Subtitles section Play video Print subtitles Americans love cheese. Cheese consumption reached an all time high in the United States in 2018, which is weird because Americans are drinking less milk than ever. Consumption of fluid milk plummeted from 247 pounds per person in 1975 to 146 pounds per person in 2018. But at the same time, cheese grew from just over 14 pounds in 1975 to about 38 pounds in 2018. Plus an extra two pounds of cottage cheese, which, let's be honest, is really a separate category altogether. The only other category of dairy product that has seen such growth over the last half century has been yogurt, which is still a far smaller share of the total than cheese in terms of consumption. So why are Americans eating so much more cheese when many other categories of dairy are either falling stagnant or growing only slightly? The rise of cheese in the United States owes a lot to the rise of restaurants, carry and delivery, according to cheese historian Paul Paul Kindstedt. One type of cheese that has absolutely exploded since the 1970s is mozzarella. The stuff you are most likely to see melted all over pizza. Americans at 1.19 pounds of mozzarella per person in 1970 and 12.15 pounds in 2018, making it the most popular single variety of cheese in America. And yes, pizza is said to be one of the primary reasons mozzarella has become so popular across the United States. Pizza moves about 25 percent. When you talk about mozzarella, pizza moves about 25 percent of the cheese, you know, in the US. But moves a tremendous amount of volume. Pizza was once not the American favorite it is today. Instead, it was a distinctly Italian specialty found in the mostly Italian sections of cities around the country. But in the middle of the 20th century, pizza went mainstream. Large chains such as Domino's, Pizza Hut and Little Caesars brought the Neapolitan Street food to the masses and pizzas reach has been growing ever since. A study in 2014 from the USDA found that one in eight Americans aged two years or older, and more than 25 percent of all males between the ages of six and 19 ate a slice or more on any given day. The US pizza market was worth more than $45 billion in 2019. Domino's, the world's largest pizza chain, built its business on perfecting the art of rapidly making and delivering pizza to households around the country. As it has grown more popular, the pizza market has segmented from cheap slices all the way up to gourmet pies. There are sit-down restaurants, carry-out delivery, take and bake and pizzas at the grocery store, fresh and frozen. What's happening with the whole pizza category and the cheese piece, you still have that value pizza you can get for two dollars at the grocery all the way up to $20 plus at restaurants and continued innovation taking place with brick oven pizzas. Now, you know, they're selling $5,000 pizza ovens that people put in their backyard. While pizza is originally Italian, American companies have successfully exported their own version to other countries around the world. Even those were cheese is traditionally rarely eaten, such as China. But other varieties of cheese have also benefited from the decades long growth of food service in the U.S. The increasing popularity of cuisines such as Mexican and Southwestern-style food have boosted the popularity of classic American-style cheese varieties such as Cheddar and Jack. We partnered with Taco Bell. We started working with them in 2012. They used to view cheese as a garnish like lettuce and tomatoes, and we started showing them all these new innovative properties that cheese can do. You know, now they stuff the shell with cheese. You know, we just launched with them a grilled cheese burrito where actually, you know, it's got cheese sauce on the inside and a melted cheese on top. Their consumers love the transformative properties. And so that's just a really fun thing that you see why it's so important to the consumer, because they can use in so many different ways in the transformation. The way mozzarella has been able to piggyback on pizza to achieve its popularity says a lot about how the fate of one food product is often tied to that of another. In the middle of the 20th century, another cheesy substance road high in the U.S., in large part on the popularity of another classic American dish: the fast-food hamburger. It is hard to talk about the history of cheese in America without talking about, well, American cheese. The yellow orange slices are famed as essential components of classic American diner staples, such as cheeseburgers, grilled cheese sandwiches and tuna melts. American cheese is a processed cheese, which means it is made from cheese and some other ingredients that, among other things, help prolong its shelf life and allow it to be smoothly melted. Perhaps the best known brand of American cheese Kraft singles are made of milk, cheddar