The U.S. Shredded/Grated Cheese Market: A Competitive Profile

Porter links high market-share with cost leadership strategy which is based on the idea of competing on a price that is lower than that of the competition. But, customer-perceived quality—not low cost—should be the foundation of competitive strategy, because it is far more vital to long-term competitive position and profitability than any other factor. So, a superior alternative is to offer better quality vs. the competition. In most consumer markets, a business seeking market-share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality better than that of the competition: at a price somewhat higher to signify an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run. Quality, however, is an intricate concept consumers generally find difficult to understand. So, they often use relative price and a brand’s reputation as a symbol of quality. The origin of the U.S. Dairy Industry goes back to family farms where cows grazed on grass. But today milk is produced in factories where cows are raised on corn feedlots which can make them prone to disease. Total U.S. shredded/grated cheese retail sales for 2008 were $3 billion. There were 17 package sizes ranging all the way from 1 oz to 80 oz. Of these, the 8-oz size captured about two-thirds of the market at 66%: the segment our statistical analysis is centered on. The shredded cheese segment accounted for the lion’s share of the market at 88.5%, with grated cheese way behind at 11.5%. It is a very competitive market with 509 brands in 2008. However, we have focused analysis on 28 brands whose 8 oz-pack sales were over $1 million. We tested two hypotheses: (1) That a market leader is likely to compete in the mid-price segment; and (2) that the unit price of the market leader is likely to be somewhat higher than that of the nearest competition. Employing U.S. retail sales data for 2008 and 2007, we found that the results supported both hypotheses for 2008, as well as 2007. We also found strong support for the idea, that relative price is a strategic variable. We compared the results of this project with similar studies: the U.S. Men’s Shaving Cream Market, the U.S. Beer Market, and the U.S. Shampoo Market. We found the results to be very similar, indicating a pattern emerging for consumer markets. Finally, we discovered four strategic groups in the industry.