Natural, Processed, and Imitation Cheese

SIC 2022

Companies in this industry

Industry report:

This industry encompasses establishments primarily engaged in manufacturing natural cheese (except cottage cheese), cheese foods, cheese spreads, and cheese analogues (imitations and substitutes). These establishments also produce byproducts, such as raw liquid whey.

Industry Snapshot

Cheese is one of the principal product groups in the dairy industry. It has become increasingly important to the growth of the entire dairy industry in the United States, which, as a single country, is the largest producer of cheese in the world. Production totals in 2009 reached 10.1 billion pounds. Wisconsin continued to be the top-producing state, accounting for more than 25 percent of production; California was the second largest state in terms of production. Annual per capita consumption of cheese increased from about 20 pounds in the early 1980s to almost 33 pounds in the late 2000s. The Wisconsin Milk Marketing Board predicted per capita consumption of cheese would increase by an average growth rate of 1.3 percent in the United States to reach 37 pounds by 2017. Even more encouraging for the industry was market saturation (nearly 100 percent of households) and product appeal, with a reported 93 percent of consumers stating they enjoyed the taste of cheese, according to Dairy Management Inc. (DMI). In 2010, this segment of the U.S. dairy industry touted more than 300 different varieties, types, and styles of cheese.

Government industry reports showed that the largest market for U.S. cheese sales in the late 2000s was the food service industry, at 43 percent. The second largest market, at 39 percent, was retail sales, and the remaining 18 percent of cheese sales were to cheese processing, including cheese sauces and frozen entrees. According to industry reports, approximately 507 establishments operated in this category in 2010. Industry-wide employment totaled approximately 29,700.

The three key factors that have generally influenced cheese consumption are convenience, health, and flavor. The "low-carb" diet fads of the first decade of the 2000s redefined cheese as a healthy, high-protein snack and meal base. With an increasing number of consumers interested in lean or meatless meals, cheese became the protein substitute of choice, followed by tofu or soybean meal products. By the late 2000s, mozzarella overtook cheddar as the most popular cheese variety.

The United States has developed very few cheeses of its own. Instead, processors replicate European cheeses and use their European names, except for Roquefort, which is a protected name. Some of the cheeses created in the United States are Monterey Jack, Colby, and Herkimer. All these cheeses are firm, ripened cheddar-type cheeses.

Organization and Structure

As Americans increased their appetite for cheese, growing numbers of small, regional cheese makers sent their specialty products to market. U.S. cheese producers obtain the raw milk to make their products from thousands of commercial dairy farms. The number of farms dwindled steadily for decades, but their size increased and milk production efficiency was vastly improved. Many of these farmers are members of one of the several hundred regional dairy co-ops. These co-ops, formed to represent milk producers in setting prices, began to take over other dairy operations, including the manufacture and marketing of a broad range of cheese products and ingredients. Large food processors either owned their own farms or purchased raw milk from the co-ops and independent farmers. Approximately 40 percent of the raw milk produced by the country's more than 9.1 million dairy cows was used to make cheese.

The dairy industry is heavily regulated by the government. Cheese manufactured in the United States must meet standards of identity (SID), which define product characteristics such as content levels of milk fat and manufacturing methods. Either Class I milk or milk of manufacturing grade may be used to make cheese. Class I fluid milk meets strict standards, which include regular inspections of the herd, herd housing facilities, and dairy equipment and milk storage units to ensure that they satisfy health and sanitation requirements. It is used for human consumption as a beverage or in manufactured products such as cheese. Milk of manufacturing grade meets less stringent standards and may only be used for manufactured products.

The government regulates milk pricing through the Federal Milk Marketing Orders authorized by the Agricultural Marketing Agreement Act of 1937, or the Agricultural Act of 1949, which established the ongoing dairy price support program. The complex pricing system affects all segments of the dairy industry.

Background and Development

Although no record exists of when cheese was first used as a food, its origins have been estimated to date back to 6000 to 7000 B.C. Its lasting quality made it a source of nourishment both at home and on journeys, and armies often carried cheese among their provisions. The first U.S. cheese plant was built in 1851 in Rome, New York, and the area remained the center of U.S. cheese production for the next 50 years. The U.S. cheese industry began shifting west to Wisconsin in the early 1900s.

About 1,400 varieties of cheese are produced worldwide. The types are usually classified according to the coagulating agent (rennet or acid) or texture (very hard, hard, semi-soft, soft, or acid). Natural cheeses are made directly from milk (or sometimes whey) by pressing the curd that forms when milk has been coagulated (or curdled), then heated and stirred, before finally draining off the whey (the remaining liquid part of the milk). Processed cheeses are made from a combination of one or more batches of natural cheeses heated to pasteurization temperatures. They were developed in the 1920s to extend shelf life, ensure product uniformity, and make slicing easier, while simulating natural cheese. The first U.S. patent for processed cheese was issued to J.L. Kraft in 1916 and described a method of emulsifying the heated cheese mixture using alkaline salts.

