Guest Columns

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The U.S. mission: Serve the cheeseheads of the world

Merle McNeil

Merle McNeil is business unit director, Latin America and Caribbean, for the U.S. Dairy Export Council. She contributes this column exclusively for Cheese Market News®.

They aren’t quite wearing orange, wedge-shaped, foam hats yet. But the way major cheese importers are buying cheese these days suggests they are increasingly walking the path to become what are known affectionately in Wisconsin as “cheeseheads.”

In 2016, cheese exports from the five leading global dairy traders — Argentina, Australia, the European Union (EU), New Zealand and the United States — rose 5 percent to a record 3.52 billion pounds. And they are picking up steam.

Over the four months from March-June 2017, exports from the top 5 grew 10 percent from the same period the previous year. Cheese shipments to China, South Korea and Mexico rose more than 25 percent each, while exports to Southeast Asia and Japan jumped 16 percent and 8 percent, respectively.

The main beneficiary for that four-month period was the United States, which boosted exports 32 percent compared to the previous year — a welcome shift after significant cheese volume declines in 2015 and 2016.

That is very good news for U.S. cheesemakers. But in the years ahead, in order to ensure a healthy U.S. dairy industry, we will need to see more consistent sustained expansion of cheese exports — not 32 percent, but annual export volume growth of greater than 10 percent per year.

• A look at the numbers

Here’s where that number comes from: USDEC estimates the U.S. dairy industry needs to increase U.S. dairy export volume from about 15 percent of the annual milk supply to around 20 percent — an effort we are calling The Next 5 % — to maintain strong overall U.S. dairy industry growth.

Raising cheese exports by around 440 million pounds over the next 5 years is a critical component to achieving that goal.

While such a gain is ambitious, given global dietary trends, we believe it is achievable.

USDEC research suggests global cheese imports will rise by more than 1.1 billion pounds from 2015-2020. U.S. suppliers essentially would need to win about 40 percent of that additional volume to get an additional 440 million pounds. And therein lies the challenge.

To reach that plateau, the United States will need to target the highest growth regions (not necessarily regions where we are traditionally strong in cheese) with products suited to their particular consumer palates (not necessarily products we are accustomed to exporting).

USDEC estimates more than half of that 440 million pounds will need to come from North Asia (China, Japan, South Korea) and the Middle East/North Africa (MENA) — regions currently dominated by U.S. competitors. If the industry is to get to The Next 5 %, it must start exporting more cheese to those two regions. And it must broaden its portfolio to cheese categories and varieties where the United States currently lags its competitors.

For example, this year’s U.S. cheese export growth is being driven in part by favorable pricing that benefits cheese subsectors in which U.S. suppliers excel on the global market, such as commodity cheddar for further processing, pizza cheese and cream cheese. But those three products only account for about one-third of global cheese trade. Nearly half of the projected growth in cheese trade is going to come from natural cheese for retail and foodservice — a subsector where the United States has a lower profile.

A stronger focus on North Asia and MENA with natural cheese for retail and foodservice is critical to meeting cheese export growth goals.

•Getting there

To take advantage of projected natural cheese demand growth, U.S. cheesemakers will need to go beyond what has gotten them this far in the global marketplace. It is a three-pronged attack:

• Expand production of some of the most demanded varieties, many of which are not typical U.S. export categories, such as edam/gouda, feta and swiss.

• Tweak current products — in terms of taste, packaging and formats — to meet the specific needs of the markets.

• Place greater emphasis on specialty cheeses, which are still fairly unknown to the rest of the world but would create a quality halo for the entire industry.

Our top market, Mexico, can be seen as both a guide and a proving ground for U.S. efforts in other regions. The United States expanded cheese exports to Mexico from about 10 million pounds in 1995 to about 200 million pounds last year. Developing close partnerships has been one of the keys to growth. U.S. cheesemakers going above and beyond to work with buyers to create gouda suited to Mexican applications and tastes went a long way to demonstrating how seriously U.S. suppliers wanted to build relationships. That kind of effort needs to be repeated in other major markets — and again in Mexico moving forward.

A recent USDEC research report on natural cheese in Mexico estimated per capita cheese consumption at only 8.4 pounds/year — a number far less than the United States and significantly lower than many of its Latin American neighbors. Room for growth is significant.

The report pointed to a number of additional ways U.S. cheesemakers can go the extra mile to lift Mexican cheese consumption and grow U.S. export volume. For example, novel, on-the-go packaging innovation would go a long way to expanding eating occasions and fostering demand in Mexico’s underdeveloped snacking cheese segment. Flavored cheeses could help capitalize on the burgeoning category of “fusion” cuisine that merges traditional Mexican and foreign tastes.

If U.S. cheesemakers expect to become global players in world cheese trade, they will need to defend and grow share in Mexico by better catering to market needs. But even more importantly, they will need to branch out and pursue strategies that better tap into the emerging inner cheesehead in the higher-volume-potential of MENA and North Asia.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

Note: The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the producer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.

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