SPREADING OUT 2007

ROSEANNE HARPER

The dairy case may just be the latest area of the supermarket where shoppers are looking to satisfy opposite desires for health and indulgence.

With commodity butter flat or down, premium, high-fat butters have pushed into the spotlight in some areas, and so have some better-for-you butter substitutes.

According to retailers, this dichotomy mirrors what's happening in other categories. Consumers are more health-conscious than ever and want to “eat right,” but when they do choose to indulge, they're doing it with flair, they said.

“Consumers are certainly better educated and more aware than ever before about what they're eating,” said Mark Brigido, president and co-owner of Brigido's Fresh Markets, North Providence, R.I.

“They want to be able to buy hormone-free products and others they see as good for them, but they also look for premium quality when they decide to splurge. You see that in other categories also.”

Sales in the butter/spread category as a whole slumped 7% in the United States, including Wal-Mart, between 2001 and 2006, according to research released at the end of last year by Chicago-based Mintel, an international research group. And the Mintel report says total U.S. sales of butter, margarine and table spreads are forecast to decrease at an inflation-adjusted rate of 3.8% through 2011.

With that forecast in the background, it may be up to premium, healthy and value-added products in the category to save the day.

While retailers told SN their sales in the whole butter/margarine/other spreads category are pretty flat, there's been quite a lot of movement from SKU to SKU.

“I've noticed in the last couple of years people are shifting from quartered margarine to tubs, and also there's some shift from margarine to butter,” said Peter Augustyn, dairy/frozen food manager at three-unit Brigido's.

“I think the tubs are more convenient than opening quarter-pound packages. People just are looking for convenience.”

That may be borne out by Chicago-based Nielsen LabelTrends' figures that show supermarket dollar sales of whipped butter in tubs are up 7.7%, and volume sales up 16.9%, during the year ending May 19, 2007.

Augustyn sees price, too, as a factor in the within-category movement.

“Because of the economy, people are looking for whatever is on deal. Even brand loyalty, I think, has declined a little.”

He pointed out that in taste tests, he found many of his customers prefer Brigido's best-seller IGA brand over Land O'Lakes, but if Land O'Lakes is on sale, they'll buy it instead.

When SN talked to Augustyn earlier this month, regularly priced Land O'Lakes was retailing for $4.59 per pound, and the IGA brand for $3.49. Augustyn said sales of butter and butter substitutes as a whole are not moving up or down.

“Butter and margarine as a combined category has been constant for us over the last few years. There are just shifts within the category.”

Augustyn said that when the company's flagship store was remodeled and expanded 1½ years ago, he gained 24 feet of dairy case, but the amount of space devoted to butter, margarine and other butter substitutes has remained just about the same at 8 feet. By contrast, space for yogurt was doubled from 8 feet to 16 feet.

Though he devotes more space in the 8-foot butter/spreads section to butter substitutes than to butter because of the large variety, sales are split about 50-50 between butter and substitute spreads in any given week.

“We just restock the commodity butter section more often.”

COMMODITY VS. PREMIUM

When it comes to the spreads, I Can't Believe It's Not Butter is the top seller at Brigido's. Then, Smart Balance. Shedd's Country Crock comes in third.

Premium, high-fat butters such as imported Plugra, Lurpak and some regional brands are not on customers' radar in Brigido's market area, where middle-class demographics dominate.

It's a different story at Kowalski's Markets.

“We do really well with premium butters, and we attribute that to our clientele,” said Britt Lindemann, dairy, frozen food and grocery lead organizer at the St. Paul, Minn.-based independent.

Most of the eight-unit chain's stores are situated in significantly upscale neighborhoods.

“There's a segment of our customers who do a lot of cooking,” Lindemann said. “You might say they're semi-gourmet chefs. We even have some local restaurant chefs who shop here.”

Those customers buy the premium brands for the flavor, but that's not to say they're not paying attention to other factors as well. In fact, two popular brands are from local creameries that get their milk only from grass-fed cows.

