Extra marks to Kerrygold
Butter range makes more inroads in key market
Germany is one of the Irish Dairy Board's greatest success stories, with almost three million packets of Kerrygold Irish butter sold each week.
First launched on the German market nearly 40 years ago, Kerrygold is the number one imported butter brand in the country and is worth around €200m in total revenue to Ireland.
This remarkable achievement is even more impressive when you consider that Kerrygold costs around €0.55 more per pack than its nearest rival, German Markenbutter. A pack of Kerrygold currently costs €1.69, compared with German Markenbutter at €1.15.
Kerrygold also has a market share of 14pc, almost three times that of German Markenbutter, which holds less than 5pc of sales.
So what is behind the success of Kerrygold in Germany?
The answer lies in branding and penetration of the market.
Germany is the largest butter market in Europe, worth around €1.2bn a year and Germans eat around twice as much butter per head of population when compared to the Irish.
Butter is seen as good, natural and healthy food and Irish butter is regarded as being more natural and healthy than other brands, so German consumers are willing to pay extra for the quality of Kerrygold butter.
Kerrygold's signature gold foil wrapping is key to enhancing the consumers' belief that they are buying the "gold of the Emerald Isle" and their acceptance that this is a superior product to all others.
The brand is built on a number of pillars, including the fact that Irish butter is natural, pure, tastes better and is a trustworthy product with reliable suppliers. The brand also relies on the German perception of Ireland as the unspoilt garden of Europe and is a great place to make dairy products.
Interestingly, German consumers have different taste preferences to the Irish, so the Kerrygold butter on sale in Germany will not taste the same as Kerrygold butter in shops here.
Kerrygold also has maximum market penetration, with its butter available in all German retailers.
Germans, like many Continental consumers, prefer the richer flavour of a lactic butter, as opposed to the sweet cream butter that we eat in Ireland. To cater for these different taste preferences, butter destined for the German market is inoculated with a starter culture to produce the distinctive flavour profile of lactic butter.
While the IDB has been phenomenally successful in supplying all German retailers with Kerrygold and securing a major market share there, it is acutely aware that it cannot rest on its laurels.
Like many developed economies, butter consumption is in decline in Germany, falling by around 3pc a year as younger consumers switch to mixed fat spreads for convenience.
Having analysed the changing consumer lifestyle demands, the IDB identified an opportunity to launch a new product.
Kerrygold Extra is based on the original Kerrygold butter but includes a blend of rapeseed oil that makes it spreadable directly from the fridge.
The new product is marketed on its spreadability, highlighting its convenience to a whole new consumer demographic in Germany. These new buyers are typically younger than the buyers of Kerrygold butter and more health conscious but still looking for the same natural attributes of the Kerrygold brand.
To the IDB's delight, Kerrygold Extra outperformed all expectations last year by becoming the IDB's most successful launch ever and accounting for sales of €18m in 2010.
While the IDB had expected to lose some of its original Kerrygold customers to the new Kerrygold Extra brand, this did not happen. Instead, Kerrygold retained its loyal customers and the new kid on the block, Kerrygold Extra, went out and poached considerable market share from other brands in the spreadable butter category.
During the past year, Kerrygold Extra has won a number of awards (see below), including Top Brand 2010 and Product of the Year 2011 in Germany, and the Irish Marketing Institute's International Marketing Award 2010.
Future aims for the IDB and Kerrygold Extra are to grow the product portfolio, increase shelf presence of the brand and ward off potential competition from new entrants to the market.
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