A good year for own label, but not functional

The butter and spreads category has reached a milestone this year as total sales topped £1bn for the first time.

Value sales have been helped by price increases across the market caused by the rocketing cost of dairy, oils, and other raw materials. The underlying picture has not been so rosy though, with volume sales down 1.1%. Branded goods have suffered as consumers switch to cheaper own-label products, which have risen 4.3% in volume. Own-label products have also outperformed the total category in value terms, with sales up 30.7% to £175.9m, albeit from a much smaller base than branded.

Total butter and spreads sales have risen 17% to £1.1bn, driven by spreadable products. However, functional offers continue to decline, notes Nick Slater, business manager at Nisa-Today's. "Spreadables tick all the boxes in terms of health, convenience and natural properties, while functional products are still confusing consumers with their various health messages."

A Sainsbury's spokeswoman agrees. "Consumers are looking for taste as well as health and favouring natural products rather than those with added benefits," she says.

Top Launch - Lurpak 50G (Arla Foods UK) 
Honey, they shrunk the butter! Arla is hoping small will be the next big thing in butter after repackaging its Lurpak in a dinky 50g format. The smaller pack size, which went into 500

Tesco stores last month, is believed to be a first in the block butter category, where the overwhelming majority of products are 250g. Lurpak said the newcomer would reinvigorate the category and draw in new customers. Including hobbits, perhaps.
The coming year could bring more bad news for functional health as the recession hits higher-price products, says Slater. "Overall value sales are likely to take a knock and will also be hit by the predicted drop in butter prices following the increases last year."

Lurpak continued its winning streak, further widening the gap between it and arch rival Flora. The Arla Foods brand, which knocked Flora off its pedestal as the top-selling butter and spreads brand last year, generated a 19.9% increase in sales to £228m, compared with Flora's £198m. Still, brand owner Unilever will be relieved it has managed to reverse Flora's downward trend, with sales up 8.9%.

Arla's success has not been restricted to Lurpak. Anchor also enjoyed strong growth, its value rising 15.3%, while Dairy Crest's Clover brand grew at a much slower rate, up 7.6% to £68.5m.

Otherwise, it was a good year for Dairy Crest, which owns five of the top 20 brands. The dairy giant splashed out on advertising, including a £4m marketing campaign for its Utterly Butterly brand, while Country Life also got significant support, with a new TV campaign featuring former Sex Pistols frontman John Lydon. Sales of the latter were up 33.6% to £58.1m, while Utterly Butterly sales increased 36.5% to £67.2m.

View The Grocer's definitive Top Products 2008 survey