Cheese analogues are made without butterfat and are designed to resemble natural or processed cheese in appearance, taste, texture, and nutrition. The cost savings of using less expensive fats, such as vegetable oils instead of butterfat, provided the incentive to produce cheese analogues. Early examples were produced in the early 1900s by skimming butterfat from whole milk, replacing it with another fat, and following regular cheese-making procedures. Technology using dried milk protein, hydrogenated vegetable oil, emulsifiers, and other ingredients was developed in the early 1970s to simulate processed American and mozzarella cheeses.

Some of the principal cheese products are cheddar and Swiss (hard); Parmesan and Romano (very hard); mozzarella, brick, havarti, and blue (semi-soft); brie, bel paese, and camembert (soft); powders and blends; and reduced fat.

Presliced packaged processed cheeses represented a healthy chunk of cheese sales, and cheese processors followed up with packaged shredded cheese in flavored varieties, including taco and pizza. Retailers also found that presliced cheeses were popular among consumers at the deli counter as well. Vacuum-packed, presliced cheese allowed deli counter staff to deal with other tasks instead of slicing cheese to order and reduced the time that customers spent waiting in line.

Industrial sales of cheese ingredients continued to grow into the first part of the twenty-first century. Much of the growth in this segment was in Italian-style cheeses, but processed cheeses, powders, and other natural cheeses were also big sellers. Industrial uses of cheese expanded as the country's changing demographics resulted in increased popularity of prepared and frozen foods.

Pizza's continuing popularity contributed to the strength of the food service market and the domination of mozzarella in the food service industry. The biggest increase was in hospitals and schools. The most significant change was the waning popularity of cheddar compared to processed cheese.

Lowfat Cheese
Consumer reports and surveys continue to show that flavor rather than fat content drives consumer sales of cheese in the United States. A prime research effort of the cheese industry was to improve the flavor of low-fat and fat-free products. Some success was achieved using innovative adjunct cultures to enhance flavor. The development of starter cultures created especially for low-fat cheeses also allowed for greater flavor with lower acidity.

Organic Cheese
An increasing number of consumers showed continued preference for organic dairy products into the first decade of the 2000s. The dairy producers and cheese makers were receptive to this newer niche market, because it offered a significantly higher profit margin than regularly processed cheese. Wisconsin was one of the two largest organic milk-producing states, but its 306 organic dairy farms represented only two percent of the state's total dairy farms. Conventional leader Kraft Foods Inc. expanded its "Back to Nature" brand name in 2004 to introduce a line of organic cheeses including cheese cubes, cream cheese, processed cheese slices, and shredded cheese. Other companies followed suit, creating organic labels to meet the increasing demand for natural products. According to the USDA, sales of organic products in the dairy industry overall increased by 83 percent between 2002 and 2007.

Statistics from the U.S. Department of Agriculture (USDA) showed total production of cheese rose slowly but steadily through the first decade of the 2000s, from 8.26 billion pounds in 2001 to 9.93 billion pounds in 2008. Italian cheese accounted for 41.9 percent of production, followed closely by American-type cheese, including cheddar, at 41.0 percent. Swiss, Muenster, Limburger, Hispanic, and other cheeses comprised the rest of the total. In the late 2000s, mozzarella was the most popular single variety of cheese in the United States, with a consumption rate of 10.9 pounds per capita, followed closely by cheddar, at 10 pounds per capita. Hispanic cheese was a small but growing category throughout the first decade of the 2000s, although consumption levels remained low at 0.63 pounds per capita. The per capita consumption rate for all cheeses in the Italian category rose 2.5 percent in 2007 to 14 pounds. Prices for all cheese dropped sharply in 2009 due to lower domestic and export demand. The USDA estimated prices for block cheese that year to be $1.30, down from $1.89 in 2008.

Five states held almost 70 percent of the U.S. cheese market in 2008. Wisconsin remained the leading cheese producer with 2.52 billion pounds produced, accounting for approximately 25 percent of the market. California was in second place with more than 2.11 billion pounds, followed by Idaho (805 million pounds), New York (716 million), and Minnesota (641 million).

The United States exported about three percent of all the cheese it produced in 2008. Still, U.S. exports reached a record 290 million pounds in that year, up 32 percent from 2007. Value of shipments reached $570 million. Mexico remained the top market for cheese exports, although other exports to other areas increased significantly, including Middle East and North Africa (increased 145 percent), Southeast Asia (increased 78 percent), and South Korea (increased 56 percent). In the first quarter of 2009, cheese exports were down 26 percent from the previous year, reaching 49.2 million pounds, and although exports to Mexico were up again, those to Asia and the Middle East/North Africa decreased. Cream, brick, Swiss, Neufchatel, muenster, and other specialty cheeses made up smaller portions of the market.

