“Summer Sun, something’s begun” sings John Travolta (Danny Zuko) about his summer romance at the beach with Sandy (Olivia Newton-John) during the song “Summer Nights,” one of the many popular hit songs in the 1978 musical “Grease.” 

Travolta goes on to sing, “Summer lovin,’ had me a blast,” during the same tune. When exploring the State of the Industry of cheese, it’s “summer lovin’” for the $68.1 billion cheese category, which has been bolstered by strengthened per capita income, enabling consumers to “trade up” for more artisanal premium cheese.

For instance, Rogue Creamery announced that its 2024 vintage of its Championship-winning Rogue River Blue cheese is available. Released every year during the fall Equinox (Sept. 22), it is the Southern Oregon artisanal cheesemaker’s seasonal specialty, with flavors reflecting the Central Point, Ore., locale. Made by hand, the organic blue cheese is the first and only USA-made cheese to be crowned World Champion at the World Cheese Awards, receiving this top honor in cheesemaking at the 2019-2020 ceremony held in Bergamo, Italy, the company says.  

Cheese processors’ cheese creations have performed well in recent years, rising at a compound annual growth rate (CAGR) of 3.5% from 2018-2023 to barely a whisper of growth, at 0.5%, expected from 2023-2028 to reach $69.7 billion by 2028, states Los Angeles-based IBISWorld in its May 2023 report, “Cheese Production in the US.”

The COVID pandemic also led to industry volatility resulting in swelling cheese consumption and overall higher dairy revenue. “A jump in cheese production revenue has been bolstered as consumption and prices have continued to move together, while swelling per capita disposable has led consumers to trade up on cheese products,” the report stated. “Revenue is expected to expand at a CAGR of 3.5% to $68.1 billion, shaking off the decline from 2018 [of 2.9%] and 2021. In 2020 specifically, revenue surged 9.8% as demand from grocery stores surged amid the pandemic. Cheese production revenue is anticipated to inch up 0.1% in 2023 alone.”

Natural cheese generated dollar sales of $14.6 billion, a 0.2% year-over-year (YoY) growth for the 52 weeks ending Aug. 11, Chicago-based market research firm Circana reports. Within the segments of natural cheese, chunk cheese saw 5.7% YoY growth to $2.8 billion, while “all other forms,” albeit from a smaller revenue stream, generated a 3.7% CAGR and sales of $226 million. The other natural cheese segments, shreds, and snack, declined 1.5% and 1.2%, respectively, notching dollar sales of $6.9 billion and $1.7 billion, respectively. With $2.8 billion in dollar sales, sliced cheese, at 0% CAGR, essentially reported the same sales YoY.

While there’s been fluctuation in herd sizes, there’s been no decline in the production of fluid milk since 2014, says Miri Eliyahu, a consultant researcher at Chicago-based Euromonitor International. Yet, she makes an interesting point as to the recent divergence of production and consumption volumes and where the milk is going — and it’s not to regular dairy milks and drinks.

“…More and more fluid milk is sold to butter, fromage, and cheese producers every year over milk producers. That is to say that the dairy industry is investing more of its core ingredient in higher ticket items, thus even the volumes reaching the retail space are on the decline for milk,” Eliyahu explains. “At the same time, the volumes for cheese, butters, and creams grow every year, yet we have the same levels of production over the recent decade. This means that the industry is just becoming more efficient with where it invests its efforts, as consumers have proven in recent years the resiliency of these more expensive categories in retail and foodservice for American consumers.” 

This dovetails into more sales and increased volume — one of the only dairy categories exceeding expectations — explains John Crawford, Circana’s senior vice president of Client Insights-Dairy.

“Natural Cheese is up 0.9% in dollars and up 3.3% in volume. It is one of the only Dairy categories that is growing faster in volume than dollars,” Crawford notes. “This is partly driven by a 2.3% decrease in average price per pound. Within Natural Cheese, Shredded is down 0.9% in dollars, but up 2.1% in volume. Chunks is up 4.1% and 5.3% for dollars and volume, respectively. Slices are slightly down, at 0.7%, in dollar sales but up 2.6% in volume.”

