Global Demand for Pizza Cheese will Grow

USDEC projects an additional 100,000 tons of pizza cheese exports per year through 2020. Are U.S. cheesemakers poised to take advantage?

Pizza powerhouse Papa John’s International recently said it expects to add 130-200 international stores annually for the “next several years.” It already operates more than 1,500 units in 41 nations outside the United States and called the international market a “significant growth opportunity for many years to come.”

Increasing global demand for pizza cheese is good news for a U.S. dairy industry enduring an ongoing global market imbalance between supply and demand, along with intensified export competition from the EU and others.  

As the director of market research and analysis at the U.S. Dairy Export Council, I have pored over the data on projected pizza cheese supply and demand in more than 20 global markets and come to a cautiously optimistic conclusion.

U.S. cheesemakers are well-positioned to secure a large slice of the world's growing love for pizza. But it won't be easy.

Current realities, future opportunities

The recent climate for U.S. cheese exporters has been difficult, to say the least. Our industry has dealt with the aftermath of the European Union’s decision to remove milk production quotas, a plateau in Chinese dairy imports, reduced purchasing power in oil-producing nations, the Russian trade embargo, and a stronger dollar, among other headwinds to export growth. The combination has sharply intensified global competition among a handful of large exporters aggressively seeking buyers to take up abundant supplies.

Consequently, we have seen a fall in U.S. cheese exports. After rising more than six-fold from 2004 to 2014, U.S. cheese shipments fell 14 percent to 698 million lbs. in 2015 and were down 22 percent through the first five months of this year.

While highly competitive conditions appear likely to hold, opportunities abound for U.S. cheese exporters. 

At USDEC, we project a compound annual growth rate of 3.2 percent in overall international cheese trade through 2020.

As a subset of all cheese exports, pizza cheese could grow at nearly double that rate. We base that optimism on a recent USDEC analysis of pizza cheese opportunities in 23 global markets. In those markets, we project 5.7 percent per annum growth for pizza cheese through 2020.

That would mean an additional 100,000 tons of pizza cheese traded internationally each year.

Per capita consumption figures show potential 

Emerging markets and developed countries alike present fertile ground for pizza growth. We see the greatest opportunities in Asia, where pizza is just beginning to take off in some countries. 

Estimated U.S. per capita consumption of cheese on pizza is more than 8 lbs. per year. Even in Japan—the most advanced pizza market USDEC has analyzed from both an economic and pizza penetration standpoint—annual per capita pizza cheese consumption is only 4.9 lbs. Most other nations in our research ranged from a quarter-pound to 3 lbs.

With populations large in many Asian countries, even a modest uptick in pizza consumption can significantly increase demand for pizza cheese.

In addition, markets in Asia and other parts of the world are almost entirely dependent on imports to meet their cheese needs—a situation that will not change for years, if ever.

The challenge to U.S. cheesemakers

U.S. cheesemakers are a natural to succeed in this environment. No other major nation in the world consumes more pizza than the United States. We are pizza experts, increasingly recognized for our strong pizza focus, ample capacity, supply consistency and depth of pizza cheese knowledge.

There are, however, challenges. Suppliers from Oceania and the EU are pricing very aggressively in the face of global oversupply. Given longer-term market trends and the economics of global dairy trade, U.S. prices are bound to grow more competitive. But they are hindering U.S. growth at present.

During a period of heightened competition, growth requires acute attention to customer needs. This includes adapting to diverse pizza cheese preferences, from color to stretch to sodium content to halal certification. In many countries, assistance from U.S. suppliers would be welcomed with up-and-coming pizza trends, such as artisan pizza and “healthier” pizzas that better align with growing consumer wellness concerns.

Grated cheese sales encouraging

U.S. cheesemakers are not starting from scratch. They are already holding their own in the market despite the intensely competitive circumstances.

For example, last year, when overall U.S. cheese exports declined, U.S. shipments of grated cheese (most of which is used on pizza) rose 19 percent. This year, with overall U.S. cheese exports down again, grated cheese sales continue to grow, up 6 percent through April. Grated cheese does not capture the universe of all pizza cheese, but U.S. performance there is a good sign.

Global demand for pizza cheese will unquestionably grow. It is up to U.S. suppliers to capitalize on it.

(Editor's note: A version of this article first appeared in Cheese Market News.)

Learn more:

• Getting Comfortable Being the Cheese Leader
• Peeling Back the Layers of International Foodservice 
• Emerging Economies will Drive Future Cheese Demand
• Dairy Export Opportunities Series: South Korea

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The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. How to republish this post.