Are Brands Toast?
Fierce competition between the major retailers has created a market where price is the main game in town. “Price competition has intensified at retail level, with the major supermarkets fighting for market share and consumers being considerably more value-conscious,” says Stephen Cameron, Group Commercial Director at Dale Farm.
“With increased farmer milk output, the overall cheese market has also increased, leading to greater competition between processors trying to maintain or gain market share.”
The ongoing shift from branded to own-label Cheddar is a source of major concern for suppliers. “You have to remember that only three years ago brands were out-trading own label. It’s been part of the retailers’ strategy to try to build the quality in own label, which they’ve done really well, but also to give it a bit more space,” says Clothier.
Cameron points out that the majority of retailers are actively seeking to differentiate through their own-label offering and reducing the number of branded lines they carry. One supplier highlights Asda’s recent decision to build its Cheddar fixture around Cathedral City and Anchor as evidence of the type of consolidation within the market for challenger brands.
This branded rationalisation is partly the consequence of a continuous improvement in the quality of own label products, but also reflects the struggles branded suppliers have faced in adding value to their own offering. “Commodities like cheese are a clear strength area for own label as the added value from brands is perceived as relatively low”, says Hamish Renton, Managing Director of HRA Marketing. He adds that, in light of retailer rationalisation, it’s inevitable some brands won’t be able to justify their position on shelf.
So just why are brands struggling to make it on to the fixture and how do they plan to turn things around?
In part, brands’ troubles are a subset of problems within the Cheddar market itself, which is losing out to other cheese categories, notably Continentals. “Switching out of Cheddar is mainly into ingredient cheeses such as feta, mozzarella and quark,” explains James Prentice, Senior Brand Manager at Arla.
Traditional Cheddar occasions are also on the wane as consumer habits change. “The root cause of the decline in usage occasions is things like the sandwich, which is the number one meal for cheese but down 11% year on year. That’s really putting a strain on, “ says Ben Webster, Senior Category Manager at Adams Foods.
Cheddar’s also losing out to other types of cheese, so in a nutshell you’ve got the pie being smaller,” adds Webster. “Within that it’s getting more competitive as well. The discounters are massively growing, which is putting more pressure on brand because there’s not a brand presence there.”
Although to a degree these factors are beyond the control of Cheddar brands, there is acknowledgement from branded suppliers that the category is not doing enough to excite the consumer.
“Some parts of the Cheddar category have got a bit boring,” says Clothier, “One thing that there’s a load of different flavour profile, but some of the Cheddar brands are a bit Henry Ford – you’ve got mature or mellow, slice or grater, and that’s essentially all you’re going to get. I’m challenging my business to abridge the flavour profiles better, to get the extra mature and vintage reserve messages across, to get the smoked {Cheddar} message across, and fill the cheese board a bit more and cover more usage occasions.”
Promotion
One characteristic of the Cheddar market that shows no sign of changing is the reliance on promotion to drive sales: 51.5% of cheddar sales have been on deal in the past year, up slightly on previous year but down from 54.8% in the year to the end of May 2013. This may point towards an ongoing unhealthy reliance on selling on deal, but Amy Fisher, Central Shopper Marketing Manager for Cathedral City owner Dairy Crest, says promotions remain a fundamental part of the marketing mix.
“Our research has shown that a massive proportion of sales simply wouldn’t happen without promotions and the market value would be a fraction of this size without them. It is a fundamental truth that a large proportion of consumers are deal shopper, shopping purely on price,” she says.
What has been noticeable is a change in the type of promotional strategy adopted, with a move away from volume-driven promotions such as multibuys and bogofs and a shift towards single unit pricing. “ That’s not necessarily going to be a volume drive but it maybe offers more value in the category,” says Clothier.
James at Arla also acknowledges the change in promotional plans towards temporary price reductions. If you couple that with everyday low pricing you’ve certainly got downward pressure on pricing.”
He also notes that a move by supermarkets to align price points has had a knock-on effect on average prices. “If you look at Sainsbury’s, who have been pushing branded simplicity for some time, they’ve aligned the prices for all their core branded Cheddars at £3.50.”
In this context, maintaining brand loyalty is a challenge but one the suppliers need to embrace. Cameron says Dale Farm’s focus has been on product development and staying ahead of consumer trends, especially in convenience formats.
“We have invested heavily in upgrading our zip closures on portion packs and introducing freestanding soy pack on grated products as well as widening our offering in sliced packs. The results of our efforts are clear, with the business having generated a 53% increase in consumer cheese sales over the past 12 months,” he says.
Other suppliers are also pushing the NPD button Cathedral City is bigger than all other competitor Cheddar brands combined and has built much of its success on a fluid pipeline of innovation.
