2023 annual cheese report: Consumers are whey-ing their options

Cheese hasn’t been one of grocery’s biggest attention-getters in the past 18 months—and for cheesemakers and deli managers alike, that’s a good thing. While soaring prices for staples like eggs, breakfast cereals and chicken kept those items in a harsh spotlight through much of 2022, dairy cheese’s high-but-hey-it’s-relative price surge of 11.1% from January 2022 to January 2023 received a lot less attention—and a lot more of a shrug from consumers.

For the 12 months ended in January, “Price increases in deli cheese remained below average,” market analysts IRI and 210 Analytics noted in their January grocery sales report, sponsored by IDDBA. That resulted in “subdued dollar gains, but also relatively mild unit decreases compared to some of the other categories around the store,” they continued.

To wit: Unit sales for deli cheeses were down 5.4% in the 12-month period, IRI found, while deli-department meat units were down 10.7%; center-store unit sales declined 6.6%; and frozen-food units fell 8.4%.

Shoppers in January continued to point to eggs, milk, beef/pork, fresh produce, poultry and bread as inflation leaders, according to IRI, even though prices cooled in categories like eggs and beef.

“It is still quite a brutal environment,” Anne-Marie Roerink, president of 210 Analytics, said in an interview. “If we compare base prices to those of February 2020, we’re sitting between 25% and 30% higher—and I sincerely doubt that many consumers are making 25% to 30% more” than they were then, she continued. Indeed, 96% of those surveyed by IRI in January said they were concerned about the high cost of groceries.

And yet: Consumers keen on keeping their overall food spending in check—in part by making meals at home vs. dining out—aren’t looking to be monastic about what they buy, either. There’s a need to balance frugality with fun, value with variety.

Enter cheese.

Cheese, already on a roll as a staple of trending high-protein, low-carb packaged snacks before the pandemic began, saw its star rise further during the pandemic as consumers decided to try buying at retail more of the flavors and specialty products they had begun exploring at restaurants before lockdowns began.

Lunching at the home office rather than at a fast-casual spot meant reason to splurge on something other than your standard sliced Cheddar for a sandwich. Fondue at a restaurant didn’t hold a lot of appeal at the height of the pandemic, but queso or melted Gruyere at home in a shiny new pandemic-purchase pot? Thumbs up. And though it may be hard to remember now, there was a pre-pandemic time when charcuterie boards were still a novelty, at least at home. (Cheese snack kits, in fact, were one of a handful of items to buck the trend of unit declines in 2022, posting year-over-year unit growth of 3.6%.)

Consumers’ exploration of new-to-them cheeses—especially specialty cheeses—in the past three years bodes well for continued growth of the category and continued strong sales in the deli department, suggests Roerink.

“We continue to see an opportunity in the marketplace for a little bit of premiumization,” she said. “It’s really that idea of wanting to do something nice for yourself or your family.” Meanwhile, Roerink noted, price-sensitive shoppers who are carefully watching their spending on meat are turning to cheese (atop a pasta dish, for example) as a flavorful but less costly way to add more protein to a meal.

Retailers that seize on shoppers’ appetite for new options in dairy cheese offerings will be best poised not just to grow sales within the deli department or in the dairy aisle but also to emerge as a top destination for consumers who don’t want to travel to several different stores each week in search of that elusive balance of grocery value and variety.

Specialty cheeses have done “tremendously well” relative to pre-pandemic, Roerink said—and, she added, “the beauty about variety and getting people to try new things is that regardless of the category … the more varieties people buy, the more they tend to be engaged with the category.”

Retired cheesemaker Gregg Palubicki has witnessed the phenomenon firsthand. Palubicki, a second-generation cheesemaker outside Green Bay, recalls the days when his Black Creek, Wisconsin, plant produced only Cheddar and “maybe a little Colby.” By the end of his 44-year career with Alto Dairy Cooperative (acquired by Canadian cheese giant Saputo in 2008), “they were making 35 cheeses at that one plant,” he said.

Part of that comes from changing consumer tastes—more shoppers today are seeking out cheeses flavored with chiles, fruit, herbs or honey/hot honey, for example—and part of it comes from who’s doing the cheesemaking, according to Palubicki. Some years back, Palubicki had concerns about the future of the U.S. cheesemaking industry—most folks he saw in dairy plants and at cheesemaking competitions were approaching retirement, as he was. But in the last decade, he has seen surging interest from a new generation of cheesemakers passionate about producing small-batch, high-quality artisanal and specialty cheeses.

“A lot of the smaller specialty cheese plants are taking a majority of the awards now” at events like the United States National Cheese Championship Contest, a biennial competition that took place in Green Bay in February, Palubicki said. The 2023 National Cheese Champion, in fact, was an aged Gouda made by Bantam, Connecticut-based Arethusa Farm Dairy, which maintains a herd of only 300 cows (vs. the 10,000-20,000 maintained by some mass producers).

Arethusa’s “Europa” Gouda beat out more than 2,200 other entries from nearly 200 dairy companies and cooperatives to take the top title; first runner-up was a hard raw-milk cheese made by Door Artisan Cheese Company of Egg Harbor, Wisconsin. Among those taking best-in-class honors in the more than a dozen flavored-cheese subcategories were bold offerings such as a peppercorn feta and a dill Havarti from Monroe, Wisconsin-based Klondike Cheese Company; a chocolate mascarpone from Waterloo, Wisconsin-based Crave Brothers Farmstead Cheese, third-generation cheesemakers touting their sustainability practices and use of a “methane digester” to power their farm and factory, was named best in class in the flavored soft cheeses subcategory.

“The biggest thing about making good cheese is you’ve gotta have good milk,” he said, and today’s up-and-coming cheesemakers are highly attuned to balancing quantity and quality, keeping herd sizes in check so they can keep cows pasture-fed, which many small producers believe results in the highest-quality milk.

“I think the industry’s in good hands,” said Palubicki, who added that he’s personally interested in cheesemakers’ fresh exploration of longtime favorites such as Swiss and blue cheese varieties.

For Roerink, innovation in the category combined with an increasingly knowledgeable and curious cheese consumer means great opportunity for retailers.

“The opportunity with cheese still lies in, obviously, there are hundreds and hundreds of specialty cheeses,” she said. “Introducing people to innovation, whether (an item) is new to them or new to the store, is crucially important to engage those consumers in the category.” Highlighting a “cheese of the month” in store and online (through the retailer’s website/app as well as social media) and offering samples for shoppers to try at the deli counter can be a meaningful way to engage shoppers and spur sales, noted Roerink. Consumers especially may be interested in trying cheeses that feature flavors trending elsewhere in the store, such as those from the Mediterranean or Korea.

In addition, giving consumers the variety they crave not only in flavors but also in pack sizes and types can be powerful, she suggested. Grab-and-go offerings shouldn’t be limited to one size/weight (1 pound, for example), because households don’t come in one size. Also, “think about mix-and-match: maybe have two different types of cheeses” in a single grab-and-go pack for those who don’t want to wait in line at the deli counter, Roerink said.

“Cheese is a wonderful, experiential category,” she said, “and taking advantage of that can really bring some new feet and some new exploration.”