Monday, March 3, 2008

Artisanal Foods Memo: Hail to the Cheese: America is Experiencing a Revolution in Artisanal and Farmstead Cheese Production, Sales and Consumption

The cheese department in the new, recently-opened Whole Foods Market in Napa, California (above) features at least a couple thousand varieties of artisanal cheeses produced in America and abroad.

As little as five or six year's ago, if you went to the cheese case in an American supermarket--including in many upscale stores--you would most likely find dozens of facings of processed Cheddar, Swiss, Monterey Jack, Mozzarella, Munster and a few other varieties of cheese, in various configurations, flavors and sizes. But you would find only a handful of varieties of non-processed, high-quality specialty or artisanal cheeses in that same store's cheese case. And, of those varieties of premium specialty cheese in the store, nearly all of them would be imported from France, Italy or elsewhere in Europe.

Artisanal and gourmet cheese was such a foreign concept in many U.S. cities not all that long ago for example, that the late Pulitzer Prize winning, long-time newspaper columnist for the San Francisco Chronicle, Herb Caen, had a joke he would use in the column at least three times a year. Caen's cheese joke: "If you go to the gourmet cheese case at the Safeway in Chico, California you will find Kraft Velveeta."

We love Chico (we've even visited). Its a college town and is fairly hip yet mainstream at the same time. But Caen, who was born and raised in nearby Sacramento, but adopted the big city of San Francisco as his hometown. And, as even adopted natives of the City by the Bay are apt to do when it comes to food, they can't help putting down the hinterland's food choices.

But, you get our point. Times have changed dramatically when it comes to good cheese in America.

Today, that's all changed in the U.S. The artisanal cheese category is big in America--and growing in popularity with consumers. Artisanal and gourmet cheeses also are being produced by hundreds of small cheese makers throughout the country, and even by a number of major cheese manufacturing and marketing companies.

No longer do American retailers and consumers have to look to Europe to stock and consume excellent cheeses. In fact, like what has happened in the premium wine category, many Europeans are enjoying American-produced artisanal cheeses at home, having tried them while visiting the U.S., experiencing a taste bud explosion which made them think they were eating gourmet cheeses from their home countries.

U.S.-produced artisanal cheeses aren't being exported to Europe and other countries in any where near the volume say California premium wine is being shipped and sold. However, it's starting. Meanwhile, the market is growing for the domestically-produced high-end cheeses so much, that's exporting isn't even a major concern to the specialty cheese producers at this point in time.

U.S. food retailers stocking more artisanal cheese varieties

Food retailers of all formats--from mainstream supermarkets, to natural foods stores and upscale grocers, to deli's and even convenience stores, are selling American-produced varieties of high-end gourmet and artisanal cheeses most wouldn't have considered merchandising just 10 years ago.

These food retailer's have discovered their shoppers want high-quality artisanal cheeses (both American-made and imported) and are willing to pay a premium for them. In fact, artisanal cheese is one of the fastest-growing categories in the approximately $59 billion a year specialty foods industry. Research firm Packaged Facts predicts the overall cheese category will see double-digit growth in the next five years, with the majority of the percentage of that growth coming from the specialty cheeses.

Up until the last few years, a consumer had to shop at a Trader Joe's, Whole Foods Market or a regional or local upscale food retailer or fine cheese shop to be able to choose from a decent selection of artisanal and gourmet cheeses. No longer is that true.

Kroger becoming a 'big (high-quality) cheese'

For example mainstream grocery chain Kroger Co. is getting into the gourmet and artisanal cheese category in a major way. Kroger, the number one supermarket chain in terms of annual sales volume in the U.S., has inked a deal with Murray's Cheese, New York's famous purveyor of quality imported and domestic specialty cheeses, to lend its brand name and category expertise to the grocer. Beginning later this year, mini-versions of Murray's popular New York gourmet cheese shops will begin opening in a select number of Kroger stores.

Safeway and SuperValu taking a bite out of the artisanal cheese market

Other national supermarket chains like Safeway Stores, Inc. and SuperValu, Inc. also are jumping on the gourmet and artisanal cheese category bandwagon. Safeway, the third-biggest U.S. grocery chain, has opened good-sized gourmet and artisanal cheese sections in its Lifestyle format stores, and even is offering a number of the specialty cheese varieties under its own upscale Safeway Signature label, which is a store brand it uses for higher-end perishable foods' items.

SuperValu, the number two supermarket chain in the U.S., is expanding its gourmet and artisanal cheese sections in many of its stores as part of its new "fresh and premium" foods format, which the grocer is using to convert hundreds of stores into a supermarkets similar to Safeway's upscale lifestyle store.

Additionally, SuperValu acquired the Southern California-based Bristol Farms gourmet supermarket chain as part of its purchase of Albertson's, Inc. a couple years ago. Bristol Farms' is one of the pioneers in merchandising specialty cheeses in the U.S., creating large gourmet cheese departments in its very upscale supermarkets and often being the first food retailer to introduce a new brand in its Southern California stores. SuperValu is tapping into this corporate division's category expertise to upgrade its artisanal cheese offerings in most all of its premium format and mid-range format supermarkets, under the new "fresh and premium" format.

