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Lactalis McLelland - The Interview

With a quality, branded cheese portfolio offering the best in both British and Continental varietals, Lactalis McLelland is the UK subsidiary of the French-owned Lactalis Group, one of Europe's largest dairy companies, with a turnover of Û7.25 billion in 2006. Lactalis McLelland incorporates the former Lactalis UK & Ireland operation with its portfolio of continental cheeses and the former A.McLelland & Son Ltd business with its popular cheddar brands, led by Seriously¨. Famous for its PrŽsident¨, SociŽtŽ¨, Seriously¨, Galbani¨ and Galloway¨ cheese and butter brands, the company is passionate about maintaining the traditions and heritage of cheese making. Sales and marketing for Lactalis McLelland's Continental range are coordinated from the New Malden office, from where Martin Rickenback, Group Marketing Director at Lactalis McLelland, spoke to The Grocery Trader.

The Grocery Trader - First question, Martin: as Group Marketing Director for Lactalis McLelland, which product areas does your personal remit cover?
My role is a new one created with my arrival, and covers our full UK range. It's also part of our move to broaden our attack to the UK out of home market, which is becoming more interlinked with retail.

GT - What do you see as the most exciting challenge of your job?
The biggest challenge has been unlocking the incredible potential of our stable of brands. There are a huge number of opportunities within the cheese sector, and we intend to bring our experience and passion about making cheese to bear so we maximise them to the benefit of our customers and brands.
We're committed to excellence in all areas of making cheese, and continue to win awards across our portfolio. We're constantly reviewing our business with our customers and looking to optimise their ranges.

GT - Were you a Lactalis person or a McLelland person, or have you joined since the merger?
I've joined since. I previously worked for a number of food companies, including dairies and Fortune 500 companies like Unilever and Grand Met. I have a long track record of trade experience in the UK and internationally, including being Marketing Director for Knorr's EMEA business.

GT - Is the integration of the McLelland business complete now?
Yes, it is. We've strengthened the business and relocated the back office to Glasgow. Cheddar marketing is now run out of Glasgow as well: the McLelland cheeses are manufactured at Caledonian Creamery in Stranraer. We also make Orkney cheddars, in a joint venture with the Orkney Farmers and local government.

GT - How big in turnover is Lactalis McLelland UK?
Lactalis McLelland is one of the Lactalis Group's largest European affiliates. The overall UK cheese market is growing 2% in value, and we're growing in line with it: the company as it is now has existed less than a year, but we're growing in all key areas and we're ahead of the market in cheddar, mozzarella and Camembert.
We also market butter under the PrŽsident brand. This is a major market for Lactalis McLelland, with our butter sales up over 20% annually.

GT- How big is the UK retail cheese market, and how big are the different sectors?
In the 52 weeks to 12 August, the market was worth £1.9bn, up 0.4% (TNS), Cheddar was £993m, +2.4%, and Continental (excluding blue) +2.9%. The other categories have fallen - Territorials by 5.9% to £200m, total blue 2.1% to £66m, Processed 1.2% to £323m, and soft white 5% to £160m.
Where growth is happening, it is for the classic reasons: 'TLC' from manufacturers in advertising and marketing, and category coverage from retailers.

GT - How does your UK business fit into the overall Lactalis Group?
Seriously¨ is a global brand, for which we're the brand guardians, and we encourage our sister operations in other countries to launch it as 'Seriously' or a local adaptation. We also sell international brands such as PrŽsident and Galbani, adapting these to a local platform for the UK.

GT - Do you export any British cheeses in other countries?
Yes, we do. Exporting starts with ex-pats but doesn't finish there: Seriously¨ for instance is now in 23 markets overseas, including Japan, where it's very popular. Galloway¨ is also sold internationally. We recently boosted our export operations, investing in upgrading the technology in Stranraer. We're about to take our Cheddar portfolio into France as well, through the group. Selling real cheddar to the French is proving quite encouraging: so far we're in one of the top three multiples, in nearly 400 stores.

