ROCKVILLE, MD. – Demand for gourmet, organic and unprocessed varieties is driving the $16 billion natural and specialty cheese market, which is projected to grow by a compound annual growth rate of 4% during 2014 to 2018, according to the market research firm Packaged Facts.

Positioned as a nutritious snack, cheese marketed as natural benefits from increasing demand for protein-rich products on the go. Consumption of natural cheese in all forms has increased over the past decade, while processed cheese has declined.

Moreover, varieties made with organic milk, milk from grass-fed cows and milk free of artificial growth hormones are surging in popularity. Sales of organic cheese are projected to increase by double digits to reach $750 million in 2018. Poised to profit from the trend is WhiteWave Foods, whose Horizon business offers a range of cheese products made with organic milk, according to Packaged Facts.

Cheese makers also are churning out reduced-salt, reduced-fat and lactose-free varieties. Responding to a push for products perceived as natural, Kraft Foods recently removed artificial preservatives from some of its Kraft Singles individually wrapped slices.

“Consumers are generally looking for products that are more indulgent, with new tastes and experiences, or healthier, more nutritious indulgences that still taste good,” said David Sprinkle, research director at Packaged Facts.  

On the flavor front, smoky, peppery and ethnic varieties are experiencing growth, supported by the growing influence of Hispanic consumers in the United States, and a trend toward sophisticated flavor profiles. Artisanal cheeses with savory spice, nut and dried fruit inclusions also are on the rise.

“The broadening of the American palette beyond traditional favorites, cheddar and mozzarella, is driving growth of higher priced specialty and ethnic cheeses,” Mr. Sprinkle said.

With 18% share of total sales, Kraft leads the natural and specialty cheese market, a fragmented landscape with mostly small players and a few mid-size to large manufacturers, Packaged Facts said. Private label natural and specialty cheese products accounted for more than 40% of total sales in 2013.

Further growth potential for the cheese market may come from the burgeoning breakfast sandwich segment in the United States as well as from a growing adoption of westernized diets with dairy products in developing markets, Packaged Facts said.