Consumers' increasing concern with their health and the continuing debate about obesity has had a significant impact on the yellow-fats sector. Dairy Crest has lowered the amount of saturated fat in Utterly Butterly by 70% and launched an Omega-3 variant following research it commissioned that revealed 54.5 % of consumers would like to improve their health. A nationwide television campaign, which features two 30-second executions, launched last month in an attempt to reassure consumers that the product's taste has not been compromised.
In today's health-conscious climate, it is a hard sell for any food that is either entirely, or largely, made up of fat. But yellow fats - butter, margarine and spreads - are still a staple in most households, with 98% penetration.
The sector suffers from two main dichotomies: consumers are looking for healthier options, but are increasingly unwilling to compromise on taste; and they want lower-fat versions, while looking for natural and unprocessed foods.
Consumer trends have a significant impact on sales. For example, with more people skipping breakfast or grabbing something on the go, traditional morning fare such as toast has been declining in popularity. This has been a key meal for yellow fats such as butter and margarine. However, the rise in home baking, and cooking from scratch to ensure more natural food is consumed, has been a boon for the sector.
The market's value has been estimated at £908m for 2007. This represents a 12% rise on 2002, according to Mintel. Given that volume sales have fallen 2.4% over this period, premium products have fared well for manufacturers. The limited amount of new product development in the sector has tended to focus on healthier versions and provenance.
The fall in volume sales of yellow fats has been driven by the obesity debate. In 2003, 65% of men and 56% of women were overweight or obese, according to the Department of Health. By 2010, these figures have been predicted to increase to 75% of men and 58% of women.
Although overall consumption is down, sales of low-fat and low-salt products, and those with other health benefits, have risen. Lowering blood pressure by reducing cholesterol in diets, to help combat the threat of heart disease, has had a major impact on the purchasing trends in this sector. Manufacturers have incorporated polyunsaturated and monounsaturated fats into spreads to target consumers looking to reduce their intake of saturated fat.
Spreads account for just over half of the market. This is down on previous years, as butter has been gaining ground. While home baking has had some effect on sales, it is the rise of spreadable butter that has driven growth. From a health perspective, this isn't great news; consumers switching from spreads to spreadable butter are increasing their intake of saturated fats, as spreads tend to be 80% lower in saturated fats than butter.
Over the past decade, margarine has almost totally disappeared, replaced by spreads, which have lower fat levels. Only Stork continues to exist as a branded margarine, and its use is restricted almost solely to baking.
Almost half of shoppers buy only one type of yellow fat. They also tend to be brand loyal, with more than a third sticking to the same brand.
Unilever's Flora is the leading branded product in the sector. Between 2004 and 2006, value sales rose by 10%, in part down to the launch of Flora Omega 3 Plus in 2006. Unilever has continued to innovate, and the range now includes Extra Light, Buttery Taste and No Salt variants. Flora's marketing strategy has focused on the breadth of choice in its range, and uses the strapline 'There's a Flora that's right for you'.
Value sales of Arla Foods' Lurpak butter rose almost 10% between 2004 and 2006, fuelled by a combination of heavy investment in promotion and the shift in consumers' preferences toward butter. In June, annual sales were valued at more than £178m, a record for Lurpak. The brand positions itself as the premium butter on the market, with the strapline 'Good Food deserves Lurpak'. It aims to appeal to consumers on the basis of taste.
Arla also owns Anchor Butter, which this year has adopted a strategy of promoting its free-range credentials, to tap into consumers' desire for more natural food and appeal to more ethically minded shoppers.
Edible oils, which are often used in cooking as a replacement for butter, are the main competition to yellow fats. The key benefit for many consumers is that products in this sector, such as olive oil, are regarded as a healthier alternative to butter when frying food.
The growth in the number of over-65s is positive for this sector, as they are heavier consumers of butter, according to BMRB. They are also heavier users of spreads than younger groups because they pay more attention to their cholesterol levels.
