We dusted off the jukebox to play the songs that best represent dairy foods and beverages. Our annual State of the Dairy Industry report examines the prospects for all dairy categories. For the cheese category, we’re playing “Let The Good Times Roll,” as sales trends remain strong.

Bold flavors, nutrition labels and snacking occasions are among the watchwords in the cheese industry as 2014 blends into 2015. Cheesemakers are adding spicy peppers, herbs and fruits to their offerings in order to attract younger consumers to the category. Snack-size packages offer convenience for households. And in an effort to be more transparent, cheesemakers are using nutrition labels and on-pack messages to communicate how they are natural, artisan, high-protein or GMO-free.

The International Dairy-Deli-Bakery Association, Madison, Wis., sees an interest in robust flavors and clean labels, said Jeremy Johnson, director of education. “In some cases, the cheeses are aged longer, some use additional processes like smoking, and others feature additional ingredients like new varieties or rubs — such as spice mixes to emulate chai tea,” he said. In addition, “Customers are interested in where their cheese is from — ‘farmstead’ and ‘local’ are hot button terms.”

Consumers are increasingly interested in flavored cheese, natural cheese, aging and convenience, said Marty Pullin, senior vice president of channel management at the Wisconsin Milk Marketing Board, Madison. “Consumers seek bold flavors,” he said, with the most popular including jalapeño, herbed, smoked, garlic and basil. And natural cheese sales have grown 0.7% per year from 2009-13, while processed cheese sales declined 3.8%, Pullin noted.

“Consumers are becoming more conscious of nutrition labels and are basing their purchasing decisions more and more on health benefits,” in particular protein content, he said.

And “convenience also remains a top concern for consumers. Cheese slices, shreds, spreads and snack sticks make up a large share of ‘convenient’ products launched over the past year.”

Dairy giant Kraft Foods, Northfield, Ill., also sees spicy and bold flavors as well as Hispanic flavors continuing to germinate in the dairy and deli aisle, said Matt Wohl, senior vice president, marketing, cheese and dairy. Cheese consumers, in particular the younger generation known as Millennials, want foods that are authentic, have fewer ingredients but a greater variety of flavors, he said.

In response, Wohl said Kraft has “renovated” its Singles brand to cut out artificial preservatives, while launching a hot habanero cheese slice extension, and Havarti and Asiago flavors of Cracker Barrel block cheese, Mexican-style Velveeta shreds and jalapeño-flavored Velveeta cheese sauce.

Spicy peppers like black pepper, habaneros and chipotle will continue to grow in popularity, as will Hispanic cheeses like cotija, queso fresco and panela, said Laurel Miller, cheese category manager for Tillamook, Tillamook, Ore.

“Consumers are becoming more and more adventurous and, at the same time, being exposed to broader influences. This is driving the mass appeal of flavors like sriracha or wasabi that were previously considered niche,” she said. “Also, interest in bold flavors is reinvigorating classic cheese flavors like sharp and extra sharp Cheddars.”

Tillamook will be launching a new sliced provolone variety in 2015 that will be smoked with hickory wood for six hours, “to create a delicious, natural product because we believe it delivers a better flavor,” Miller said. The company also plans to take a hard look at snacking cheese, delivered in smaller quantities while still providing high protein and bold flavors.

Bold flavors, sweet-savory mixes and blended spices are the flavors and ingredients that Sartori, Plymouth, Wis., is looking toward. The company also sees consumers wanting to incorporate cheese throughout their day, provided they have a comfort level that their cheese is more natural than processed, said Susan Merckx, marketing director. The company has introduced espresso, chai and Merlot BellaVitano cheese items in the past year, as well as a 36-month-aged Parmesan and 18-month-aged BellaVitano originally set aside for family, to thank consumers during its 75th anniversary.

“Consumers are starting to look at cheese with more intrigue,” Merckx said. “They want cheese as a snack, then to be used in their dinner dishes, and also to be the hit at their entertainment parties.” Consumers are familiar with terms like “gluten-free” or “all-natural” or “simple,” she added, “but they don’t necessarily know what all the terms mean or how they affect what they purchase. We’re working each day to educate consumers on these topics.”

Bold and all-natural

Sargento, Plymouth, Wis., believes consumers enjoy variety, bold flavors and the basic ingredients of all-natural cheese as well as the natural sources of calcium and protein that it provides, said Barbara Gannon, vice president of corporate communications and government affairs.

The company features sharp Cheddars and creamy pepper Jack spiced with peppers like jalapeño and habanero, as well as the new Sargento Tastings line of 3- to 4-ounce chunks available in eight varieties.

Klondike Cheese Co., Monroe, Wis., focuses primarily on its Odyssey feta brand, which has continued to grow at retail and picked up more business in foodservice as well, with the plain, crumbled variety the most popular. The company introduced blueberry and cranberry flavored feta this past year, the first fruit-flavored varieties it has ever created, said Luke Buholzer, vice president of sales.

“The biggest trend in feta is that it is still a growing category, unlike some of the other, mature cheese categories,” he said. “We haven’t had to get too creative other than different pack sizes.” The company introduced an 8-ounce retail package of feta in brine this past year, Buholzer added.

Nuestro Queso, Rosemont, Ill., specializes in the Hispanic cheese segment, which has seen growth rates of more than 7% annually in recent years even as the cheese category overall has come closer to 2%, said CEO Mark Braun.

“The flip side of that is … everybody looks at the same demographics, and everybody’s fighting for that [market],” he said. “That becomes very tricky.”