cheese, whey, milk protein concentrate, milk fat, sodium citrate, calcium phosphate, modified food starch, whey protein concentrate, salt, lactic acid, annatto and paprika extract for color, natamycin, which is a natural mold inhibitor, enzymes, cheese culture and vitamin D3. Apart from slices such as Kraft singles, processed cheese also refers to products such as Velveeta and a range of spreadable cheeses such as cream cheese and cheese products such as Easy Cheese and Cheez Whiz. It appears a few different groups of food scientists were working on recipes that would become what we know as American cheese. But in 1916, the Canadian born American businessman James Lewis Kraft patented the process for producing the American cheese that would make the Kraft brand name famous. Later, American cheese became a staple ingredient on cheeseburgers served all around America and later around the world by fast food giants. Perhaps most famously, McDonald's. You look at like a McDonald's right, and the launch of that chain and the launch of the hamburger using American cheese on that kind of just helped install that culture and in the world. And I always, I always still tell people the fun fact: if you think about 85 percent of cheeseburgers...or burgers have cheese on it, and only about 10 percent of chicken sandwiches have cheese. I would much rather have the taste of beef versus the taste of chicken, there kind of side by side. They're kind of...chicken's blander yet they put more cheese on beef and chicken. So chicken's an opportunity when you think about that. However, processed cheeses have declined in popularity over the last decade or so. For example, Industry Research Group IRI told CNBC that processed cheeses such as slices and spreads sold in the cheese section of the grocery store dairy aisle have seen sales decline nearly 18 percent since 1995, from eight point seven pounds per person that year to seven point zero seven pounds in 2018. So there's a couple of categories within dairy that have been struggling over the past few years, one being processed cheese and one being margarine. And so you think about how consumers have moved away from processed food, processed cheese and and margarine have really struggled over the last five years. Processed cheeses like processed foods in general have their critics who say these long-loved goods are unhealthy examples of America's misapplication of industrial manufacturing methods to food. It is not even cheese, say some haters. In a comment to CNBC, Kraft said its process historically brought safe, fresh and convenient cheese to millions of Americans at a time when that wasn't the norm. American cheese continues to be popular in over 60 percent of households. Kraft also said it makes over 30 flavors of natural cheese in a variety of cuts. Some industry analysts think the decline has to do with these consumer concerns and with the way processed foods are labeled. Processed cheese, as you know, I think it suffers from having a nomenclature that, you know, from the code of federal regulations its named as processed cheese, and that has to be on the package, you know, legally. And what does process mean? A lot of them are, you know, all dairy. It just allows it to have a longer shelf life and the science behind it allows it to melt just beautifully. And that's why it's so great on a burger, because it's just got that perfect melt. You know, if I want to make a cheese dip, there's not much better than a processed cheese to put that together because of its smooth melt, it's not going to oil up. That's the properties it owns and it should have. Intriguingly, while grocery sales of processed cheese are down, customers ordering cheese or sandwiches with cheese at the deli counter, whether in a grocery store or elsewhere, seem to be opting for American cheese, the processed kind at about the same rates they have in the past. Another reason why processed cheese might be falling out of favor is that technology for packaging natural cheese has improved tremendously, undercutting the need for preservatives. When you shipping forward to the category, you. What happened was it was the introduction of all the new flavored cheese and also, I'll call the packaging system, higher quality packaging preservative systems to enable natural cheese to be launched and stay without molding. You know, if you look at like a sliced sandwich cheeses today, you know, you definitely need to, you know, rely more on multi-vac systems to be able to preserve, shut and seal, you know, with less preserve. Right, they have zero preservatives like the natural or the processed cheese have. And it is notable, however, that processed cheese has seen a bit of a resurgence of interest amid the coronavirus pandemic. With more people cooking at home, stocking their pantries and perhaps eager for nostalgic comfort foods, the fact that processed cheese is