cheese
October 19, 2018

Millennials Shun Processed Cheese for Natural Styles

 |  By: Fran Howard

Millennials—at 71 million strong—are changing the face of the dairy case, at least for cheese. And marketers appear to be paying attention, primarily due to this generation’s $200 billion in spending power.

“Millennials can be category killers for a reason,” says Sara Dorland, economist with the Daily Dairy Report. “Processed cheese seems to be one of those products that millennials view with disdain, and this year’s most recent consumption data and CME trading volumes seem to confirm that sentiment.”

 Most Americans are familiar with American processed cheese, slices and loafs known for their superior melting qualities. “American processed cheese is a decades-old product category, with a melt that gives comfort foods like cheeseburgers, macaroni and cheese, grilled cheese, and nachos that cheesy goodness that gen Xers and baby boomers alike grew up on,” Dorland notes. Millennials, however, have not gravitated to the product like previous generations due to a perception that processed cheese is not as healthy as natural cheeses.

“The list of ingredients on a processed cheese product is not for the faint of heart, with nearly 20 listings in a typical product, compared to Cheddar cheese slices with fewer than five ingredients,” says Dorland. A recent Bloomberg article noted that processed cheese no longer makes the cut for millennials, a generation of consumers seeking “nourishment from ingredients that are both recognizable and pronounceable.”  This trend has been driving growing demand for natural cheese varieties, resulting in a dwindling market for processed cheese, Dorland notes

According to USDA’s Economic Research Service’s annual report on per capita consumption of selected cheese varieties, Cheddar cheese consumption climbed 6.5% from 2016 levels to hit an all-time high last year of just over 11 lbs. The jump in Cheddar consumption helped boost total natural cheese consumption to 37.23 lbs. per person, another record high. “Today, people are eating three-times the natural cheese that people consumed in 1970,” Dorland says.

At the same time, consumption of processed cheese has been declining, according to the report. Per-capita consumption of processed cheese was just over 7 lbs. last year, compared to the 1996 high of 8.75 lbs. From 1970 to 2017, per capita consumption of processed cheese grew 30%. “Over the last 20 years, the compound annual growth rate of natural vs. processed cheese consumption diverged, with natural varieties increasing 1.54% and processed falling 0.75%,” Dorland says.

To determine the impact of this shift on consumer demand, Dorland looked at trade on the CME spot market over the past two years. Through September 2018, a total of 273 and 1,419 loads of blocks and barrels traded at the CME spot market, respectively. That compared to 455 loads of blocks and 1,329 of barrels for the comparable period in 2017. “This year’s barrel trade, which is basically the market of last resort for processed cheese, is two to four-times the volume traded during the same period between 2011 and 2016, suggesting that the consumption shift could be permanent,” she adds.

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