Millennials aren't making the same consumer choices their parents once did. They're avoiding casual dining restaurants like Applebee's and opting for e-commerce instead of brick-and-mortar shopping. Now, a new millennial change has been added to the list: American cheese.
American cheese - technically not cheese but a "processed cheese product," and a staple of generations past - doesn't mesh well with millennials' desire to eat healthier. Unlike the baby-boomer generation, millennials are health conscious, and seek non-processed and fresher foods. Food chains have reflected this desire accordingly, providing alternative cheeses that offer fewer unknown chemicals. American burger chain Wendy's (NASDAQ: WEN) offers their customers asiago cheese on their sandwiches, while Canadian locations of restaurant chain A&W has emphasized their newfound dedication to real cheddar. The effort to appeal to millennials seems to be paying off, as both chains have increased revenue.
One store owner, Gayle Voss, chooses to offer cheeses that hail from a small farm in Wisconsin, to reflect the importance of source and quality for the millennial generation. Voss, an owner of a grilled cheese store in Chicago, noted that while she buys processed cheese, "people want to know where their food is coming from, and [her] sales reflect that."
But what does this mean for well-known American cheese providers like the Kraft Heinz Company (NASDAQ: KHC)? Kraft Foods (now a subsidiary of Kraft Heinz), which makes the traditional Kraft Single individually-wrapped American cheese slices, began offering canned processed cheese in 1916 to the US military. Such a product proved to be particularly beneficial for American soldiers away at battle during World War I, given its long shelf life and the convenience of its pre-cut slices.
Today, 40% of American families purchase Kraft singles. However, total sales have remained lackluster, and the future looks bleak, with analysts predicting that sales of processed cheese, including Kraft, will decrease 1.6% this year. According to the US Bureau of Labor and Statistics, prices for processed American cheese has fallen to under $4 per pound for the first time since 2011. Dairy consulting firm HighGround Dairy has found that the market value of cheddar cheese itself has fallen significantly as a result of decreased demand.
In efforts to make American cheese marketable, Kraft has set its sights on distinguishing its products from other cheese. Presently, Kraft has a 30-person research team focused on increasing the sales of American cheese. Peter Cotter, general manager of cheese for Kraft, believes that it is the "melt" that may drive consumers to opt for American cheese. "Honestly, you can't get that in a natural cheese," he said.
Meanwhile, as American cheese enters its twilight, the industry for vegan cheese flourishes. According to the Plant Based Foods Association, the vegan cheese market has increased by 43% in 2017 and is currently valued at $124 million. Just in the last year, vegan products brought in $99.5 billion. Researchers argue that such a change is driven by milleninals' desire to avoid fat and cholesterol to ensure better health in the long run - a choice that they're likely to keep making as they age.