In total U.S. markets and convenience stores for the 52 weeks ending Aug. 11, dairy processed, or imitation cheese, generated YoY dollar sales of $2.6 billion at a negative CAGR of 2.3%. Volume-wise, the overall processed cheese category is down 0.9%, according to Circana data. Processed cheese slices, which comprise 60% of sales, are down in dollars and volume at -2.1% and -1.0%, respectively.

“Processed Cheese is one of only three dairy categories that are down in both dollars and volume, the others are Milk and Margarine,” Crawford states.

A catalyst for growth 

More than ever, quick-service restaurants (QSRs) are expanding their menu options beyond their main offerings. Domino’s Pizza, the No. 1 QSR within the pizza industry with $9 billion dollars in sales in 2023, added Mac & Cheese to its menu, beginning in late September. Domino’s Mac & Cheese is available in two varieties: 5-Cheese Mac & Cheese and Spicy Buffalo 5-Cheese Mac & Cheese. Domino’s 5-Cheese Mac & Cheese features penne pasta combined with a blend of cheddar, American, Parmesan-Asiago, mozzarella blend, and Alfredo sauce, which are oven-baked to creamy, bubbly perfection. Domino’s Spicy Buffalo 5-Cheese Mac & Cheese adds a flavorful twist to the classic dish, as it is drizzled with hot buffalo sauce.

On the pizza side, Burnaby, British Columbia-based Daiya Foods Inc., a dairy-alternative food company, released a “new and improved” dairy-free pizza line. The reformulated pizzas boast a lighter, fluffier, and crispier gluten-free crust, with enhanced rich tomato sauce now paired with reformulated cheese made using Daiya Oat Cream blend. The new pizza line features Cheese, Meatless Pepperoni, Supreme, and Fire Roasted Veggie Pizza varieties.

Recipes using the countless varieties and textures of cheese also plays a pivotal role in handcrafted cheese dishes, from lasagna, to mac and cheese, to a cheese souffle, the top of a grilled hamburger, and much more. Since its beginnings in the foothills of the Italian Alps in 1882, Italian-based Galbani Cheese, a division of Lactalis USA since 2006, has curated new recipes with brand ambassador Chef Marco Sciortino in celebration of National Italian Cheese Month in September. 

The recipes for Chocolate Hazelnut Ricotta Mousse and Homemade Ricotta Gnocchi invite home cooks and cheese lovers alike to embrace the rich traditions of Italian cuisine with expertly crafted dishes that home chefs can rely on, the company says. Additionally, recipes using the mild flavor of Galbani Ricotta pairs well with both sweet and savory ingredients, allowing for a wide range of flavor combinations to suit any taste preference. 

Innovation a key driver

In a performance snapshot, IBISWorld’s report suggests that while revenue expansion of cheese fell on the back of rising milk prices, which in turn led to increased cheese prices, American consumers are unlikely to cut the nutritional, flavorful goodness of cheese from their diets. 

Therefore, “price hikes made little impact on the sales volume of cheese,” the report stated. “Profit dipped marginally through the end of 2023 as selling price swells didn’t completely make up for the higher operating costs.”

The report suggests that cheese blends will continue to cater to consumers’ appetite for cheese. Innovation is key, the report stated with the following observations:

• Cheese producers are incorporating cheese blends. For example, Kraft’s “Mexican Four Cheese” includes cheddar, asadero, Monterrey jack, and queso quesadilla cheeses, catering to consumers looking for cheese to make Mexican-inspired dishes.
• Reduced fat and light cheese options have been developed as an alternative to full-fat cheese for health-conscious consumers.
• The implementation of sustainable packaging has also helped cheese producers cater to environmentally-conscious consumers. For example, Kraft is now using eco-friendly packaging for some cheese products.

While market saturation is high, cheese producers should create new and unique products, new flavor profiles, production techniques, and packaging to attract consumers, the report stated.

“Consolidation is an emerging trend among cheese producers,” IBISWorld’s report stated. “With higher competition and saturation, many smaller producers are finding it difficult to compete with larger, more established companies. This is making acquisitions more common.”

Euromonitor’s Eliyahu notes that as the dairy industry invests more of its core ingredients like milk in higher ticket items, the volumes for cheese, butters and creams will grow ever year. 

“Yet, we have the same levels of production over the recent decade,” she concludes. “This means that the industry is just becoming more efficient with where it invests its efforts, as consumers have proven in recent years the resiliency of these more expensive categories in retail and foodservice for American consumers.”