processed might actually now be a selling point. But consumers now with, with faced with wanting to have products that have a longer shelf life, that maybe were canned, that they were shopping in different the different sections of the store that maybe they hadn't shopped in before. Kraft Macaroni and Cheese, I think, had a huge, you know, a huge uptick in terms of the volume that it sold during COVID. But what we saw was we saw processed cheese and margarine all of a sudden did some pretty good growth, which we hadn't seen, again, for like the last four or five years. Kraft told CNBC it has seen double-digit growth in its singles product in 2020 and pointed out that internet searches for grilled cheese sandwiches, which frequently feature Kraft singles, are up 30 percent. While restaurants are largely behind the rise of cheese eating in America, what consumers are buying at grocery stores also shows how the cheese market has changed. Stores are stocking ever-greater varieties of cheese in an array of forms to make it easier for customers to incorporate cheese into their diets. The aforementioned changes in packaging have had a huge impact, and not just on processed cheese. Historically, grocery store cheese was sold mostly in blocks. Over the last few decades, companies have found ways to package cheese for convenience and to market new categories of products for customers. Kraft American Singles. These pasteurized processed cheese food slices can make your basic tuna salad sandwich pretty special. They're individually wrapped, so they're easy to open. Sometimes all a company has to do to induce customers to buy cheese is cut it for them. For example, those bags of shredded cheese you see everywhere; they came about in the 1990s when the process for easily shredding and packaging large amounts of cheese was developed. Now shredded cheese is the biggest seller of natural cheese varieties. The entire natural cheese category is worth around $17-$18 billion, and shredded cheese alone is about $6 billion of that. Customers like the convenience. One of the things we looked at, is once you put a shredded cheese in the household, they just use so many different ways. I think about a quarter of the usage was just people snacking out of it. You know, if you're making a omelet, people still snack. If you're making a quesadilla they were still snacking before they even made the quesadilla and it just became a snacking device and it actually led to different snacking forms being introduced wen you go in homes and do that ethnography with the products. That's where you see a lot of innovation take place,"well, how are you using this?" There is also pre-sliced natural cheese, which is sold in what are called shingled packs, because they resemble the shingles found on a roof. But those don't sell as well as whole blocks. Cheese is also cut into crumbles, sticks, cubes and other snack or garnish ready sizes. The Babybel brand sells small wax-coated wheels of cheese. Brands such as Oscar Mayer and Sargento sell snack packs with cheese meat, nuts, dried fruit and chocolate. In some cases, these companies are trying to promote cheese as a portable protein source, capitalizing on interest in high protein diets. Oscar Meyer even calls one product Portable Protein Packs. It is a way to keep cheese palatable and relevant to customers whose tastes in recent years have increasingly veered toward foods that are at least perceived to be natural and healthy. One potential challenge to cheese is plant-based cheeses. So far, these are a small portion of the market. Only about 3.3 percent of products competing with processed cheese are plant-based and 0.1 percent of those competing with natural cheeses are plant-based. But technology is improving. To remain competitive with new rivals like these cheese makers are experimenting with technology that can infuse cheese with new flavors and are even trying out different feeds for dairy cattle in a similar manner to the trend in grass-fed beef. You know, I would say in the last decade you started seeing, it's more in the higher end restaurant arenas, but, you know, you start to see some cool things. The fusion of cheese, whether it's cheese infused with coffee, cheese infused with wine. So you think about how it would help the category to much more experiential and the innovation that's come into that category is really focusing on consumer need states now. A lot of this innovation makes its way into restaurants before it hits store shelves. Customers have also developed an ever-greater interest in cheeses that are craft-made, locally sourced, ethically produced and environmentally sustainable. The artisanal or craft cheese market in the United States is so far small, but it is growing. And that's where the artisan cheese makers really come in and are able to find a niche that they want to expand beyond just the typical cheddar.