GT - Strategically, how do you balance satisfying British consumers' demands for their beloved cheddar with the objective of winning us round to continental cheeses?
You're right about it being a balancing act. You can't shake Britain's unyielding love affair with cheddar, whose size and penetration goes on growing, due to innovation and nurture. We benefit all round as the Number Two branded player in cheddar.
British per capita consumption of Continental cheese is still relatively far down the table compared to the rest of Europe, but it's certain to grow. Continental cheese accounts for less than 50% of cheese consumed here, but there's major interest from consumers and retailers alike.

GT - How are you going about making more Brits fall in love with Continental cheeses?
We're leveraging the brands' inherent strength: a lot of people's first exposure to PrŽsident is when visiting France, where it's brand leader in certain areas.

GT - What proportion of Lactalis-McLelland's UK retail business is Cheddar?
Cheddar is a little over 50% of the cheese market, and our sales reflect this.

GT - What proportion of your retail sales go through supermarkets?
Our sales through the key retailers again mirror the market picture: we have good distribution on our key products, and long term we're looking to build this alongside our ambition to grow out of home.

GT - Do you have one sales team for both British and Continental cheeses?
Yes, we do: customers generally appreciate having a single source for the two types, although we have multiple contact points with each retailer. The company's shape now means we can offer a broad product solution backed by a consumer-based perspective on the overall market.

GT - Do you supply both pre-packed and 'block' cheese? How are retail sales split between the two formats?
We supply both, but here again our sales are in line with the market. Individual accounts' splits depend on the customer's focus on deli versus pre-pack: we offer some retailers a comprehensive deli range, while others prefer a more straightforward selection.

GT - How has the UK cheese market been affected by concerns over obesity - are we still eating plenty of what we fancy, or are we consciously cutting down?
Consumers are now much more aware of the healthy eating debate. Younger males are still eating heartily, but older ones are more careful. Overall the cheese market is in good health, and lighter versions, including our own PrŽsident¨ Light, are growing week on week.

GT - Are reduced fat cheeses catching on in the same way as semi-skimmed and skimmed milk a few years ago?
There's growth in reduced fat and lighter products, driven by the taste reassurance brands bring to the consumer; meanwhile as manufacturers we give consumers the option.

GT - Can you talk us through the different brands in Lactalis McLelland's product portfolio, and how they fit together in retail?
In the Cheddar aisle Seriously¨ is the UK's second largest brand, worth over £60m, more than £45m of which is the Seriously Strong range, made exclusively with Scottish milk. There's also Seriously Vintage and Seriously Farmy - farmhouse cheddar, made in traditional open vats in cheese rooms; Seriously Smooth; and Seriously Spreadable, the first adult cheese spread. Galloway¨ is Scotland's favourite family cheddar, targeting mainstream family cooking, grating and sandwiches. McLelland¨ is Scotland's number one branded cheese house and McLelland Mature is a leading brand there, alongside our Orkney branded cheddars, Galloway¨ and Seriously¨ brands.

In Continental soft cheese, PrŽsident¨ Brie and Camembert are widely appreciated; PrŽsident¨ Camembert is the brand leader in France. This summer we re-launched our Brie pre-pack featuring the same recipes as the French varieties, communicating their authenticity to newcomers to the category. In Continental hard cheese, we've been very successful with our Emmental cheese, the bestselling such varietal in the UK. We've re-launched our Emmental light slices, which are only 9% fat, among the lowest fat cheese in the market. Internationally PrŽsident¨ is a Û1bn brand.

