Westgold, the butter brand of Westland Milk Products, is fast making a name for itself in the United States. Photo / Clinton Lloyd Photography.
A $35 million investment in a butter plant upgrade is paying creamy dividends in the US for New Zealand’s Westland Milk Products and its premium retail butter brand Westgold.
Just five years ago, the century-old South Island dairy cooperative was in distress. It had not been able to pay a competitive milk price to its farmer-owners for years and had high debt. Under a $588 million deal, it was sold to a subsidiary of Chinese conglomerate Yili, with 400 farmers being paid $246m for their shares, and Yili taking on the balance of $342m of Westland’s debt and liabilities.
How things have changed.
Today, after a lengthy debut campaign that strongly pitched the grass-fed, free-range qualities of Westgold butter, it is the only imported butter mega-retailer Costco uses in its premium private label Kirkland Signature, offered in more than 600 US stores.
Another super-retailer, Walmart, has this week doubled to 1100 the number of its stores offering Westgold butter, which was launched in the US just 15 months ago.
And last year, Westland was signed up by major US grocery distributor Kehe, opening another sales path for Westgold butter to a different range of supermarkets and stores across the US. Shortly, the company expects its butter to be in 2500 stores outside Costco.
General manager, sales and marketing, Hamish Yates says “The US has gone incredibly well for us”.
It’s been helpful that the US has a large population of dairy lovers, but more importantly, Yates says, they have an appreciation for the difference between butter produced by cows on grass 24/7 and those fed grain in barns.
”Their butter is largely grain-fed so ours offers quite a different character by way of colour and nutrients.”
Butter produced from grass-fed cows has a much better balance of Omega 3 and 5 antioxidant and anti-inflammatory properties’ ratios and is yellow due to its beta-carotene, a provitamin used by the body to make vitamin A, Yates says.
Westgold’s target American consumer is the 25 to 35-year-old mother in a middle-income household.
“They’ll be focused on producing nutritious food at home and happy to try new recipes. They’ll also be interested in a product’s origins - they will be a label reader and researcher,” Yates says.
They’ll also be happy to pay a premium for quality.
“We’re certainly not targeting the mass market. We’d never be in a position to satisfy that sort of demand,” he says. (Westland is supplied by around 400 farms.)
An 8 ounce or 227 gram pat of Westgold butter fetches US$3.50 ($5.78) at a Walmart, and around US$3.90 ($6.44) in other grocery stores. Eight-ounce pats are the standard in the US. (In New Zealand most butters come in 500gm pats, though Westgold’s foil-wrapped offering here and in Australia is in a 400gm format.)
Costco offers its members Westland butter through the Kirkland Signature private label in a box of four 8oz pats at a 25-30 per cent discount price to non-Costco stores, Yates says.
The bulk-buy retailer in FY23 reported a 148 per cent year-on-year lift in sales volumes of Kirkland Signature butter, he says.
Yates could not share export volumes for commercial reasons.
The US western seaboard from California up to Washington State and Oregon has been a strong starter market for Westgold. The east coast is looking promising.
“We’re starting to see good distribution and store-ranging popping up in Illinois, New York and New Jersey. Sales definitely gravitate towards the coasts which tends to be the way wealth is distributed in the USA,” Yates says.
While breaking into the US market has involved a lot of hard work - Yates says Costco’s quality expectations are particularly high, including rigorous annual audits of the supply chain from farms to packagers - it was the Irish dairy sector that blazed the grass-fed dairy trail that Westland has followed.
Americans’ appreciation of the difference between grass-fed and grain-fed butter has been fostered by the Irish dairy board for many years, says Yates.
But with the diet of Westland cows being more than 95 per cent fresh grass or forage, the company saw an opportunity to pitch to US consumers a product superior to butter from Ireland, where many herds spend winter in a barn.
The company was also keen to move up the value chain by developing higher-value products or “focusing on markets where the innate value of our grass-fed and unique catchments are appreciated by consumers”, Yates says.
“So about three years ago we set about investing $35m in our (40-year-old) butter plant. We gutted the building and brought it up to modern standards with two churns, and upgraded all our packaging ability. This allowed us to double the volume packed into retail and food service formats directly from the churn.”
“The Irish haven’t gone but we’ve taken huge market share off them”, Yates says. (Latest available figures say the fastest-growing US butter import markets between 2021 and 2022 were Ireland, by US$68m ($112m), New Zealand by US$56m ($93m) and India US$6.6m ($10m).
Yates says Westland has invested “many millions” in the butter export drive - Westgold butter is sold in 18 countries - over and above the spend on the butter plant.
But it hasn’t been spent on fancy billboards or television promotions: that’s beyond Westland’s budget reach, he says.
Instead, the company relies heavily on promotion through social media and trade shows - it has four scheduled in the US this year.
“And the joys of dealing with a private label (at Costco) - there are no marketing costs.”
Two years in, Westland is still very much a newcomer, trying to drive consumer awareness as a new entrant, Yates says, noting the number one challenge for any market newbie is “getting product on the shelf”.
The butter plant project marked Westland’s move away from bulk butter production.
“We only produce about 10,000 tonnes of 25kg bulk format. The majority of that goes into the foodservice channel and we also do some smaller sizes for some markets,” Yates says.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
Japanese food group Meiji is listed on the Nikkei 225.