Artisanal cheese is becoming so popular in the U.S., that upscale grocers like Whole Foods Market, Wegman's, Bristol Farms and others are putting cheese aging caves in some of their new stores. In it's "new generation" lifestyle-oriented stores, Whole Foods has upscale cheese departments that are as much as 2,000 square feet in size, including the aging caves. These grocers and others also are regularly running wine and cheese pairing and tasting classes in-store, bringing in specialty cheese producers for special events, and promoting the category like its never been promoted at retail before in the U.S.

France takes notice

So many new and high-quality artisanal cheese producers have come on the scene in the U.S. in just the last five or so years--and so many retailers are selling and promoting U.S-produced specialty cheeses--that powerhouse gourmet cheese producing and marketing country France has taken notice of the surge in domestic production and sales in America, long its largest market for cheese exports.

Last summer, France formed the Cheeses of France Marketing Council, and has launched a marketing and PR campaign in the U.S. as a way to remind American consumers of the quality and characteristics of French cheese.

France and other European countries like Italy don't have much to worry about though. The boom in domestically-produced artisanal cheeses in the U.S. is lifting all boats, including France's, Italy's and Denmark's. Sales of imported gourmet and specialty cheese is up by double digits as well.

The 'less but premium' consumer trend

This boom in high-quality artisanal cheese isn't a surprise to us. It mirrors what has been happening in all the other food and grocery categories in the U.S. for the last decade, which is what we call the "less but premium" trend or flight towards premium quality foods and beverages. Middle class, upper middle-class and affluent consumers have been trading-up in many categories, buying more expensive premium-quality foods but in smaller quantities.

Just a few of the category examples of this phenomenon include: ice cream. Consumers in droves are buying pints of super-premium ice cream like Haagen Dazs and Ben & Jerry's instead of half-gallon containers of premium ice cream, even though the half-gallon of premium ice cream is still good quality and costs about the same price as the pint of super premium. Further, dozens of smaller, regional super-premium ice cream (and frozen yogurt) makers are thriving, including those using soy, rice and goat milk in addition to cow milk.

The coffee category is one of the most demonstrative examples of this consumer phenomenon. Consumers of all income-levels are buying better, higher-quality, more expensive coffee at retail food stores than ever before. This is so pervasive that mainstream coffee brands like Folgers and Maxwell House have not only introduced their own versions of premium coffee, they've even reformulated their mainstream lines, so they contain finer-quality coffee beans.

And, of course, the "Starbucks phenomenon," in which consumers with even limited incomes are willing to pay $4 -to- $5 for a premium hot or cold coffee drink, shows how this trading-up premium trend is not limited to the affluent only.

The confections category also is one where consumers are buying premium, more expensive treats like chocolate bars for example, in smaller quantities. Less is more if its premium chocalate is the rend. Premium and gourmet (along with organic, nutrient-enhanced and Fair Trade) are the fastest growing segments of the confections category. Dark, premium chocolate, which just a few years ago was a tiny upscale niche in the category, is becoming mainstream. It's the fastest-growing segment in the category.

More growth to come in the artisanal cheese category

We see continued double-digit growth in the artisanal cheese category. We also see more start-up companies creating their own cheeses and brands, including dairy farmers who want to add value to their operations and create a bradned product instead of exclusively selling their milk to a milk processing firm.

One dairy farmer who did this just a few years ago is John Fiscalini, who operates a dairy farm in Modesto, California that's been in the family since 1914. A few years ago Ficalini created Fiscalini Cheese Company, a one-man operation, on his dairy farm. Today, just a few years later, not only is the dairy farmer turned master cheese maker's farmstead-produced cheese considered some of the best in the U.S., it's won prizes internationally in cheese competitions as well as at home.

Fiscalini's timing was good in that it coincided with the growing interest in artisanal and gourmet cheeses by U.S. consumers, along with the trend among food retailers to expand their selections of the high-quality specialty cheeses in their stores.

Look for more dairy farmer/entrepreneurs, along with chefs and others, to get into the artisanal cheese business, creating new brands and even new varieties as they model the U.S premium wine industry in creating new cheese varieties that are distinctly American, as well as others inspired by European traditions and styles.

About 25 years ago, a small group of artisanal cheese producers in the U.S. formed the American Cheese Society, an organization that promotes artisanal and farmstead cheese production and sales, and offers educational information about the category. There were so few artisanal cheese producers in the country at the time in fact, they could all fit into a very small room.

That's changed dramatically today, and the field continues to boom. For example, when the cheese society held its annual "best cheese" awards--its sort of an Oscar for best cheese in a given variety--there were only 300 different cheeses entered in the competition. Last year however, over 1,200 cheeses vied for the much desired "best cheeses" award at the group's annual awards ceremony.

Like the specialty, premium, natural, organic and Fair Trade product categories--which we write about regularly--the artisanal cheese category will continue to grow rapidly. And it has good company with all these other premium, natural and healthy categories--coffee, new-age beverages, ice cream, fresh produce, meats and so many more--that we can safely say, when it comes to growth in the natural, specialty and artisanal foods' categories, the "cheese does not stand alone."

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