Galbani¨, a business we've recently acquired, is the UK's preferred brand of Italian cheese. It's also the number 1 in Italy. The principal business is Mozzarella, plus blue cheese, led by Dolcelatte¨. Other important speciality cheeses include SocietŽ Roquefort and Basque cheeses, together with goat and sheep milk products.
GT - With Christmas approaching, what proportion of cheese sales are in the pre-Christmas period? Which cheeses do particularly well at Christmas?
The Christmas period offers retailers the chance to double their monthly sales of continental cheese. It's a good time for luxury items such as Roquefort, while classic Continental cheeses like Brie and other cheeseboard favourites like goat and sheep's cheese also do well. Consumers also trade up on cheddar at Christmas, with Vintage proving popular. We have a separate marketing team who present our dedicated Christmas solutions to the major accounts, working a long way ahead.

GT - Can you give us a picture of the typical UK consumers for your various cheeses?
There's no single typical customer: our premium brands like PrŽsident¨, Seriously¨ and Galbani¨ attract a discerning consumer, and there's a slight southern bias on more up market cheeses, depending on the product.

GT - Looking across your range, what's the proportion of usage split between recipes, sandwiches etc and on the cheese board?
Again it depends on the cheese: Italian cheeses like Mozzarella, Mascarpone and Ricotta are largely used as ingredients, while French specialities are largely for the cheeseboard. Cheddar usage is fairly evenly split between culinary and sandwiches or cheese board.

GT - I understand that Lactalis McLelland as a company is "passionate about maintaining the traditions and heritage of cheese making." When you're making cheese on an industrial scale as you do, how feasible is it to use traditional methods?
It's totally feasible! We have a cheese grader at Stranraer who selects and grades cheeses in the time-honoured way, but we also employ state of the art production technology. Our farmhouse cheeses are still made using artisan methods: you can't win awards for the best cheeses like we do without having the techniques in place.

GT - What consumer marketing activity are you currently carrying out in the UK?
We've been sponsoring programmes on UK Food TV and Bright Ideas, presenting Seriously, PrŽsident and Galbani to the core target market. We do extensive sampling and demonstrations: we're very active at Highland fairs with the McLelland cheeses, and we've been featuring Galbani at BBC Lifestyle Fairs. We've run a BBQ roadshow for Emmental Slices, which are brilliant on burgers, and PrŽsident Butter, and doing in-store sampling for Seriously Smooth.

GT - Has your cheddar production been affected by the poor summer?
Not directly. A variety of factors affect milk's availability and price, not just the weather.

GT - Will you be putting up your prices in the near future due to UK farmers increasing their milk prices?
The prices of Seriously Strong and our other cheddars are due to go up as we speak. We're doing no more than recouping the cost of farmers getting more money for their milk. Incidentally, we don't own any farms in Scotland, but we invest in supporting and nurturing the ones who supply us. When we won the Supreme Cheese Award at the British Cheese Awards recently Andy Smith, our Group MD, paid tribute to the farmers involved: it's a combined effort.

GT - What are the biggest external factors affecting UK demand for cheese generally?
Whatever factors may affect demand short term, I can't see a time when people stop eating cheese altogether. In any case our cheeses tend to be more up market, and people buy them on quality. When it comes to ready availability of quality cheeses, consumers have never had it so good.

GT - How do you work with the multiples to help them build their share of the continental cheese category, and how much further can it grow?
Continental cheeses' UK penetration is half the level of cheddar: there's enormous scope to build it without affecting cheddar. We actively develop partnerships with retailers, calling on our deep international knowledge of both cheese and cheese consumers. Given time, Continental cheese could well catch up: who would have thought a generation ago that Chicken Tikka would now be Britain's most popular meal?

GT - Final question: where do you see Lactalis McLelland UK going from here?
Anything's possible! We'll go from strength to strength - we've got a great brand portfolio, backed by the resources of a major international group, and we know all about meeting consumer needs. It was my ambition to build the business from the moment I first walked through the door. I get a great kick out of seeing brands and people do well, and prosper in a challenging environment, which we will continue to do.
Contact Information
For further information please contact:

Lactalis McLelland
John Merriam
National Account Controller
Tel: 020 8336 6536
www.galbani.co.uk
www.president.uk.com
www.mclelland.co.uk