- Land O’Lakes' net earnings rose during the third quarter of 2020 due largely to a surge in retail butter sales, the company said in a statement.
- Butter sales were so strong they offset declines in foodservice and commodity market volatility. CEO Beth Ford told Bloomberg she expects sales of this product to increase more than 20% in 2020 compared to a normal year.
- The favorable report for the dairy offering is a bit of good news for an industry that has faced challenges from plant-based alternatives and the dumping of millions of gallons of milk this spring as stay at home orders curtailed demand.
When Food Dive interviewed Land O’Lakes' then chief operating officer Beth Ford in 2017, she predicted butter would experience tremendous growth with its simple ingredient list and clean label association. The pandemic has only served to accelerate that demand.
Butter is an integral ingredient in many baking recipes, making it a prime candidate for consumers who are baking and eating more frequently at home. From cakes and cookies to rolls and crust, butter is an indispensable component of the home baker's pantry. The pandemic has expanded the number of home bakers to include not only those who like to work in the kitchen but individuals who have avoided it in the past.
Ford told Bloomberg retail demand for the product prevented Land O’Lakes from storing butter produced during peak milk production for the holiday baking season. This astonishing demand during the summer — which is typically the slowest baking season — is unlikely to slow down for the holidays. Manufacturers told Food Dive that from about mid-November until the end of the year, business tends to boom for baking ingredients.
Although a dairy product, butter’s sales track record has not been as dismal as some segments in dairy such as milk. The ingredient has benefited from clean-label trends as well as fad diets like keto, which require high fat intake. Butter also has gained ground as shoppers avoid processed alternatives like margarine.
Despite plant-based competitors, traditional butter remains a staple in U.S. kitchens. North American retail sales of butter posted a 7% compound annual growth rate from 2012 to 2017, according to Euromonitor research cited by Bloomberg. An IRI report ranked butter and butter blends as No. 4 on a list of its top-growing categories.
The ingredient also isn't marketed as a better-for-you product and therefore does not have the price premiumization that goes along with that positioning. At a time when millions of jobs have been lost or incomes sharply curtailed, a moderately priced ingredient that is versatile in the kitchen is likely to be a welcomed addition to shopping baskets.
The familiarity of butter also helps spur demand. The pandemic has driven a resurgence in the popularity of iconic brands and trusted products. Land O’Lakes has been around since 1921 and is a familiar sight on grocery shelves where it is known for its golden sticks of butter and other dairy offerings.
Land O’Lakes knows butter remains a large category, and although the company produces a variety of products, it is continuing to innovate to cater to modern consumers. In 2017, the Minnesota-based food brand launched its Dairy Accelerator incubator to invest in dairy product startups struggling to reach scale.
While butter companies are not eligible for the program, it is clear Land O’Lakes is searching for disruptive ideas that it could then integrate into its own dairy portfolio. As it waits for these investments to pay off, Land O’Lakes can take comfort in the fact that an old favorite in butter remains in high demand with consumers.