Retailers, riding out the volatility of commodity butter prices, say their dollar sales have increased, even as more consumers embrace private label
Butter prices have soared on the commodity markets to their highest level since 2004. As these higher prices have made their way to supermarket shelves, shoppers are taking note — either buying less or shifting to private label.
While retailers said their private-label butter took up much of the slack, they show evidence that their whole-butter category is slipping in volume.
Nonetheless, Mintel, an international consumer research firm with offices in Chicago, indicates the butter category enjoys good growth potential.
The company's latest study on Savory and Sweet spreads, published in September, shows dollar sales down nationally, but volume sales up from 2004 to 2009. Volume has fallen in 2010, as prices have risen.
“Even as consumer survey results indicate the use of butter is growing, FDMx [supermarkets, drug stores and mass marketers, excluding Wal-Mart Stores] dollar sales show declines in 2006, 2009 and 2010, as shoppers traded down to private label and migrated to Walmart in 2009, and cut down in usage in 2010,” researchers note in the report.
That migration to private label, which researchers theorized might be the result of efforts to trim food budgets, is borne out by what some retailers are seeing in their stores.
“The first half of this year, private label was running even with the recognized brands,” said Tony Abbatemarco, operations manager, Food Circus, the Middletown, N.J.-based company that owns Foodtown stores. “But in the last two or three months, private label is making up more like 57% to 60% of the category's sales.”
The 10-unit chain has seen its private-label butter's unit sales rise 6% through September, and dollars sales rise 1%.
Comparing everyday prices, Abbatemarco said a pound of Foodtown's private-label sweet or salted butter is currently retailing for $3.79 per pound, compared with $4.99 for national and regional brands.
And when there's a sale, private label usually has a better sales price on it — a deeper discount — he pointed out.
Private-label butter's share of sales through FDMx has grown steadily from 47% in 2006 to 51% in 2009 as private-label offerings become more accepted by consumers watching their food budgets, according to Mintel.
“A growing presence of private label organic lines, including butter, have helped to drive sales of private label as well,” researchers wrote.
Other analysts have noted that other trends have helped stabilize the category.
“Butter prices have been very high for several months, over $2 at the [Chicago Mercantile Exchange],” but even so, retail butter sales have been pretty good, said Florida-based dairy market analyst Jerry Dryer.
“Folks are entertaining at home this year. Baking, etc. That's good for butter sales.”
Although prices have begun to ease, consumers are still hunting for bargains, Abbatemarco and other retailers told SN.
“They are definitely still buying on sale. They're scrutinizing everybody's ads,” he said.
Butter sales dollars may be up for most of the year because of rising wholesale and commodity prices, but those higher prices appear to be having a direct impact on volume.
Even though Mintel and other research firms say that household use of butter has remained relatively strong — and senior analyst David Browne forecasts slow but steady growth of the category — retailers SN talked to said that rising prices have driven down volume in recent months.
For his whole-butter category, Abbatemarco's unit sales are down 4% year-to-date even though his dollar sales are up 2%.
Other supermarket retailers told SN they were seeing similar sales patterns.
“We are experiencing strong dollar sales increases in the butter category due to higher commodity costs, [but] with units trending down,” Maria Brous, spokeswoman for Publix Super Markets, Lakeland, Fla., said. “Private-label butter is experiencing similar trends with dollar sales outpacing total category but units are also declining.”
In Texas, the story's a little different, but reflects much the same pattern.
Dale Pinkston, business manager for dairy, United Supermarkets, Lubbock, has seen increases in both dollar sales and unit sales this past year.
“We have seen an increase in sales this fiscal year both in terms of number of units as well as sales dollars,” Pinkston said. “However, dollars are up more than unit numbers, due to substantial price increases we've had to endure over the past three months.
“Fortunately, we've seen the cost of butter flatten in recent days.”
United does have a private-label butter, and there has been some movement away from branded to the private-label product, Pinkston said.
Recent sales data from SymphonyIRI Group, Chicago, and the Nielsen Co., Schaumburg, Ill., indicate that higher prices may be tamping down category volume.
SymphonyIRI figures for U.S. FDMx, which excludes club stores and convenience stores, as well as Wal-Mart, show dollar sales of butter up 2.3% and unit sales down 6.3% for the 52 weeks ending Oct. 31. And, while dollar sales of private-label butter for that period are up 2.9%, unit sales are down 7.2%.
Meanwhile, Nielsen indicates that supermarkets with at least $2 million in annual sales, excluding supercenters, may be having an even more challenging time with the category. At these stores, data indicate that sales of butter have experienced declines in both volume and dollar sales during the 52 weeks ending Oct. 2.
Dollar sales, Nielsen indicates, are down 2.1% and unit sales are down 1.3%.
Researchers agree consumers are leaning more toward private-label butter, which industry sources say has improved exponentially in quality over the last few years.
Shoppers do not appear to be shifting their purchases to margarine or buttery spreads. Sales in that category have declined as well.
“Margarine sales dollars are flat and units are declining [year to date] across both PL and branded. Consumers are not switching to margarine,” Brous at Publix said. “That's indicated by decreasing unit volume. Typically when butter is priced higher, margarine units increase. That is not the case this year.”
Indeed, SymphonyIRI shows margarine and buttery spreads down 5% in units and 8.7% in dollar sales. And Mintel is projecting only modest growth in margarine/spreads from 2011 through 2015, as younger consumers tend to prefer butter over margarine.
“We've found that young people are more interested in butter,” Mintel's Browne said. “I think it's part of going back to basics. There's better taste and it's more natural.”
At Foodtown, Abbatemarco said margarine and buttery spreads are trending down. So there's no evidence there that customers are making a switch from butter to a substitute.
Abbatemarco explains the dip in butter unit sales this way: “I'd like to think people are just eating in moderation, butter included. You don't have to spread half a pound of butter on a piece of bread.”
Or maybe they're dipping their bread in olive oil.
“I see that in restaurants,” Abbatemarco said.
But SN found that SymphonyIRI figures show no growth in olive oil, either.
When it comes to no-growth unit sales of butter, retailers don't seem concerned, possibly because unpredictable, volatile commodity prices put wholesale pricing out of their control.
Britt Lindemann, dairy, frozen food and grocery lead organizer at 10-unit Kowalski's Markets, St. Paul, Minn., said he hadn't noticed significant ups or downs in butter sales over the year.
“I'm just glad the holidays are coming. That'll bring butter sales up. People bake and entertain at home.”