Consumer butter prices not fully reflecting market

Published 5 April 17

The average consumer price for butter has risen by just 10% over the last year, compared with a 90% uplift in the market price for bulk butter. As a result the gross margin* had dropped from over £4,000/tonne in early 2016 to £2,400 by February 2017.

Historically, consumer prices have not been as volatile as bulk butter prices. When bulk butter fell by £1,800/tonne between the summer of 2013 and spring of 2016, consumer prices did not follow. In fact, consumer prices initially rose and only started to reflect lower bulk values from November 2015, more than two years later. When consumer prices did fall, bulk prices were already on the up, and, as a result, consumer prices never fully reflected the low bulk butter prices seen throughout 2015.

The chart plots the AHDB bulk butter price against the ONS retail butter price, converted into £’s/tonne.

Consumer butter price versus bulk price Apr17 

It is worth noting that the consumer price will reflect a number of factors, not just the value of bulk butter. These include distribution, packing and packaging costs, as well as the retailers’ margin. As such, we would not expect to see a pound for pound movement in prices. However, over a long time period, we would expect to see consumer prices to show a correlation with the underlying value of fat in the marketplace.

* Gross margin is calculated as the difference between the average retail butter price in £’s per tonne as quoted by ONS and the AHDB UK bulk butter price.