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Margarine use spreads at butter's expense

New Zealand is renowned for its butter exports and Kiwis have always had a soft spot for the dairy spread and baking ingredient.

Naturally, butter has been a long-standing item in the consumers price index (CPI) basket. By comparison, margarine was added to the CPI basket in 1975 as a result of a basket review in 1974. At that time, 79 percent of spending (in dollar terms) on butter and margarine was on butter, and the remaining 21 percent was on margarine.

In February 1975, butter was less than half the price of margarine, averaging about 32 cents per pound whereas margarine cost about 67 cents per pound. This means that, in 1975, butter accounted for nearly 9 kilograms of every 10 kilograms purchased, while margarine accounted for approximately 1 kilogram.

In 1975, about 60 cents in every $100 spent by households was on butter and margarine. That figure fell to 25 cents in every $100 in 2008.

Based on periodic CPI reviews, the relative importance of spending on butter as a percentage of spending on butter and margarine overall, has declined from 79 percent (in dollar terms) in 1975 to 44 percent in 2008.

Table 1

Spending on Butter as a Proportion of Overall Spending on Butter and Margarine
Year Percentage
1975 79
1978 80
1981 82
1984 77
1989 74
1994 62
1999 59
2002 50
2006 48
2008 44

 

In 1984, margarine was still more expensive than butter, but the gap had narrowed. Butter was about $1.05 per 500g in February 1984 and margarine averaged $1.20 per 500g.

Margarine was still a little more expensive than butter in 1989, but by 1999 it had become cheaper.

In June 2006, butter averaged about $2.10 per 500g and margarine averaged $1.95 per 500g. Butter prices increased strongly in late 2007 and early 2008. In November 2008, butter prices were 81.3 percent higher than in June 2006. By comparison, margarine prices were 16.0 percent higher, giving the vegetable spread a sizable price advantage. Butter was about $3.75 per 500g in November 2008 and margarine averaged $2.30 per 500g.

New Zealanders currently buy nearly 30 million kg of butter and margarine from supermarkets each year. Margarine accounts for about 6kg of every 10kg purchased, while butter accounts for about 3kg. Blends account for the remaining 1kg.

As part of the 2008 food price index review, Statistics New Zealand estimated that the amount of butter bought in supermarkets decreased by about 10 percent in the year to June 2008 (in response to rising prices), and the amount of margarine bought rose about 2 percent.

Back to Price Index News: January 2009

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