As covered in the last post, butter is being imported to the U.S to meet domestic demand. Currently, about 7% of domestic butter is imported and Irish butter is the largest import source by far (Table I). U.S. Tariffs of 15% on EU products have just been agreed to. Will this increase domestic butter prices?
As seen in Table I, Ireland is by far the largest supplier of butter with over half of the U.S. butter imports. Will higher retail butter prices result in lower consumption of imported Irish butter?
The five countries listed in the Tables below supply 90% of the U.S. butter imports.
Butter from Ireland is unique in two ways. It comes from grass-fed cows and has a lower water content than most U.S. processed butter. Also, most of the butter shipped from Ireland is branded with an established strong brand name, “Kerrygold”. The US. acceptance of “Kerrygold” butter has doubled in the last five years. “Kerrygold” is now the second best-selling butter in the U.S. behind Land 0’ Lakes.
Sales of Irish butter decreased in the last three months as tariffs became likely.
U.S. producers and churners can make butter with similar characteristics to Irish butter, but the brand name “Kerrygold” adds value to “Kerrygold” Irish butter.
The retail price of Kerrygold typically ranges from 6% to 27% higher than conventional U.S. butter. Even with the higher prices for Kerrygold, U.S. sales have doubled with its acceptance. Consumers of “Kerrygold” have accepted the higher price and sales have grown. Will current customers quit buying Kerrygold with an increased price 15% higher? Probably not, as current buyers like the product and are already willing to buy a more expensive butter. Will new buyers of Irish butter spend 15% more for a higher priced butter? Most likely, the growth rate of “Kerrygold” in the U.S. will slow.
The taste of Irish butter is richer and has a higher butterfat content which are key to the purchasing success, but the brand name is also a very valuable asset.
To fulfill the need for U.S. consumption of butter, imports are needed to meet domestic demand. If “Kerrygold” decreases in sales, additional U.S. butter production is needed, and this is usually a slow process. Additional imports from new sources will have to be found.
Buyers of Irish butter will have to pay a little more, but, as with other items with new tariffs there will be higher priced consumer purchases. In the case of butter, the price increases will be subtle. National and international brand names are very valuable. Can “Kerrygold” be processed in the U.S.?