“NPD is key to driving cut-through in a saturated market and maintaining shopper interest in the cheese category,” says Wilson who cites the launch of Cathedral City’s flavoured block range comprising smoked, sweet chilli, and caramelised onion, as an example of value-adding innovation.
The products launched in late 2014 in Asda and have subsequently been rolled out to Sainsbury’s and Morrisons from May 2015, and Tesco from June 2015.
“The response from consumers to date has been extremely positive,” says Fisher. “Smoked and caramelised onion are thus far attracting the most sales; however, we’ve found on sampling days that the sweet chilli variant is hugely popular among those who try it.”
Fisher also points to the addition to the Cathedral City Minis lunchbox snacking range of mature, lighter and mild varieties and the extension of the Cathedral City 550g big block range is evidence of the brand’s commitment to category growth. This year, Dairy Crest has also launched a convenience–specific mini bag of Cathedral City Selections to capitalise on the top-up shop occasion.
Point Of Difference
The ongoing challenge for brand managers is to try to articulate a genuine point of difference as strongly as possible – whether it’s through NPD or other marketing activity.
“There’s no place for me-too brands,” says Clothier. “I think we’ve got a genuine point of difference within the category as a family business farming in Somerset, and the only ‘green’ brand in the whole of cheese.”
Clothier says Wyke’s environmental credentials are going to be placed front and centre of the brand’s growth strategy in an effort to tap shoppers’ will to spend a bit more on products produced in an ethical way. The brand is being relaunched in September with new packaging that reflects its Somerset provenance and will also carry a logo that reads: ‘100% green made with 100% renewables.’
Wyke is far from the only brad using marketing as a means to stand out from the crowd. Indeed, the Cheddar category has seen a raft of new advertising campaigns over the past few months with Seriously Strong, Anchor and Pilgrims Choice all receiving investment aimed at growing awareness and building an emotional connection between consumers and the brand.
Marketing
Arla launched a new £6m marketing campaign in June aimed at repositioning Anchor as a great tasting dairy brand, not just a butter brand (see above). A new Anchor Cheddar ad featured the strapline ‘Rich Anchor Cheddar, That’s The Good Stuff’ and presented a family of animated characters known as the Hugglers.
“This year we’ve tried to put the products a bit more front and centre while keeping the emotional connection we’ve built over the last couple of years,” says Lucie Illingworth, Senior Brand Manager at Arla. Although she says it is too early to know the full impact of the campaign, Arla is committed to maintaining levels of investment in the fast-growing brand going forward.
While value sales of Anchor Cheddar have soared 255% to £29.4m in the past year [Nielsen 52 w/e 23 May 2015], Pilgrims Choice has been rather treading water of late, with value sales down 8% to £98m [Kantar 52 w/e 26 April 2015].
In an attempt to revive the brand’s fortunes, owner Adams Foods relaunched Pilgrims Choice in January, with revamped packaging followed by a £3m marketing campaign in May.
The Pilgrims Choice Chosen campaign was centred on a distinctive TV commercial that showed Pilgrims Choice staff dancing whenever a shopper chose the brand, and was supported by digital activity encouraging people to ‘Choose a Choon’ for the ad with the chance to win a year’s supply of cheese. Webster says the aim of the relaunch was to be disruptive and different and says sales of Pilgrims Choice are up 5% since the start of the year as a result.
Lactalis McLelland has also been looking to transform the fortunes of its Seriously Strong brand with a new brand identity. A packaging overhaul carried out in February was aimed at highlighting the brand’s Scottish provenance and giving shoppers clearer cues about the brand’s taste and texture.
Seriously Strong also launched a major TV push using the voiceover of Scottish actor Dougray Scott to reinforce the expertise and attention to detail that goes into producing the Cheddar’s characterful flavour at its creamery in Stranraer. Lacalis’ ultimate aim is to double value sales of the brand over the next five years.
The high level of activity seen to date in 2015 shows that branded suppliers are not prepared to accept defeat to own label just yet. Indeed, it’s not all doom and gloom from Cheddar brands. Cathedral City’s Fisher highlights a number of consumer trends – in meal making spontaneous snacking, taste & indulgence, and healthy & vitality – that she believes can be key category growth drivers in the years ahead.
The healthy trend is particularly relevant with Cheddar brands previously having attempted to appeal to health-conscious shoppers through the development of reduced-fat and lighter variants. Though such products still find an audience, albeit a relatively small one, some brand owners believe the real health trend is for natural and wholesome products, a trend from which cheese potentially stands to benefit.
“Some consumers see healthy as just being natural, so they would prefer to have the fullfat variant rather than anything they perceive to have been messed around with,” explains Arlas Illingworth.
In light of the challenges facing branded Cheddar, the decline of milk prices and the supermarket price-war suggesting that things could well get worse before they get better, any trend that plays to brands’ advantage represents a potential light at the end of the tunnel.
They also suggest that they’re not quite toast yet.
