As discussed in Dairy Australia’s March Situation and Outlook report, the good news for consumers is in the fast-moving consumer goods (FMCG) world, the rate of price rise is slowing.
Inflationary pressures along the supply chain have been passed along to consumers, but at the risk of impacting sales.
In response, Australians have been buying less, and in some instances excluding products from the trolley altogether*.
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With volumes sold of most foods having decreased during this time, the key foundation for value growth has been increased retail prices.
These are prominent trends seen over the entire retail sector, which have impacted the performance of categories with relatively high price growth, including the key dairy groups†.
As retail prices move towards a peak, the challenge will be for product categories to maintain value growth, as consumer choices continue to limit volumes sold.
Dairy shelf prices have steadied but volume sold of dairy spreads, cheese and yoghurt are now rising.
Australian households are gravitating towards these products more frequently, likely fuelled by the cost-saving tactic to consume more in-home.
Sales of butter have increased one per cent in volume terms over the 12 months to January 28 and rising sales of everyday-style cheeses such as the block and shredded varieties have boosted the overall cheese category.
Yoghurt has continued to perform well, led by a significant jump in plain Greek yoghurt volumes†.
The increased volumes sold of these dairy products will help maintain value growth within each respective category.
The milk category remains the exception; while the total volume sold of fresh and long-life milks respectively, remain lower, total value growth has dropped†.
The vast majority of Australian households continue to purchase milk, however the ‘right-sizing’ approach by many consumers has weighed on volumes sold.
The avoidance of food waste is a much larger focus for many Australians, especially as a means to save costs.
Homescan panel retail data shows buyers have been moving away from 2-litre varieties, towards 1-litre and 3-litre pack sizes.
So much so, that 3-litre varieties now hold the larger share of fresh milk sales (46.6 per cent of fresh milk sold), with sales growing 3.8 per cent in the 12 months to January 28†.
The different milk varieties have also been contending with the plant-based beverages (PBB).
After initially underperforming, the shock factor of inflation appears to have worn off for many PBB consumers and the price gap between the milks and PBB has tightened.
While some buyers have been moving between fresh and long-life milks, some have also swapped for PBB.
In the 12 months to January 28, the volume sold of PBB has increased 6.4 per cent, however this has been largely driven by increased quantities purchased by existing customers, especially by ‘young transitionals’ (households under the age of 35, with no children) or small-scale families.
These demographics (especially the former) have been economically pressured, increasing their purchasing of products on promotion and their in-home consumption†.
With the cost of living and interest rates both likely to remain high for the majority of this year, many of the cost saving tactics adopted by consumers will stick.
Despite these changes, dairy is faring well, and the Australian domestic market continues to perform strongly for its supply chain.
Total volumes sold of dairy across the four key categories (with the exception of yoghurt) remain below pre-inflation levels, but volume growth in some of these groups will help maintain solid value performance, especially against the backdrop of steady sticker prices.
Eliza Redfern is the Dairy Australia analysis and insights manager.
Footnotes:
* NIQ Australian Consumer Outlook, November 2023.
† NielsenIQ Homescan based on a continuous panel of 10,000 households; excludes non-private dwellings and businesses, non-permanently occupied households and out-of-home/impulse purchasing. Dairy Australia calculation based in part on data reported by NielsenIQ through its Homescan Service for the dairy category for the 52-week period ending January 28, 2024, for the total Australia market, according to the NielsenIQ standard product hierarchy. Copyright: Nielsen Consumer LLC
