Natural trends

by Editorial Staff
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Cheese is among the strongest segments in the dairy category, and one that offers ongoing opportunities for cheese makers of all sizes. The numbers indicate America’s love affair with cheese continues, and more growth may be on the horizon. A study of the market reveals evidence consumers want cheese made with milk from cows that haven’t been treated with recombinant bovine somatotropin (rBST), a substance used to boost milk production, and conclusive proof of a trend toward natural cheese rather than processed. American artisan and farmstead cheese-making also is growing in popularity, and a new business model for making and selling farmstead cheese has emerged in Vermont.

A study conducted by Mintel International Ltd., Chicago, and released this past May showed cheese sold in retail outlets increased 15% between 2006 and 2008. The research firm further estimated the market is set to reach nearly $16 billion in sales during 2009.

Mintel forecasts cheese consumption will continue to rise for a variety of reasons, including the fact restaurant sales continued to languish earlier this year. Such news is positive for categories such as cheese that are integral to snack and meal options in the home.

The population also is rising among core cheese comsuming groups. Mintel’s survey found consumers over the age of 45 are the most likely to eat cheese. From 2004 to 2014, the population for individuals aged 55 to 64 will increase nearly 37%, while the population of seniors aged 65 to 74 will increase nearly 40%, and it is forecast this growth will fuel additional cheese consumption.

Finally, natural cheese outpaced total category growth by six percentage points.

"Part of the success of natural cheeses versus processed varieties squarely fell in the overall premiumization trend that took hold in the time period," Mintel said. "Consumer interest in not only healthier but less processed foods has led to greater interest and approval with higher-priced, but better-quality, products including natural cheese."

The natural cheese segment will reach $8 billion in sales during 2009 in food, drug and mass merchandising channels, growing by 4% to 5% annually through 2013.

Looking at processed cheese, Mintel sees a different story. Sales fell 3% from 2003 to 2008, even with solid growth of 4.7% in 2008, and even the soft economy won’t reverse the trend entirely.

Redefining natural

The natural cheese category described by Mintel relates to U.S. Department of Agriculture standards of identity that define the difference between processed cheese (made from natural cheese and oil) and natural cheese, made strictly from milk and cultures.

But more recently, a new discussion has taken place regarding what constitutes "natural" cheese for consumers. Many consumers are now seeking cheese made from the milk of cows not treated with the production enhancer rBST. The controversial issue migrated to the cheese market from the fluid milk category.

A few years ago major dairy processors, including Dean Foods Co., Dallas, and HP Hood L.L.C., Lynnfield, Mass., began to restrict their farmer suppliers from using rBST. The information usually was communicated to consumers via label statements on milk jugs. Previously, only organic milk, and a few small specialty brands, offered this labeling effort, but when Dean Foods took the step the no-rBST milk category was born.

It didn’t take long before the trend was transferred to the milk used to make cheese. After all, one of the largest cheese-makers in the United States, Tillamook County Creamery, Tillamook, Ore., already had begun sourcing milk from cows not treated with rBST.

At the 2008 Food Marketing Institute (FMI) Show, Kraft Foods Inc. introduced Kraft Natural Cheese Made with 2% Milk. The company made a point that the product was made with "No Added Growth Hormones, for those consumers looking for dairy products made with milk from cows not treated with rBST."

Cabot Creamery, Cabot, Vt., a subsidiary of Agri-Mark Cooperative, also recently adopted a no-rBST policy.

"We decided, late last year, and gave our farmers notice in January that as of Aug. 1 we were not accepting milk from treated cows for our branded Cabot products," said Doug DiMento, director of communications. "We did this not only to protect our brand but to move forward in other parts of our business as well. It was a tough decision because it came during one of the worst years in recent history as far as profitability for producers. But in the long run, we thought it would be in the best interest of the co-op."

Cabot has not put a message on its packaging, or done any kind of marketing related to the policy.

"We didn’t even issue a press release," Mr. DiMento said.

Tillamook has stuck with its policy, and now includes a label message.

"We only have so much room on that label, so we weigh everything very carefully when determining what we put there," said Jay Allison, vice-president of sales and marketing for Tillamook. "We would not have that message there if we didn’t think that it continues to be very important to our customers."

Cheese may be a staple, even a commodity, but innovation drives the category. Convenient forms and packaging have brought a great deal of success to those who have plunged into new territory.

One of the latest trends is fortified cheeses. Earlier this year, Cabot rolled out Cabot 50% Reduced Fat Cheddar Cheese with Omega-3 DHA. Cabot spokesman Jed Davis said the company also likes to experiment with flavored cheeses, as witnessed by its chili-lime cheddar.

