Butter is now significantly cheaper in Germany. A number of supermarkets and discounters massively reduced prices at the start of February. Aldi, for example, but also its competitors Kaufland and Norma only charge 1.59 euros for the classic 250-gram packet of German branded butter from their own brands.
That’s 40 cents or the equivalent of 20 percent less than last time. And this is not about a short-term offer, but about the new normal price – at least for the next four weeks.
The new contracts with the dairies came into force at the beginning of the month. However, their term is only one month, reports the Dairy Industry Association (MIV). So in March there could be a new butter price.
The current level is now the lowest it was almost two years ago. In 2022, prices had risen sharply, in some cases even to 2.29 euros per standard packet for private labels. Far more than three euros had to be paid for butter from brand manufacturers such as Landliebe, Meggle or Weihenstephan.
Now the market is turning. The background to this is falling milk prices paid by dairies to farmers. “Aldi has decided to pass on the lower purchase prices,” says a statement from the discounter, which wants to prove itself once again as the price leader in Germany. “By significantly reducing the price of an everyday item, we are creating a noticeable relief for our customers.”
Similar statements come from Kaufland. “In recent months, consumers have been affected by the increased cost of living and high inflation. Kaufland stands for a large selection at low prices. From the company’s point of view, this also includes passing on price advantages directly to its customers.
That was completely different in 2022. As a result of the Ukraine war, farmer prices had climbed to historic highs. The farmers received an average of 53 cents for a kilogram of raw milk, reports the MIV. That is 46 percent more than in the previous year. In November and December, the price level was even more than 60 cents in the national average.
The dairy farmers then significantly increased their production volumes. “Many farmers took the price peaks with them and kept their cows longer than usual in milk production and only brought them to the slaughterhouse later,” describes MIV chairman Peter Stahl, who is the main job chairman of the Allgäu dairy Hochland.
At the same time, demand has plummeted in recent months. Butter sales, for example, are almost ten percent lower in the period from January to November than a year earlier, as current figures from market researcher Nielsen show. “Consumers save money when buying groceries and often do without certain products,” describes MIV representative Stahl.
This combination of increased supply and lower demand then led to bulging warehouses at the dairies – and is now responsible for the sharp price reduction, which the farmers will also feel clearly in the coming weeks, according to the industry.
This has also increased the pressure on brand manufacturers in the butter sector. In the past few months, they were still among the winners of the crisis, as data from the GfK Group show.
The market shares had increased because their goods had always been available for months at one of the big retail chains on sale and the prices were around the same as private label brands. As a result, consumers tended to buy branded goods.
The price for so-called block butter had already given way. What is meant are ten-kilogram blocks that are bought, for example, from bakeries or confectionery manufacturers. Their price was recently significantly cheaper than that of molded goods. At the end of January, prices on the Süddeutsche Butter- und Käse-Börse in Kempten were between 4.18 and 4.50 euros per kilogram. This is the lowest level since autumn 2021.
Industry insiders do not expect prices to drop immediately for other dairy products. The reason for this is the terms of the supply contracts between industry and trade. In the case of butter, these are often only a few months, sometimes just four weeks like now. With cheese, yoghurt, cream, drinking milk and the like, the running times are usually six months or more. And the current contracts aren’t expiring yet. In the medium term, however, prices could also slide there.
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