While the stereotype of the typical US consumer might lead one to think that everyone stateside orders their coffee with anything but milk (ie soy, oat, almond or whatever the latest dairy free substitution might be), the truth is that dairy consumption has increased by almost 10% in the last 10 years.
Last year, the average US consumer made their way through a record 297kg of dairy products representing a 1.4kg increase over the previous year. That’s the equivalent of almost seven additional standard blocks of cheese per person each year.
Butter and cheese, the two most important categories for Irish dairy products in the US, have seen growth in consumption of 29% and 15% respectively since 2010. US consumers continue to prove their love and enjoyment of all things dairy.
Irish dairy performance in the US
The US market has increasingly become a vital destination for the Irish dairy industry, with exports reaching €359m in 2020, more than a twofold increase in value over the last five years and contributing almost 16% to Ireland’s total growth in dairy exports within that same time period.
According to the most recent CSO data for the year to date (January to September 2021), 21% of all butter exports from Ireland were destined for US households, along with 6.1% of all cheese exports.
For many in the US, Ireland has now become synonymous with excellence in grass-fed dairy production, characterised by our lush pastures and rolling green hills.
Few brands have captured the imagination of the discerning US shopper as has Kerrygold, with Bloomberg heralding the Ornua-owned brand as having ‘Conquered America’s kitchens’, turning consumers into vigorous brand ambassadors.
US grocery market
The US as a whole is not homogenous; with its expansive geography and ethnographic contrasts it can’t be treated as a single uniform market when we consider the consumer. What is consistent, however, from coast to coast, is the priority placed on choice. US grocers can have double the number of products on shelf as their Irish or European counterparts. Nowhere is this more evident than in the dairy aisle or what has now become the ‘dairy and lactose-free’ section.
Another important distinction between US and Irish grocery markets is in the number of retailers. Whereas in Ireland, five retailers account for the vast majority of grocery products bought, the US is far more fragmented, with at least 200 banners, many of which operate only on a regional or single-state basis.
Examples include top 10 retailer H-E-B, operating 365 stores only in south Texas; and Wegmans, which is present in six states in the northeast with 108 stores. While both are considered regional players, H-E-B and Wegmans account for over $32bn and $10bn in sales respectively, making them, and the US market generally, hugely attractive for brands, both domestic and imported.
By 2022 the grocery retail market in the US is forecasted to be $1.65 trillion adding an additional $5.9bn in sales between 2020 and 2022 according to the IGD. Promotion of Irish agri-food and drink within these and other key partner accounts is the responsibility of Bord Bia and we regularly meet with the key purchasing decision-makers to both reinforce the reasons to continue their commitment to Irish dairy and to give preference to Ireland above other sources.
Irish dairy success
In what is certainly a competitive category, with a very significant domestic industry, why do US consumers and our key trading partners repeatedly select Irish dairy?
It is a category driven by quality and taste and Ireland, with a reputation for premium dairy products and natural grass-fed production, has managed the difficult task of both differentiating itself and communicating its outstanding taste versus the competition, both domestic and imported.
Quality Assured Irish dairy
In the US dairy market, the movement towards health and wellness and food choices as a lifestyle statement will only increase. For that reason, brand trust, which encompasses the integrity of the process involved in its making, must be credible and withstand increasing scrutiny. Irish dairy has this credibility, with proof points provided by the Sustainability Dairy Assurance Scheme, and Origin Green, while our grass-fed credentials are now further reinforced by the Grass Fed Standard for dairy. All of these initiatives help to build brand trust with consumers and our key retail partners, thereby validating their choice in Irish dairy.
Bord Bia has undertaken a number of research projects aimed at building deeper consumer understanding and delivering market insight. While COVID-19 has certainly created many challenges for the food and drink sector, a silver lining has been a resurgence in consumers turning to what’s familiar and comforting when it comes to food – good news for Irish dairy with its natural, pure and wholesome image. According to Bord Bia’s series of Future Proofing Toolkits, measuring how consumer shopping and consumption patterns have changed, 27% of US adults are choosing familiar foods suitable for home cooking more often and 42% say they will continue to choose these favourites into the future. The rise of home baking specifically during lockdowns and working from home created a so-called ‘butter boom’, bringing a whole new generation of amateur bread and pastry makers into the dairy category.
Additionally, we know from Bord Bia’s Global Sustainability Insights that although the US may have further to travel when it comes to perceptions of sustainability and food, the sustainability agenda has accelerated over the past number of years. This is especially the case in what might be considered sensitive areas like dairy and meat where over 60% of US consumers consider sustainability as ‘critical’ or ‘very important’. This is also reinforced by Bord Bia’s Dietary Lifestyles Report released in March of this year which confirmed that 64% of US consumers are making increased efforts to be more aware of the environment around them. If we apply this in a market context and look at a retailer such as Kroger, the second largest conventional grocery retailer operating in the US with sales of $133bn, sustainability is a priority pillar for its 2021-26 strategy aiming to “develop more environmentally friendly procurement and supply chain strategies that benefit both people and the environment”.
Our research clearly tells us that shoppers are becoming more discerning about their choices and purchasing products they deem worth the higher price. However, it must be noted that Irish dairy is not alone in occupying the position of grass-fed in the US, with plenty of competition both from local and imported products vying for the attention of those same shoppers. Key differentiators such as natural, taste and product integrity will continue to be drivers for Irish products, justifying their premium positioning.
Looking towards the future, while innovation and new brand launches in the plant-based and dairy-free certainly seem set to continue, the majority of these have been alternatives to liquid milk options, consumption of which has fallen out of fashion over several decades.
The big players in the dairy space are keeping a watchful eye and taking a strategic approach. Danone is owner of the Alpro and Silk plant-based dairy alternative brands, while Lactalis and General Mills have introduced plant-based versions into their Siggi’s and Yoplait brands – all seeing these as complementary and incremental to their existing portfolio of dairy brands.
This category blurring has been a feature for some time now and many consumers, for whom as we have said before, choice is king, do not necessarily see dairy and non-dairy alternatives as an either-or but just that, an alternative.
In the conversation about the rise of the dairy-free movement, it’s important to note that consumers generally are increasing their intake of plant-based foods and seeking to reduce their animal product consumption rather than eliminate it completely.
Consumption, as with everything else, is part of the overall sustainability agenda and consumers will continue to focus on what their own personal impact has on the environment, and on society more broadly, be that in packaging, food waste or energy usage.
The Grass Fed Standard
The Grass Fed Standard for dairy was introduced to trade audiences in the US, the UK, and Germany in 2020. Although Irish dairy has always been identified as grass-fed, trade buyers and consumers demand evidence to support this reputation. With the standard now in place, consumers in these markets can now be assured that dairy products carrying the Grass Fed Standard are produced using milk from cows that have a diet of at least 95% grass (fresh weight) and spend an average of 240 days/year outdoors on pasture.
The standard provides verifiable proof to the market of Irish dairy farmers’ capability to produce milk from a predominately grass-based diet, and ensures that Irish dairy uses its natural advantage to its full potential.
Processors that wish to use the grass-fed logo, must undergo an audit against the Grass Fed Standard at 12-month intervals.
The Grass Fed Standard asks no additional requirements of farmers other than to be a member of the Sustainable Dairy Assurance Scheme (SDAS). Data required to calculate the grass-fed status of each herd is collected as part of the Sustainability Survey, completed by the farmer as part of their audit. Each farm’s grass-fed figure is provided to the farmer in their Farmer Feedback Report (available at farm.bordbia.ie).