Country of origin of butter and cheddar sold in Scottish and British retailers: analysis

3. Conclusions and recommendations

3.1 Key findings - butter

• the butter market in Scotland and the rest of GB is made up predominately by brands
• this is due to the nature of the shopper, the successful marketing of branded butter, regular promotion and successful innovation in growing categories such as spreadable butters
• Scottish processors have been slow to innovate and market. Whilst now demonstrating growth, they have not achieved the penetration of leading brands such as Lurpak and Anchor
• over two-thirds of branded butter sold in Scotland is Lurpak Scottish branded butter is struggling to grow outwith Scotland (less than 1% of sales) and is not keeping at the pace with British and European rivals, primarily due to a lack of significant marketing investment both in Scotland and in the rest of GB
• retailers currently support Scottish processors well in terms of the stocking of Scottish origin private label block butter. The exception is Morrisons whose sourcing is poor and lags significantly behind the market
• whilst block butter is an important sector to the category, the fastest growing sector in the butter market is spreadable butter. Most of these are sourced from Ireland
• current labelling of Scottish butter is good across retailers and brands. However, many though do not commit on labels to using Scottish milk, only declaring GB milk as the source, even though it is likely to be Scottish

3.2 Key findings - cheddar

• the retail cheddar market is more important to Scottish processors, worth more than twice the value of butter
• retailers stock a good amount Scottish cheddars both branded and private label across GB
• the market is more commodity driven than butter, with private label having a stronger hold and promotions often dictating shopper choice
• the dominant brands in the retailers are primarily Scottish and British origin rather than European
• unlike with butter, there are significant sales of Scottish brands south of the border
• however, it is unclear if GB-wide sales of Scottish butter are driven by a perception of "Scottishness" by shoppers. Further consumer research would be necessary to clarify this
• clarity of labelling of private label and branded products is mixed; the majority of private label products fail to fully declare that the product is made in Scotland using Scottish milk
• Scottish branded products are predominantly clear about both cheddar origin and packaging origin, even if not within Scotland
• there are some Scottish cheddars that should have clearer information on origin of cheddar so that shoppers are in no doubt of what they are purchasing
• packaging and added value processing appears to be a gap for Scottish processors, some Scottish brands expressly declare that its product is made in Scotland but packed in the UK. This would suggest that there is limited packaging, grating and slicing facilities for cheddar in Scotland meaning that products have to travel south of the border for finishing

3.3 Overall conclusions and recommendations

• Scotland has a strong dairy processing base that is being supported in most parts by the retailers through varied stocking and sourcing of products
• Scottish processors struggle to create strong brands that can compete with the large multinational processors. Scottish consumers have a higher propensity to purchase brands, but to date have supported non-Scottish butter products
• Scotland performs well in cheddar, but the market is large and there is room for greater penetration. However, to do this they need to innovate to grow the cheddar category rather than cannibalise what is currently on offer
• this is true for the butter market; Scottish brands have been creating 'me-too' products to mimic the market leaders. This is unlikely to have success out with Scotland as has been demonstrated by the woeful presence of Scottish branded butter in the rest of GB
• this work has focused on two of the largest dairy categories (butter and cheddar). To understand the retail dairy sector in more detail it would be beneficial to understand the other large categories, particularly yogurt, ice-cream and liquid milk
• this report provides an overview of the GB and Scotland retail market. It is therefore a comprehensive but not full picture of the added-value dairy market. To provide a full view of the sector it would be beneficial to carry out similar work for the foodservice sector. However, complexity of the market and lack of data still makes this unachievable in a credible form
• for the overall sector to grow it will be important to consider the current processing landscape in Scotland, to fully understand capacity and supply. This should consider what gaps may exist and what is holding back processors in producing innovative, NPD that could grow the Scottish market
• labelling across products from retailers is generally good, but lacking in consistency. Clearer labelling from some would be beneficial for the industry and consumers
• both the cheddar and butter sectors have large potential going forward, both in terms of private label and branded goods
• there may be potential for an added value cheese processing facility in Scotland
• it will be important for Scottish companies to have commercial, marketing and operational support to compete with large multinational processors both in GB and across Europe
• this work has provided new insight into two key dairy categories. This allows a more focused discussion with processors and retailers based on facts not perception
• there will be merit in extending this type of analysis to other product categories beyond dairy, to identify opportunities and establish barriers to growth