Butter – Procurement Best Practices & Sourcing Strategies

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Global Butter Market Size

According to the latest research statistics and overall industry trends, the global butter market is set for exponential growth, exhibiting strong growth and offering ample opportunities for stakeholders. Based on a recent research report of ELINT Market Research, the global butter supply is anticipated to cross 12.5 million metric tons (MMT) by 2023, with a worldwide consumption size of 11.2 MMT. These promising statistics indicate a proper balance between the demand and supply landscape, presenting ideal market prospects. In addition, Oceania emerges as the leading sourcing region for butter, costing USD 5783 per metric ton in 2022. All these significant developments complement the butter industry’s favorable circumstances, balancing it as a lucrative sector for growth and investment purposes.

One of the noteworthy factors for this promising outlook is the minimal surplus stocks in 2022, which are merely 0.2% compared with the average of the past five years. Such scarcity related to surplus stocks indicates the benefits of reliable industry management and points out a minimalistic scope for over-supply-related hurdles. In addition, the global butter market is experiencing a significant transition in consumer choices, with rising demand for plant-based and lactose-free butter. Although butter characteristically has lower lactose levels than milk, there appears to be an increase in requirements for lactose-free butter, fueled by the global trend of growing emphasis on lactose-free dairy products. This major shift propels innovative product offerings, such as fermented plant-based butter launches by players like Dutch startup Willicroft.

Market Definition:

The butter market stands for the multifaceted industry that covers the production of butter, a dairy product derived from cream, its distribution, and end-user consumption. This highly versatile food delight has a vital role in household kitchens and professional platforms, which range from baking and cooking to delightful presentations on bread. The industry’s noteworthy characteristics include continuous consumer requirements for high-quality butter, often influenced by texture, taste, flavor, and nutritional value.

Butter Market Drivers

• Rising Culinary Exploration:

The continuously changing domain of the culinary sector and consumers’ increasing delight in experimenting with various cuisines have tremendously added to the rising demand for butter products. As a vital component of different recipes, butter has become an undetachable ingredient in kitchens globally, boosting the industry’s expansion.

• Consumer Preference for Natural and Organic Products:

The butter industry has grown exponentially due to consumer emphasis on organic and natural products. Such a transition resonates with the global movement that prefers sustainable and healthier dietary choices. As people become more conscious about their food habits and aware of the origin and processing of products, the requirement for natural, high-quality butter is rising.

• Growing Awareness of Nutritional Benefits:

Consumer awareness about the importance of healthy eating has resulted in rising demand for quality butter as a nutritional ingredient. Butter is gaining greater attention as a part of the health-balanced diet due to its recognition as a source of essential vitamins and healthy fats, fueling the market growth.

Butter Market Challenges

• Competition from Margarine and Substitutes:

Although the butter industry is flourishing with current global trends, it has a hurdle of margarine and other substitute ingredients. Consumers may seek alternatives as a part of health choices or budget-effectiveness, making it crucial for companies to bring innovations with their offerings to stay competitive.

• Fluctuating Dairy Prices:

The butter industry is heavily connected to the dynamics of the dairy industry, making it vulnerable to spikes in dairy prices. Such price fluctuations may have a notable effect on overall production costing, impacting product pricing and, in turn, market dynamics.

Butter Market Opportunities

• Innovation in Product Varieties:

In today’s competitive world, offering innovative butter products in the form of specialty or flavored butter presents a lucrative growth avenue for market players. It enables players to meet the changing consumer choices and boosts product differentiation, offering a much-needed competitive advantage in the industry.

• Expanding Global Markets:

The rapid globalization rate of the food sector offers ample scope for butter producers. Exploring untapped and emerging markets enables market players to benefit from the demand for dairy products, augmenting industry expansion.

Butter Market Trends

• Technological Advancements in Production:

An existing pattern in the butter industry involves adopting innovative technologies in different production processes. High-end automation and advanced production techniques complement improved product quality, fulfilling the changing demands of consumers and market regulations.

• Sustainable Practices:

Sustainability is the central concern in a highly dynamic food industry, and the global butter industry is no exception. A notable pattern is a shift towards more sustainable practices, using quality sourced ingredients and adopting eco-friendly packaging solutions. All these perfectly align with consumer awareness regarding social and environmental responsibility, impacting their product choices.

Butter Market Segmentation

• Product Type: The research report classifies the market into unsalted, salted, and clarified butter (ghee).

• Distribution Channel: As per distribution channel, the report divides the market into Supermarkets/Hypermarkets, Convenience Stores, and Online Retail.

• End-User: Based on end-user, the research categorizes the market into Residential and Commercial (Restaurants, Bakeries, Food Service).

Butter Market Regional Dynamics

The global butter industry deals with a dynamic landscape influenced by several regional factors shaping supply chains and industry trends. In the US, the major hurdle arises from a shortage of skilled laborers, which acts as a vital supply constraint affecting both production and distribution platforms. On the other side, in the the Southern Hemisphere, Australia and New Zealand face issues with milk supply during the dairy season of 2022-2023. All these factors force market stakeholders to revise their operational plans and inject substantial investments in automation and technology to deal with the issue of labor crisis effectively.

In the Asia Pacific region, India emerges as the leading force in the butter market, with a significant contribution of 56% to the overall global production, closely followed by Europe, with a share of 19%. Regarding consumption, India and Europe are the primary players, accounting for 56% and 22%, respectively. Regarding trade dynamics, New Zealand is at the front with a 59% share in butter exports, followed by Europe at 20%. Based on the import industry, Russia and Mexico are the major hubs, importing 28% and 15%, respectively.

Engagement Models

Regarding the engagement model for the butter supply chain, the global pattern indicates a preference for long-term contracts ranging from 1 – 2 years, emphasizing consistency and stability. Suppliers usually operate as cooperative entities in this industry, with global contracts as the central choice. Such engagement plans help market stakeholders to effectively deal with the highly dynamic and volatile industry scenarios, ensuring a consistent supply chain for mutual benefits. As the global butter industry continues to change with time, stakeholders must understand the regional dynamics.

Recent Activities in the Butter Market

• A promising Dutch startup, Willcroft, launched its new product – Fermented Plant-Based Butter. This development is part of the company’s motive to take center stage in the industry with sustainable alternatives to existing dairy products.

• A leading company, All Things Butter, has announced its achievement in security £530,000 investment, boosting the company ahead as it launches its new product series in the UK. This financial boost signifies a crucial phase for the company, stabilizing it to gain more on the rising demand for high-quality products.

Butter Market Players

The butter market has several leading giants and new startups. Some prominent names are Fonterra, Arla Foods, Saputo, Murray Goulburn Cooperative Co. Limited, Bega Cheese, and Warrnambool Cheese & Butter Factory Company Holdings Limited. These stakeholders are vital in setting the industry tone and driving significant innovations to drive market growth.