Current Conditions

Despite the crisis of low price/low demand experienced by milk producers in 2008 and 2009, cheese producers increased production amounts in both years. Total cheese produced in the United States totaled 9.9 million pounds and 10.1 million pounds in 2008 and 2009, respectively. Price of cheddar cheese rose about $2.00 a pound during the summer of 2008 before declining again to about $1.70 per pound by the end of the year. Prices fluctuated during 2009, falling as low as $1.15 per pound during the summer of 2009, before rebounding to about $1.60 per pound by year's end.

In 2009, the largest single category of cheese produced was mozzarella, followed by cheddar cheese. However, all American-type cheeses made up the largest single subsector of the industry with 4.2 million pounds: cheddar cheese, 3.207 million pounds; and all other American cheeses, 995,000 pounds. Italian cheeses followed closely with 4.180 million pounds: mozzarella, 3.267 million pounds; parmesan, 28 million pounds; provolone, 24 million pounds; ricotta, romano, and all other Itlian cheeses, four million pounds each.

According to the U.S. Department of Agriculture, in 2009, 26 plants produced 1.2 billion pounds of processed cheese, 28 plants produced 893 million pounds of processed cheese foods and spread, and 14 plants produced 90 million pounds of cold pack cheese and cheese foods. Thus, 47 plants produced a total of 2.19 billion pounds of processed cheese in 2009, down from 51 plants that produced 2.29 billion pounds in 2000.

In the late 2000s and into 2010, specialty cheeses were gaining more shelf space as consumer interest grew in high end cheeses. The segment was, however, somewhat stymied by a stagnant economy that had consumers watching their spending. Other trends continued toward more variety, healthier choices, and added convenience, especially in the sliced cheese segment. Mintel International, as reported by Dairy Foods, found that about four-fifths of cheese is consumed on sandwiches or in foods that contain cheese. As a result, the selection and availability of presliced cheeses grew during the late 2000s, both in the dairy aisle and at the deli counter.

Industry Leaders

Kraft Foods Inc., the leading cheese producer in the United States, is part of a diversified conglomerate worth $40.4 billion in 2009 with about 97,000 employees. Cheese accounted for 14 percent, or $6.8 billion, of 2009 revenues. In 1988, Kraft was purchased by Philip Morris Companies Inc., for $12.9 billion. Philip Morris combined Kraft with a 1985 acquisition (General Foods Corporation) to form Kraft General Foods, the largest coffee and cheese producer in the United States. In 1995, it was renamed Kraft Foods Inc. Its strongest competition in cheese production came from large dairy companies like ConAgra Foods. ConAgra, based in Omaha, Nebraska, reported $12.1 billion in fiscal 2010 sales with 25,000 employees.

Co-ops that process the raw milk from their dairy farm membership are also strong contenders in the competitive cheese industry. Formed in the late 1990s through mergers, including the former Mid-America Dairymen, Inc., Kansas City, Missouri-based Dairy Farmers of America (DFA) had 17,000 members in 48 states and 3,000 employees in 2010. As one of the country's largest dairy co-ops, DFA produces cheese from the milk of its member farms and sells its cheese products under the Borden label through its American Dairy Brands division. Sales in 2009 reached $11.2 billion.

Research and Technology

In the late 2000s, the cheese industry was benefiting from research work at five dairy research and technology centers that were part of Dairy Management Inc.'s (DMI) National Dairy Foods Research Center Program: the Dairy Products Technology Center at California Polytechnic State University, the Midwest Dairy Food Research Center, Southeast Dairy Foods Research Center, the Western Dairy Center at Utah State, and the Wisconsin Center for Dairy Research. In 2009, DMI launched a research program that aimed to create better tasting and more versatile low-fat cheeses, both natural and processed. In addition, the Dairy Products Technology Center was focusing on new applications of technology in the cheese manufacturing process with an emphasis on enhancing flavor, texture, and yield.

Another project sponsored by DMI involved the development of methods to retard mold growth on cheese surfaces. Two affiliated researchers from Virginia Polytechnic Institute and State University in Blacksburg, Virginia, announced their identification of a way to inhibit mold growth by leveraging natamycin, an antimicrobial preservative approved by the FDA for use in the food industry. Natamycin proved especially effective on shredded cheeses, which were more likely to develop molds.

Also working with DMI were researchers at Cornell University, led by Syed Rizvi, who created a "vatless" cheese-making process. In the traditional vat process, nine pounds of whey and one pound of cheese are produced from every 10 pounds of milk. The vatless process leverages a combination of membrane filtration systems and coagulators to produce a "zero" whey mozzarella-type cheese from a smaller quantity of microfiltered and concentrated skim milk.

Finally, researchers at the Wisconsin Center for Dairy Research developed a way to slice cheese by using lasers. By adapting a cold laser, similar to what is used for eye surgery, they were able to use the ultraviolet light, which emits in short wavelengths, to slice the cheese by blasting apart the molecular bonds that hold the ingredients together. The procedure holds promise for the eventual replacement of large commercial cutting machines that require high cleaning, sterilization, and maintenance and often produce work-related injuries.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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