Rising milk and butter prices were one of the main stories within FMCG in 2017. In July, Peder Tuborgh (Arla’s Chief Executive) predicted butter prices would rise due to the increasing price of milk fat, generating alarmism around butter shortages for the Christmas period (BBC).
One of the key factors behind growing butter prices was the reduced milk production that followed from the surplus in 2015-2016, which led to a surge in milk prices (The Grocer). Despite the higher prices and the growth in popularity of dairy alternatives, butter consumption has been on the rise following studies indicating the food is potentially not as unhealthy as previously thought (The Daily Mail).
Butter is “better”, but at what price?
Using the Pricing History report, Brand View has analysed the price of Own Label 250g salted butter blocks across the six major UK retailers. The analysis revealed that the average shelf price jumped from £1.10 at the beginning of 2017 to £1.59 at the end of the year (up 44.5 percent) (Chart 1, Tab 1).
After a price rise in January, the average shelf price of Own Label butter remained stable up until the middle of the year. From July, prices started to increase steadily, climbing 25.2 percent in the last four and a half months of 2017 alone, in support of Arla’s predictions.
While Tesco saw the greatest price increase, up by 63.3 percent to £1.60 (Table 1, Tab 1), Asda recorded the lowest (+33.0 percent), up to £1.45; making it the cheapest retailer at the end of the year. This resulted in a £0.15 price gap between Asda and the second cheapest retailers (Morrisons, Sainsbury’s, and Tesco) (Chart 1, Tab 2).
For the analysis of branded butter, Brand View has identified four 250g block salted butter listings available in the six retailers for the full duration of 2017.
Branded butter recorded a 20 percent price rise in 2017, up to £1.86 on the last day of the year (Chart 1, Tab 1) – Lurpak recording the sharpest increase, up by 25.1 percent (Table 1, Tab 2). The last four and a half months of the year accounted for the vast majority of the increase in the average price of branded butter, up by 19.2 percent between 16 July 2017 and 31 December 2017.
Are retailers milking it?
After analysing butter prices, Brand View expanded its analysis to look at milk prices. We have focused on the shelf price of four pints of Own Label milk – differentiating between full fat, semi-skimmed, and skimmed variants to identify any potential differences caused by high prices of milk fat in late 2017. All of the retailers analysed increased the price of their Own Label milk by £0.10 across all fat variants by the end of 2017. Asda, Ocado and Tesco had the lowest price for milk (£1.09) at the end of the period, £0.01 less than Morrisons, Sainsbury’s and Waitrose (Chart 2, Tab 1/2/3).
Morrisons was the first retailer to apply the £0.10 increase on 24 October 2017, with Sainsbury’s following three weeks later. Tesco briefly increased its milk price to £1.10 on 23 November 2017, before lowering to £1.09 eight days later to match Asda and Ocado.
Brand View has also analysed the price of two branded semi-skimmed milk products (2 litres) that were available all year long in all retailers; Cravendale and Yeo Valley Organic.
While the price of Cravendale experienced multiple price variations throughout the year due to promotional activities, at Sainsbury’s and Tesco in particular (Chart 2, Tab 4), the price of Yeo Valley Organic has remained stable; seeing only a price increase of 5.3 percent at Sainsbury’s (Table 2, Tab 2).
Dairying or daring dairy-free?
Together with milk and butter, plant-based alternatives (including non-dairy milk) also invaded the news last year. Using Brand View Assortment, we reviewed how the share of non-dairy versus dairy options changed in the milk category in 2017.
Plant-based milk gained ground in the milk category in all retailers except Tesco and Asda, where the proportion of non-dairy listings slightly decreased compared to the beginning of 2017.
Perhaps not surprisingly, Ocado and Waitrose had the greatest proportion of non-dairy milk products, accounting for 48.04 and 48.03 percent of their respective ranges. However, Morrisons closely followed Ocado and Waitrose with its share reaching 46.49 percent, having increased the proportion of its non-dairy milk range by 6.49 percent during 2017. (Chart/Table 3).
What will happen in 2018?
Both the milk and butter categories have been at the centre of the news in 2017 having experienced significant price increases. According to Promar International, as reported by The Grocer, consumers should remain prepared for fluctuating dairy prices in 2018, despite possible weakened farmgate milk prices.
After increasing the share of non-dairy alternatives in the milk category in 2017, retailers are expanding their plant-based food offer in other areas, with campaigns such as Veganuary 2018 spurring on demand. With a rapidly growing vegan population, up 360 percent in the last decade (The Vegan Society), the milk category is likely to offer further growth opportunities for plant-based alternatives in 2018.