During the next five years, the value of the sector is expected to rise 12% to £1.03bn. When inflation is taken into consideration, this represents a rise of 3%.
BUTTER, SPREAD AND MARGARINE BRANDS BY VALUE AND MARKET SHARE
2006 2004 04-06
pounds m % pounds m % % chng
Flora 175.0 19.6 158.7 18.7 10.3
Bertolli 38.0 4.3 36.9 4.3 3.0
I Can't Believe
it's Not Butter 30.0 3.4 33.2 3.9 -9.6
Stork SB 19.0 2.1 16.1 1.9 18.0
2 ARLA FOODS
Lurpak 163.0 18.3 148.8 17.5 9.5
Anchor 75.0 8.4 69.0 8.1 8.7
Yorkshire Butter 1.3 0.1 1.3 0.2 n/a
3 DAIRY CREST
Clover 68.0 7.6 59.0 6.9 15.3
Utterly Butterly 45.0 5.0 40.0 4.7 12.5
Country Life 42.0 4.7 36.3 4.3 15.7
St Ivel Gold 12.0 1.3 21.0 2.5 -42.9
Willow 7.0 0.8 8.0 0.9 -12.5
Vitalite 6.0 0.7 11.0 1.3 -45.5
Golden Churn* n/a n/a 3.3 0.4 n/a
4 KERRYGOLD 20.4 2.3 18.2 2.1 12.1
5 MCNEIL NUTRITIONALS
Benecol 18.5 2.1 19.5 2.3 -5.1
6 KERRY FOODS
Filippo Berio 6.0 0.7 6.0 0.7 0.0
Pure 5.0 0.6 2.7 0.3 85.2
Other brands 33.0 3.7 33.5 3.9 -1.5
Own-label 129.0 14.5 126.5 14.9 2.0
Total** 892.0 100 849.0 100 5.1
*Golden Churn has been withdrawn from the market
**some totals are affected by rounding-off
YELLOW-FATS BRANDS BY ADSPEND
Brand 2007 2006 2005
1 Flora 3,200,444 4,422,190 6,031,852
2 Anchor Butter 2,935,844 762,898 7669
3 Lurpak 2,386,520 988,439 4,006,165
4 Bertolli 1,764,125 2,055,618 958,148
5 Country Life 1,116,240 1,605,519 n/a
6 Utterly Butterly 1,056,165 n/a 1,205,796
7 Flora Pro-Activ 1,010,385 1,416,367 392,935
8 Anchor Spreadable 891,643 2,314,155 3,530,388
9 Clover 874,945 2,616,405 2,514,090
10 St Ivel Gold n/a n/a 858,137
Source: Nielsen Media Research
ANALYST COMMENT - WILLIAM DUFF, MARKET ANALYST, TNS
The butter, spreads and margarine market is worth almost £894m, with nearly all households buying into the market at least once a year. Although consumers are buying less frequently, value growth has been driven by people purchasing slightly more on each occasion, coupled with price increases. This has been partly fuelled by an increase in 'Y for pounds X'-style promotions, and impressive growth rates within the 1kg pack size segment.
With several of the sector's categories underperforming, it is spreadables that are driving growth. The category has benefited from a shift away from block butter toward spreadable alternatives, both in its standard and lighter variants. This would suggest that health and convenience are key factors.
However, sales of block butter are far from dead. Although it has suffered as a result of lost shoppers, as well as declining frequency of purchase, the emerging popularity of unsalted blocks has attracted new buyers and buoyed the category.
Block butter has reacted to the media concerns surrounding salt intake by offering variants with a reduced sodium content. Although enjoyment and practicality remain the key reasons for consuming block butter, health may be the fastest-growing reason. If not a complete turnaround for block butter, this is a step in the right direction.
Health remains on the consumer agenda, yet they seem prepared to seek out healthier variants within core offerings, rather than switching to more explicitly health-oriented spreads.
As a result, these categories are performing relatively poorly, with the impressive growth rates of healthier and more convenient alternatives paying testament to this.