Spreading What's New

Higher prices and healthier habits pose a challenge for the butter market.

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Health and wellness trends offer many challenges to the butter market. As more Americans try to cut down on excess fat and calories by reaching for “better-for-you” foods, butter sales have struggled. Though it’s unlikely that many American households will completely eliminate butter or margarine, manufacturers need to innovate ways to keep their product moving into (and out of) American refrigerators.

Mintel estimates the market for butter, margarine and table spreads reached $5.2 billion in 2007, a 31% increase from 2002, when the market was estimated at nearly $4 billion. However, sales increased primarily because of rising dairy prices, not because of increased consumer usage. As milk prices rise, so do butter prices, driving up dollar sales while volume sales remain flat.

Higher prices pose a challenge to the butter market. Mintel’s latest consumer survey reveals that nearly half (48%) of butter users buy less butter when prices increase. Margarine prices are not as volatile, so significant butter price increases carry the risk of driving people towards cheaper, non-dairy alternatives, like margarine.

The market’s other major obstacle is Americans’ general move towards healthier, lower-fat eating. More people are grilling or baking instead of frying, and those who cook with fats are tending towards better-for-you oils like olive oil. Mintel reports that olive oil sales grew 79% from 2002 to 2007.

Butter (and other) eaters

Though the butter, margarine and spread market is faced by numerous challenges, four in five Americans (80%) still reach for these products regularly, according to Mintel. Mintel’s exclusive consumer survey revealed that consumers use stick butter and tub margarine most frequently. Because these products are complementary – butter can be used for cooking and baking, while tub margarine is used as a spread – it seems logical that many consumers use both.

Somewhat surprisingly, Mintel’s survey shows that more than a third of adults have switched from margarine/spreads to butter in the past few years. This is contrary to the advice of health organizations that recommend using margarine as part of a healthier, lower-fat diet. But it may suggest a desire for more “authentic,” less chemically enhanced foods.

“Healthier-for-you” has been the rule of thumb for new butter and margarine products, as companies try to mold their image to today’s health-conscious mindset.

For new butter products launched from September 2007 to September 2008, “organic” was the second top claim, according to Mintel’s Global New Products Database (GNPD). For margarine and other spread products – where science plays a greater role – Mintel GNPD shows that “low/no/reduced trans fat” and “low/no/reduced cholesterol” were the second and third top claims over the same time period. Only “kosher” topped these health claims in new U.S. products.

However, not all healthy product launches in the butter, margarine and spread market have been successful. Price is still very important to American consumers, especially as food prices rise and the economy tends toward recession.

High-priced Benecol and Take Control (now Promise Activ), both made with plant sterols, each saw sales dip between 2005 and 2007, Mintel reports. But lower-priced Smart Balance, also made with plant sterols, saw phenomenal sales growth during the same period. It seems there is a firm price ceiling for healthier-for-you spreads.

Baking – which relies on butter for taste and texture – has been a challenge with many new nutrition-enhanced spreads, until recently. In January 2008, Smart Balance Butter Blend Sticks launched in certain regions of the United States to improve healthier spreads’ cooking and baking performance. The sticks contain both healthier ingredients and butter to perform better in baking recipes.

Better butter packaging

Beyond better-for-you ingredients, butter, margarine and spread manufacturers are trying to find other ways to make their products appeal to today’s consumer. Recognizing that a traditional 4-ounce stick of butter could be too large for a health-conscious or smaller household, Land O’Lakes introduced 2-ounce sticks in February 2008.

The new sticks don’t change the overall product size; purchasers still get a full pound of salted butter. But they do wisely target Americans who only need a small amount of butter for a recipe, allowing them to use what they need and store the rest for later.

Exemplified by Land O’Lakes simple, yet ingenious packaging innovation, butter, margarine and spread manufacturers will benefit from paying close attention to why consumers are – or are not – using their products. Tapping into health trends, offering exciting new formats and recipes, and convincing consumers to “trade up” to better butter will help companies drive sales, even as the economy shakes.

Fast Facts

51 new butter and spread products were launched between January and September of this year, more than double the number launched in 2003.
Kosher led the top 10 claims among new U.S. butter and spread products launched between September 2007 and September 2008, followed by trans fat and cholesterol claims.
Total U.S. sales of butter and spreads are expected to increase by nearly $1.2 billion through 2012.
80% of American consumers regularly purchase butter and spreads.

Source: Mintel