'We're losing to cottage cheese': The protein-maxxing craze is hurting cream cheese sales

By Bill Peters

U.S. cottage cheese sales have more than doubled from levels seen in 2021

Cottage cheese is making a comeback thanks to social-media videos and a protein craze.

After spending years forsaken in Americans' refrigerators, cottage cheese is staging a comeback, and that is weighing on sales of cream cheese.

Kraft-Heinz said Wednesday that as the nation's ongoing protein craze drives more people to buy cottage cheese, its Philadelphia Cream Cheese brand - which commands a majority of the U.S. market for cream cheese - was falling behind.

"What Philly needs from a category perspective is more innovation, because it's very clear where we're losing as a category," CEO Steve Cahillane said on Kraft Heinz's (KHC) earnings call. "We're losing to cottage cheese and other more protein-forward [items]."

"We need to do more innovation around what the consumer is looking for, vis-à-vis protein, vis-à-vis flavors, vis-à-vis overall innovation," he added.

U.S. cottage cheese sales rose 17.7% to around $2.32 billion for the 52-week period that ended on Oct. 4, more than double the levels seen in 2021, data from Circana show. By contrast, sales of cream cheese over that period fell 4.4% to around $2.88 billion.

For years, cottage cheese was more tolerated as a healthy choice than it was actually enjoyed. But in recent years, producers haven't been able make enough of it. Now the cheese is being used as a spread and appearing in recipes for everything from scrambled eggs to ice cream. The food industry is taking notice.

Analysts credit "protein-maxxing" - the social-media-driven protein craze - as a factor behind the demand. Use of GLP-1 weight-loss drugs has also played a role, as people look for ways to get more nutrients into their diet.

"It's perceived as a high-protein way to keep your muscle mass up when you're on GLP-1s," said Brian Walton, an economist at Bozic, a dairy-market data tracker.

Melissa Altobelli, a dairy analyst at Circana, said the resurrection of cottage cheese started a few years ago after the diary product went viral on TikTok, with people watching cooking videos to get ideas for how to use the cheese, she said.

A shift away from larger meals and toward snacking has also benefited products like cottage cheese and yogurt, given their nutritional value and the way they're often packaged, which can make them easier for people to eat on the go.

"More than half of consumers report snacking three or more times per day, and snacking occasions are increasingly replacing traditional meals rather than simply occurring between them," Altobelli said.

The protein boom has led to tighter supplies of whey, a high-protein dairy byproduct often found in drinks and snacks, driving up prices. According to government data, the price of Class II milk - used to make cottage cheese and other soft dairy products - stood at $19.15 per hundredweight, or 100 pounds, in October. That was off higher levels reached at various points earlier this decade, according to a compilation of those prices provided by Bozic. However, costs for other products beyond cottage cheese itself influence those prices.

Production levels for cottage cheese are still lower than during the boom seen in the 1970s, which eventually gave way to yogurt. But some large companies are spending more on production.

Carl Colizza, CEO of dairy processor Saputo (CA:SAP) - one of the biggest makers of cottage cheese in North America - said in September that it was trying to keep pace with consumers' appetites. During a conference that month, he cited "a couple of exciting areas where we're investing in additional capacity, like in cottage cheese and in some cultured products where we are struggling to meet demand."

Cottage cheese is also attracting investments of other kinds. In January, investment firm L Catterton said it would take a majority stake in dairy brand Good Culture. In a release, L Catterton said Good Culture's sales had increased nearly fourfold over the prior three years.

"In 2014, I realized there was massive whitespace in a stale category that was lacking innovation," Jesse Merrill, Good Culture's co-founder and CEO, said in that release.

As for cream cheese, Kraft Heinz in September said it would roll out new versions of Philadelphia Cream Cheese, with flavors like hot honey, cranberry orange and salted caramel, in an effort to stand out on grocery shelves. The company also recently launched a lactose-free cream cheese under the Philadelphia name. The Philadelphia brand had roughly 62% of the market share for U.S. for spreadable cheese last year, according to Eurominotor International.

Kraft Heinz's sales fell 2% in the third quarter as the consumer-goods industry dealt with cautious consumers and stiffer competition. But on Wednesday's call, Cahillane downplayed the threat to cream cheese posed by cottage cheese's ascent.

"There's nothing wrong with the brand," he said of the company's Philadelphia line. "It's just the category is under some pressure relative to switching out of cream cheese into cottage cheese and others. And that's very addressable, but it's going to take just a little bit of time."

-Bill Peters

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11-06-26 1214ET