Dive Brief:
- A combination of lower-cost dairy products from Europe and a milk surplus in the U.S. have created a national cheese oversupply. Cheese inventories at the end of March reaching their highest levels since 1984, according to USDA data.
- More than half of the supply is American cheese, about 2% is Swiss, and the rest is classified as "other." The U.S. has faced challenges importing this supply due to the strength of the dollar, while Europe has gained the business the U.S. has lost. Exports of butter and cheese from the U.S. are still up 35% and 9%, respectively.
- Prices for raw milk and cheese have plunged in both the E.U. and the U.S., including cheddar falling to a five-year low on the Chicago Mercantile Exchange this week.
Dive Insight:c
Manufacturers are reporting difficulty moving cheese as the supply continues to build. Cheese production plants are soldiering on to keep up with the excess supply of milk, but the cheese isn't moving as fast as it's being produced.
As a result, cheese prices are falling. If cheese is inexpensive enough, more manufacturers may create new varieties of products that contain cheese to capitalize on the added flavors and protein the dairy product provides.
Cheese manufacturers will need to get more creative in how they develop and present innovations to consumers to push this excess cheese. Cheese can easily be positioned as a healthy snack with the right serving size and shape, packaging, and marketing. Better-for-you cheese snacks could capitalize on consumers' demand for convenience and healthy snacks while also turning a profit on the excess cheese supply while prices are still tanking.
Startups may see an opportunity to create marketable products out of inexpensive ingredients, and more cheese-based product startups could pop up and generate interest from investors and major manufacturers. General Mills' 301 Inc. recently invested in startup cottage cheese producer Good Culture's latest $2.1 million funding round, so the interest is there.