Artisanal trends continued to influence cheese in 2018, a continuation of review period trends. This sophistication of consumers’ preferences, as well as increasing commodity prices, drove value growth in 2018; however, the easing of commodity price pressure meant that value growth was much lower than observed in 2017, but marginally higher than the average value growth for the overall review period.
Soft cheese continued to be the strongest performer in value terms in 2018, although its total value share was much lower than that of packaged hard cheese. The strong growth exhibited by soft cheese continued a trend exhibited throughout the review period, due to increasing distribution and strong new product development, particularly from artisanal brands supported by major dairy players such as Puhoi Valley (Goodman Fielder) and Kapiti (Fonterra Brands).
Following strong unit price growth in 2017, driven by increasing commodity prices, and particularly felt in packaged hard cheese, unit price growth in cheese stabilised in 2018. Due to its overall influence on the performance of cheese held by packaged hard cheese, the latter’s stagnant unit price growth strongly influenced the low unit price growth observed in cheese in 2018.
Fonterra Brands (NZ) Ltd continued to lead cheese, gaining strong value share in 2018, with the company leading all constituent categories. The Anchor brand is now fully under its control across all dairy categories, with cheese the last category to be acquired from Goodman Fielder.
After fully losing its distribution of Anchor, Goodman Fielder lost strong value share and fell to third position behind Dairyworks in 2018. However, in line with artisanal trends, the company started to focus on growing its Puhoi Valley brand.
In line with artisanal trends, a number of local niche players managed to increase their distribution capabilities by securing agreements with major supermarket chains. Whitestone Cheese Co and Massimo’s Italian Cheeses are among the local players to secure supplier agreements with Foodstuffs, Progressive Enterprises and Nosh Foodmarkets.
Strong new product development continued to be observed, focusing on specific products that cater to health and wellness concerns among local consumers. Their preferences have shifted towards more natural and less processed products.
While strong new product development within dairy only flavoured milk drinks drove sales growth for domestic consumption, value growth was lower than that observed by powder milk, which was one of the most dynamic categories in 2018. The growing presence and penetration of the “grey market” for powder milk sales helped drive its performance, with powder milk popular among Asian tourists, and thus often found predominantly in souvenir shops and in duty free areas at airports.
High commodity prices in 2017 witnessed strong growth in unit prices, although they stabilised in 2018, and as such unit price growth was much lower compared to the previous year. Forecast period unit price growth is expected to be more subdued than witnessed in 2017, owing to increasing price competition, particularly in higher growth categories such as organic milk.
Supported by its leading Anchor brand, Fonterra Brands continued to lead drinking milk products in 2018. The performance of the company, and in particular Anchor, was attributable to its leadership of fresh milk, which was the largest category within drinking milk products in 2018.
Local player Lewis Road Creamery continued to gain value share within drinking milk products, despite being considered a niche offering in comparison to Fonterra Brands and Goodman Fielder. The company has developed a reputation as one of the leading and most successful innovators in drinking milk products, following the successful 2015 launch of the co-branded product Lewis Road Creamery Fresh Chocolate milk, incorporating the Whittaker's 5 Roll Refined Creamy Milk Chocolate.
Retaining its second position in overall drinking milk products, Goodman Fielder also ranked second in flavoured milk drinks and fresh milk I 2018. The company’s position is largely due to its Meadow Fresh, which introduced Meadow Fresh with No Added Permeate in 2017 to cater to consumer preferences for less processed products.
Strong growth within flavoured yoghurt helped drive the overall performance of the category in 2018, with its value growth rate corresponding to overall yoghurt and sour milk products. Strong flavour innovation, particularly in Greek style yoghurt, helped to drive value growth in the category.
While remaining the smallest category within yoghurt and sour milk products, drinking yoghurt was the strongest performer in value terms in 2018. The strong performance of the category was attributable to new product development focused on single serve offerings targeting children, offering healthy and nutritious snack options.
Higher levels of premium position and strong new product development, particularly in flavoured yoghurt, helped drive strong unit price growth in 2018. Increasing levels of new product activity focusing on more premium products, as well as limited growth in pack sizes, helped drive unit price growth.
Fonterra Brands (NZ) Ltd continued to lead yoghurt and sour milk products in 2018. The company led plain and flavoured yoghurt, while ranking fourth in drinking yoghurt.
Goodman Fielder continued to rank second in 2018, with stable value share. The company’s performance was largely derived from its leadership of drinking yoghurt, while it was ranked second in flavoured yoghurt.
Local player Epicurean Dairy Holdings was one of the standout performers in the category again in 2018, with its strong new product development driving the overall performance of drinking yoghurt. Through brand The Collective, the company has been at the forefront of driving the popularity of pouch drinking yoghurt as a snack option for children during the review period, and is thus well placed to be one of the strongest performing brands over the forecast period.
While other dairy retained high levels of penetration, particularly in cream, the increasing presence of private label, as well as an overall lack of innovation in comparison to other categories within dairy, resulted in other dairy exhibiting the lowest growth within dairy in 2018. Lack of association with health and wellness and premiumisation trends – which is the focal point of innovation in competing dairy categories – is expected to hamper its performance over the forecast period, with the lack of dynamism expected to offset any gains made due to increasing penetration, although natural consumer demand is expected to remain.
Cream was the strongest performer within other dairy in 2018, driving the performance of other dairy overall. The category remained the largest within other dairy in value share terms.
Coffee whiteners remained the weakest performer in 2018, exhibiting current value decline, a continuing theme throughout the review period. It continued to suffer from declining consumer demand, with New Zealanders enjoying fresh milk, particularly frothed milk through the influence of café-style coffee.
Perhaps unsurprisingly given its dominant status within dairy in New Zealand, and the fact that other dairy is dominated by cream in value terms, Fonterra Brands continued to lead other dairy in 2018. The company’s performance was driven by its leadership of cream, while it also led chilled and shelf stable desserts.
Goodman Fielder continued to rank second within other dairy in 2018. The company led fromage frais and quark, whilst it also ranked second in both chilled and shelf stable desserts and cream.
Owing to price sensitivity among local consumers, as well as increasing product portfolios, private label gained value share within other dairy in 2018. Particularly noticeable was the improving performance of the private label lines of both Foodstuffs and Progressive Enterprises in cream, where they aggressively compete with Fonterra Brands and Goodman Fielder, due to the relatively straightforward nature of the category meaning that price becomes a key determinant in consumers’ decision making.
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This industry report originates from Passport, our Packaged Food market research database.