An overabundance of cheese is providing a gateway for ingredient manufacturers to make the most of the protein-heavy snacks' popularity — not to mention a newfound penchant for fat.
"Consumers are counting ingredients, not calories, and see a product as more healthy if it is minimally processed than if it’s low in fat and calories," Emily Balsamo, research analyst at Euromonitor International, told Food Dive in an email.
Widely recognized as a value-added ingredient in many foods, manufacturers have a real opportunity to use cheese at advantageous prices to increase the appeal of food products, Dean Sommer, food technologist, Center for Dairy Research, University of Wisconsin, told Food Dive in an email.
Target healthy snack occasions
Americans are looking for protein-forward snacks. "For snack manufacturers, is there a way of using American cheese, and granted we have cheese crackers, and crunchy snacks, but certainly there is an opportunity to look at interesting flat breads or thin snacks that have a swirl of cheese or a cheese flavor," Kara Nielsen, independent food trendologist, told Food Dive.
"We know that while consumers are interested in healthier snack options, they still place emphasis on flavor, and that’s where cheese as an ingredient may present an opportunity," Amanda Topper, senior food analyst at Mintel, told Food Dive in an email. "Incorporating cheese-based flavors to existing snacks may be one way to achieve this." She said cheese boosts the nutritional profile of snacks due to their protein content.
"Snacking is big and cheese snacks capitalize on one of the biggest trends of recent years: protein," Balsamo said. "The trend atmosphere is kind to cheese because saturated fat is not currently seen as evil."
Balsamo pointed to products such as Oscar Mayer P3, which "features cheese as a healthy, high protein and natural ingredient." Along these lines are Borden’s Good2gether snack trays, Sargento’s Balanced Breaks, and Organic Valley’s snack sticks.
Portable snack-sized cheeses also introduce consumers to new cheese varieties, potentially impacting their future purchases, Topper said.
Another way to take advantage of the surplus in U.S. cheeses is to incorporate cheese-based flavors in existing snacks, such as cheese-flavored popcorn, "a segment that continues to perform well due to its perception as a healthier snack, as well as chips or crackers with alternative bases, including rice or nuts, for example," Topper said.
As the outdoor grilling season heats up, Nielsen said she sees more examples of cheese that will stand up to the heat of the grill. "What kind of coating could you put around a cheese and is this something you can grill itself and perhaps top with a barbecue sauce," she asked. "Or a kabob with a block of cheese that has a crispy coating on the outside that can be added to a skewer and not make a mess on the grill."
"Some companies I've worked with are investigating the use of non-melting cheeses such as the Finnish-style cheese, Juustoleipa, or the Latin American-style cheese, queso blanco, as a cheese that can be directly placed on a grill since they don't melt and flow," Sommer said. "It is also the beginning of salad season so there will be high demand for fresh mozzarella in the various shapes for use in salads."
Sizing the potential
According to the USDA, the total U.S. cheese inventory at the end of March was a record 1.19 billion pounds, up 8.4 million pounds or 1% from February; and up 11% from March 2015. Prices have started falling, with cheddar trading at a five-year low last week on the Chicago Mercantile Exchange, according Bloomberg. Half of the oversupply is American cheese, and Swiss cheese accounts for nearly 2%, with the remainder noted as "other."
The cheese glut ties into the global oversupply of milk, for example, the oversupply in the European Union’s dairy market. With the abundance of milk, cheese vats in the United States remain full.
In a 2015 study, Mintel predicted the cheese category will grow 19% from 2015-2020, reaching $27.7 billion, based on prices at the time.
Balsamo said processed cheese sales were down by more than 5% by volume in 2015, with the downward spiral expected to continue this year. "Consumers are wary of processing, and processed products are generally produced by 'Big Food,' which is no longer seen as trustworthy," she said. "Kraft Singles declined by 6% in value in 2015. American cheese saw a 5% drop compared to 2014."
On the other hand, colby/jack cheeses saw significant increases in volume, Balsamo said, as did mozzarella. The most popular cheese in America by volume, cheddar, saw modest increases in production in 2015.
What's next?
Sommer said frozen pizza manufacturers are no doubt looking to freeze some cheese now at reasonable prices and then use it later in the year when cheese prices typically rise due to the holiday season. Other manufacturers will increase their inventories in regard to cheeses that require long aging times, such as parmesan and aged cheddar.
Topper said Mintel sees considerable opportunity for natural cheeses, especially as consumption of processed cheeses is on the decline. Natural cheese sales grew 31% from 2010-2015, reaching $17.3 billion last year.
"There are also opportunities for private label, especially with organic and premium options that are priced competitively and do not compromise on quality," Topper said.
Look for price promotion to bring inventory levels back down … as well as margins for branded cheese; "we might see more private label actually," Caroline Roux, research manager of food and drink, Mintel, told Food Dive in an email.