Braun sees a big push toward mainstreaming Mexican-style cheeses into the Anglo market, which his company would like to tap into while hewing to its emphasis on authentic, natural processing.

“If you’re a natural cheese producer, like we are, that’s a challenge because you don’t have pricing flexibility,” he said. “You have firms going after that business with substitutes, but they have strong brand power and large marketing budgets that they use to gain market share.”

On the health front, the Wisconsin Milk Marketing Board has seen less concern about sodium in cheese, with few new cheese products sporting the “low-sodium” claim and retail volume sales of low-sodium cheese down 21.2% in multi-outlets plus convenience stores during the year ended Aug. 10, according to Chicago-based IRI, Pullin said. But according to NPD Group, Rosemont, Ill., awareness of GMOs is rising, with 55% of adults expressing concerns.

Kraft has reduced the sodium content per slice in its Singles by approximately 20% over the past two years, and, as noted, the company stopped using artificial preservatives in its cheeses, Wohl said. Sargento also offers some reduced-sodium options and does not use artificial preservatives or GMOs, Gannon said.

Potential for growth

The greatest growth potential in the cheese category could come from highlighting the nutritional benefits, in particular the protein content, said the IDDBA’s Johnson, noting that Chicago-based Mintel has reported 55% of consumers agree that cheese is an inexpensive source of protein.

In addition, he said, “Millennials are interested in trying new cheese, but they are generally looking for smaller portions. So a well-curated section of new flavors in smaller portions may help with that audience.”

Pullin of the Wisconsin Milk Marketing Board agrees Millennials are looking for exciting new flavors, and baby boomers in particular want the protein and calcium that cheese provides. He also suggested that cheesemakers provide information about who crafts their cheese, pair cheese with both healthy and indulgent foods and beverages, offer smaller packages for smaller households, and leverage “the brave new world of social media” to send messages and cultivate new consumers.

The “snack space” and bold flavors are where Miller of Tillamook sees growth potential. Buholzer of Klondike also sees growth opportunities in a greater variety of specialty cheeses. “We’re seeing more and more consumers stepping outside the box of, ‘the only cheese I eat is mild Cheddar,’” he said. “They’re exploring more specialty cheeses, and the industry is producing high-quality specialty cheese.”

Braun of Nuestro Queso sees potential for growth in demographic shifts, packaging innovation and new channels such as home delivery of groceries, “especially in markets that are densely populated and expensive to get around” like New York City. Merckx of Sartori agreed that online shopping holds promise of growth in the category, as do innovations in packaging and point-of-sale material.

Customer and government requirements

While some retailers have moved away from pegboard displays for cheese, the IDDBA doesn’t see them going away anytime soon, Johnson said. “We have seen a few companies offer sliced cheese in rigid trays that are easier to merchandise on shelves or in baskets,” he said. “We’re also seeing deli cups for some grated and shredded cheeses.”

Tillamook redesigned its shredded cheese line into stand-up pouches with consumers and their refrigerators in mind, Miller said.

“We heard our consumers say that when they used shreds they had problems with messy spills, and [the packages] were difficult to store in a neat and accessible way. Beyond the consumer benefit, this item will work well with retailers’ initiatives to reduce pegged shelf space,” she said.

Kraft has not seen a strong request from retailers to move from pegs to shelves for its shredded cheeses, Wohl said. Neither has Sargento, according to Gannon.

“As the company that introduced peg bars to the dairy case, we are partial to their continued use but work with our retail customers to meet their requirements,” she said.

Industrial customers who use cheese as an ingredient in their end products have their own sets of requirements, particularly when it comes to ingredients. Klondike gets “pretty varied” requests that often depend upon what the end-customer wants, Buholzer said. “Some end-customers care more about functionality than clean label,” he said. “At the other end of the spectrum, end-users will have a whole laundry list of ‘banned’ items that you can’t use.”

Potential new requirements under the FDA’s nutrition labeling proposals will not affect Sargento in any significant way, Gannon said. “The updates that are being proposed do not significantly affect cheese, with the possible exception of a definition for ‘natural’ that FDA may adopt in the future.”

In reaction to the proposals, Sartori is working to educate consumers on what it means to be gluten-free, Merckx said. “It’s important for us to be honest with our customers and let them know exactly what our products are made of,” she said.

Buholzer sees GMO labeling as a potentially contentious issue and said Klondike is “waiting to see how it shakes out.”

Kraft has publicly commented on the FDA proposal, saying that while the company supports many of the proposed changes, it has concerns about several issues, including the establishment of daily value for calories, new regulatory policies related to sodium, changes to trans-fat labeling, and a mandatory declaration of added sugars as distinct from sugars in general.

“We recognize that consumers are interested in nutrition information about our food products that will enable them to make healthy dietary choices and for that reason we support the rationale to update the Nutrition Facts label to reflect current science,” the company said. “However, we do have some concerns about several aspects of the proposed rule that we believe lack strong scientific rationale, may result in unintended consequences or may confuse consumers unless accompanied by robust consumer education and outreach.”

Whatever the government requires, Miller said consumers are paying more attention. “The natural cheese category is growing because consumers are increasingly reading labels and looking for all-natural ingredients and no additives,” she said.

 How cheesemakers navigate the overlapping and sometimes clashing demands of the government, retailers and consumers will go a long way toward determining their continued success as the calendar turns to 2015. If consumption and sales trends stay strong, cheesemakers will continue to hit “replay” on the song “Let The Good Times Roll.”  

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Read our review of the Cultured category