“The naturals and the European premiums are rising dramatically for us. They're making up about 10% of our butter sales. Commodity butter is flat.”

Kowalski's carries five European premium butters and has had big success with all of them, ever since it started carrying its first — Lurpak — about six years ago.

Butter substitute spreads do so-so at Kowalski's, Lindemann said.

“Smart Balance does quite well for us. It beats the others in that category, but after it and I Can't Believe It's Not Butter, sales trail off. In fact, we're considering scaling back on the size of the set for those [butter substitute spreads].”

Other retailers told SN that of all the butter substitute spreads, Smart Balance garners the most sales, possibly because the brand is aggressively marketed in their areas, with a lot of different advertising venues.

SPECIALTY MERCHANDISING

Premium butters rack up very impressive sales at Price Chopper Supermarkets, Schenectady, N.Y., but officials attribute much of their success to where in the store the products are merchandised: in the specialty cheese department.

“At first, management didn't want butter in our specialty cheese departments, but they did become convinced,” said Michel Bray, specialty cheese manager at the chain, which has 115 units.

“The premium butters got lost in dairy, and if customers did find them, they'd compare the price to commodity butter and that wasn't good,” Bray added. “It's an entirely different customer for the premiums than for commodity butter.”

Carrying several SKUs of imported butter and also premiums from Vermont Butter & Cheese Co., the chain's specialty cheese departments have seen big sales of them.

“We've seen no less than a triple-digit increase from three years ago. Kerrygold [from Ireland] dominates the premium category with our customers, but they all do well. Kerrygold, whipped, in an 8-ounce tub is hugely successful.”

Just in the last year, premium butter sales in Bray's departments are up 40% to 60%, he said.

“They're still gaining in popularity, and I know it will continue. Right now Kerrygold and Plugra are doing the best. People tell me Plugra is great for baking, and we always do have a spike in sales of it in November and December [when customers are doing holiday baking].”

Bray said he's looking for more varieties.

“We have some interesting flavors. Vermont Butter & Cheese is coming out with a sea salt butter, and we're just about to get our first organic butter. It'll be our first organic, and we expect it to do well.”

He wants to take advantage of the growth in the organic arena, and what's probably coming in the all-natural segment, he said.

According to Nielsen LabelTrends, a Nielsen Co. product that looks at trends based on manufacturer labeling practices, U.S. supermarkets sold 4.7 million pounds of organic butter during the year ending May 19, 2007. That's up 21.8% vs. the same period a year ago. Dollar sales were just as favorable. In fact, organic butter exceeded $23.3 million, up 20.4%. Organic margarine and spreads also are gaining popularity in the U.S. supermarket channel, the Nielsen statistics show. Nearly 1.2 million pounds were sold, up 129.1%. In dollars, it came to $4.4 million, up 122.9%.

By contrast, products with a “natural” claim on their packages didn't fare as well last year. Natural butter and natural margarine/spreads slid 9.4% and 10.4%, respectively.

PRICEY PROPOSITION

While sales of organic butter are climbing, the price can be daunting. The brand Bray is bringing in is in 6-ounce blocks, small so that the unit price won't be so high. Even in his high-end specialty cheese department, price can be hampering. Indeed, Bray wanted to add what he said was a delicious Parmigiano Reggiano-flavored butter, but decided customers wouldn't hurdle the retail.

“It would have to be $5 to $6 for eight to 10 ounces.”

At Brigido's Fresh Markets, Augustyn had tried an organic butter last year, but discontinued it. It didn't turn fast enough at what he had to retail it for: $5.59 a pound.

The growth of organics and all-natural butters can be attributed, certainly in part, to consumers' awareness and health-consciousness, which have been revved up by the consumer media. And the continuing success of premium butters is driven a lot by television cooking shows, Bray and other retailers theorize.

“Sometimes, a [premium] butter is called out explicitly on a cooking show,” Bray said.

Mark Brigido gave credit to TV's Food Channel and other cooking shows for educating customers and boosting supermarket sales all around.

“Those shows have absolutely been a tremendous asset to our whole industry.”