly an overstatement to say that the Western European consumer is obsessed with health. Apart from an understandable wish to live a long live, we can identify at least one more strong driver behind this trend: the abundance of information available to the modern consumer. Health is omnipresent in media and the internet is almost bursting from blogs and discussion forums about the latest diet trends. The immediate consequence is that the conception of what healthy living is becomes fragmented. 10-15 years ago, official nutrition recommendations, based on research and often backed up by the state, were largely unquestioned. Today official recommendations compete with a large variety of alternative diets, which are promoted by health gurus and bloggers: low carb, protein, paleo, raw food, gluten-free… The list is open-ended.   

For cheese manufacturers, this means that there are two ways to target the health and wellness trend. The first option is to target official, well-established mainstream conceptions about what is healthy. As fat, especially saturated fat, is identified by this health conception as a risk, such an approach will traditionally focus on reduced fat cheese. By 2015, however, the trend for reduced-fat cheese is not overly positive. After an increase at the beginning of the millennium, the retail volume share of reduced fat cheese out of total cheese in Western Europe has stabilised at 9% and is even expected to see a slight decline over the coming five years.

This means that targeting alternative health trends may make more sense, as especially the on-going protein-craze offers opportunities for cheese. These opportunities are for instance seen in the Nordic region, where the fromage frais and quark, including cottage cheese and the Icelandic fresh cheese skyr, is seeing strong growth due to effective marketing as high-protein products.


Premium at home

Certainly, it is not only within the area of health that consumers are getting more educated. Also when it comes to food quality, the bar is being raised, as an increasing number of consumers are able to distinguish good from less good. Private label and economy products put pressure on prices in the lower end of the market, but at the same time there is a growing base of consumers who are willing to pay extra for premium quality, at least occasionally.

For cheese, this constitutes an obvious opportunity. Compared to other dairy products, such as milk or even yoghurt, the processing plays a much more important role in cheese, and consequently the quality spectre is much wider. A vast majority of milk is already sold as a simple commodity product, but for cheese the possibilities for adding value through increased quality seem almost endless. In Germany, for instance, this has been exploited by manufacturers to create growth in the segment of long-aged cheeses with very intense flavour.

Another example could be taken from Denmark where Arla in 2014 launched a Castello Aged Gouda, which is positioned as a luxury tapas and accompaniment to a fine wine. While cheese in most Western European countries is still dominated by large scale industrial manufacturers, this trends towards premiumisation will potentially even create a profitable niche market for miniature production of premium craft cheese. It is an opportunity which is just waiting to be taken.

Convenience for the busy

Convenience is the trend which Western European cheese manufacturers target most actively. The trend is driven by an increasingly busy life style, where both parents often pursue careers, while spear time activities such as sport are also incorporated into family life. With income levels remaining high in many countries this creates a base of consumers who are happy to pay to save time. This points to a potential for increasing unit prices and value growth, but still cheese manufacturers have to answer the question, in exactly which way cheese products can target the convenience trend.

It seems that two approaches can be identified. The first one focuses on the traditional usage of cheese on top of bread and aims at making this faster and more convenient for consumers. The concrete strategies mainly consist of launches of pre-sliced cheese and a focus on packaging innovations such as re-sealable packaging. This approach is already fairly traditional and it has a long presence in most Western European markets.

The second way in which cheese manufacturers target the convenience trend is newer and more dynamic. The core idea is to launch culinary cheeses, which tap into the on-going boom in meal solutions and prepared dinner elements, which all aim at making cooking at home easier for consumers. Concrete product examples can be taken from France, where Entremont SA in early 2015 launched a range of grated cheese for specific recipes such as Entremont Special Salades and Entremont Special Pizza. That the trend is widespread can by illustrated by the fact that in Finland the local dairy giant Valio has launched similar recipe-specific products, such as for instance Tex Mex grated cheese, while Arla has launched Arla Apetina salad cheese. As it can be seen, higher convenience and increased segmentation here sums up an added value, for which consumers can be charged a higher price.


Euromonitor International expects that the strategies currently employed by cheese manufacturers to stimulate the Western European market will bear fruit in the period 2015-2020. While total volume growth for 2010-2015 stood at 2% an improvement to 3% is forecasted for 2015-2020. In value terms an even stronger improvement is expected as stagnant constant value in the period 2010-2015 is expected to be replaced by a 3% constant value growth over 2015-2020. If we interpret these figures we can think of them as communicating a simple message: With the right strategies for adding value for consumers, business can be made even in highly mature markets.


Author: Stefan Anbro, senior research analyst,
Euromonitor International


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