Upfield and UK spreads market- H2 2022 update

When will butter and margarine prices peak?

In an Interview with Third Bridge Forum, the specialist said that across Europe butter and margarine costs are increasing. They told us margarine prices have increased by 20% over the past two years. Although they are beginning to flatten, the specialist said they might not peak until a “little bit later”. Butter prices are also continuing to rise and the specialist does not think they will peak until “early-to mid-next year”. 

However, price increases are unlikely to influence whether customers choose to purchase butter or margarine, according to the specialist. Such decisions are “95% driven by marketing purposes”, they told us. The specialist said conversion from butter to margarine is also driven by marketing and has been successful in the Netherlands and the UK. However, the specialist said significant marketing spend would be needed for similar penetration in France, Spain and eastern Europe. 

Meanwhile, the specialist told us that margarine prices could be reduced by switching from rapeseed oil to bamboo or coconut oil. They said such a change could save 300-400bps of gross margins but it requires CAPEX for extractions and further R&D to manage the taste change. The specialist said further cost reductions could come from converting to paper packaging, which is cheaper vs plastic packaging. They also said further innovation in margarine could come from removing unnatural ingredients and adding supplements such as calcium to the recipe. 

As companies like Upfield look to market margarine, the specialist said they face an industry conundrum in finding the best message to spread. The specialist said they could promote it as plant-based, a healthier alternative to butter or both, despite reservations that such a strategy would be confusing.  

Click here to access all the human insights in Third Bridge Forum’s “Upfield & the UK Spreads Market – H2 2022 Update – Inflationary Impacts & Consumer Behaviour” Interview.