Tillamook in recent years has offered more forms and new packaging, including slices and shreds.

Mr. Allison said the company recently returned to pouches for its slices after offering them in snap seal clamshells for a few years. Tillamook also has re-designed its labels and changed the color code on its peg-board stock-keeping units.

Cellars at Jasper Hill

A few years ago, brothers Andy and Mateo Kehler resorted to explosives in launching the latest expansion of their farmstead cheese company, Jasper Hill Farm, Greensboro, Vt. The explosives were used in the construction of a sizable underground aging facility.

In creating the Cellars at Jasper Hill Farms, a new business that will partner with other small cheese makers, the Kehlers may also have lit a fuse on a business model that will help spur American artisan cheese making to a new level of growth.

Most farmstead cheese makers, often family-operated businesses with a handful of employees, are in effect operating a four-fold business that includes farming, cheese making, aging, logistics and marketing. The Cellars at Jasper Hill provides affinage (aging), logistics and marketing services for partner cheese makers. The business model — loosely based on that of Neal’s Yard Dairy of London — allows farmstead cheese makers to place one or two of those tasks in the hands of a knowledgeable partner. The cheese maker may then focus on the signature aspects of his or her business — producing milk that is influenced by the particulars of the farm and its animals, and turning that milk into unique cheeses.

"The actual logistics of getting the cheese out of rural area like Vermont can be pretty daunting," Mr. Kehler said. "Many cheese makers rely on FedEx and UPS, and that can have an impact on the quality of the product and can add a good deal of cost."

Centralizing aging and logistics reduces some of the most expensive aspects of the cheese making business.

Many of those farmers are like the Kehlers themselves — people who came into farming from other backgrounds — others are longtime farmers seeking an alternative to the dwindling economics of modern dairy farming.

The Kehlers see The Cellars as another contribution to the artisan cheese industry, an industry providing a viable option for small scale farms.

"Part of our mission as a company, our social bottom line, is the protection of the working landscape in Northern New England," Mr. Kehler said. "In some other places it might not be as important, but that agricultural patchwork really is something that defines this part of the country, so we are looking to enhance that."

An impetus for The Cellars at Jasper Hill was the partnership forged in 2003 between Jasper Hill Farms and Cabot Creamery. Jasper Hill had been making cheese less than a year when it began working with Cabot, a large cheese maker, owned by a farm cooperative (Agri-Mark) that does $750 million in annual sales. Together they produced a traditional clothbound Cheddar.

Cabot Clothbound went on to win Best of Show at the 2006 American Cheese Society Conference, and is now the flagship providing the scale needed to make the Cellars model work. Jasper Hill produces other outstanding cheeses from the milk of their own herd of Ayrshire cows, but those are small-scale products by nature.

"Our business has really grown up around the Cabot Clothbound," Mr. Kehler said.

With the new company getting lots of attention, many in the artisan cheese community see no reason this model may not be replicated in other parts of the country by other affinuers.

To date there are 13 cheese makers partnered with The Cellars, the most recent being the von Trappe Farmstead Wakefield, Vt., a brand new cheese maker whose products are just reaching cheese stores this month.

The caves themselves encompass 22,000 square feet of aging space, in seven separate vaults designed to provide optimum humidity and temperature for aging a variety of cheeses. The Cellars project represents a $3.2 million investment by the Kehlers and outside investors.

Artisan innovation abounds

The American Cheese Society, Louisville, Ky., is made up of artisan and farmstead cheese makers, retailers and enthusiasts in North America. The group currently is developing a certification program for those who sell and serve artisan cheese. Many member cheese makers have grown in recent years and are redefining the way artisan cheese is sold. These include Cowgirl Creamery, Petaluma, Calif., which sells its own cheese as well as a portfolio of products from other cheese makers. Cowgirl has retail outlets on both coasts.

Rogue Creamery, Central Point, Ore., has begun exporting its blue cheeses to Europe. Jasper Hill Farms, Greensboro, Vt., now works in partnership with fellow Vermont cheese makers to age and market those partners’ cheeses.

The artisan cheese industry is young (the A.C.S. just celebrated its 26th anniversary) and growing. Nearly half of the 400 or so licensed artisans are in business less than 10 years, and the number of cheeses entered into the A.C.S.’s annual judging has doubled in the last five years.

This article can also be found in the digital edition of Food Business News, October 27, 2009, starting on Page 43. Click here to search that archive.

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