The major ice cream manufacturers are desperate to revive the impulse market, but they must innovate to compete with supermarket value packs, poor summers and outlets such as McDonald’s, writes Gemma Charles
Ice cream manufacturers have been racking their brains to whip up interest in the flagging impulse market.
The extension of confectionery countlines into the pre-packaged impulse sector has been pretty much exhausted, so manufacturers have been developing new ideas to capture consumers’ attention. NestlÃ©’s mother brand is to appear on a creamery that will be used by cinemas, convenience stores, leisure centres and zoos to produce popular soft ice cream (MW last week) and the Del Monte brand, known for juices and canned fruit, will be placed on packaging for a range of fruit lollies and sorbets.
The Unilever-owned market leader, Birds Eye Wall’s (BEW), also plans to introduce limited edition Magnums using the theme of the seven deadly sins. It is backing all its brands with the biggest marketing spend in the sector – £20.5m.
Whether these innovations will be enough to turn the category around remains to be seen. According to Mintel, the total UK ice cream market was worth an estimated £1.24bn in 2001, having shown little change since 1996.
However, there has been steady growth in the take-home market, coupled with a fall in the impulse ice cream sector. Since 1996 impulse sales have dropped 18.5 per cent while take-home has risen 17.1 per cent. On the positive side, consumers are favouring premium products across the board, helping value to stay in the market.
Weather has been a factor affecting impulse sales. After hot weather in the mid-Nineties, poor summers since 1998 have hit sales. But observers also agree that consumers will have been influenced by the fact that it is cheaper to buy multipacks of impulse-type products from supermarkets than it is to buy single portions through convenience stores. Other factors that have played a part in the fall of the impulse sector include the explosion of the tub format offering Mars, Cadbury and NestlÃ©’s confectionery brands, the decline of the confectioner-tobacconist-newsagent (CTN) and the move into the sector by fast-food restaurants, such as McDonald’s with its McFlurry.
Lack of innovation has only contributed to the decline in consumer interest in the impulse category. One supermarket buyer says: “Apart from the Maltesers stick, there has been little to really excite consumers in the impulse category. Even Magnum Moments [bite-size Magnums] didn’t turn out to be as big as it might have been.”
Yet according to Information Resources, BEW’s Magnum brand across all formats is the top ice cream brand, with value sales of £69m for the year to October. This is some way ahead of second-place Cornetto, also a BEW brand, with sales for the same period of £44m. They are just two of a number of BEW products that appear inside the top 20, including Solero, Carte d’Or, Calippo and the Unilever-owned Ben & Jerry’s. BEW’s dominance of the market looks set to continue despite a ruling in 2000 by the Competition Commission that it must allow retailers to allocate 50 per cent of the space in its freezers to other brands. Yet the ruling has made some impact as most BEW brands have registered falls in sales, while total ice cream sales have increased by 1.3 per cent, according to the Information Resources data.
Frederick’s Dairies is the licensee for Cadbury and newcomer Del Monte. Its sales and marketing director, Peter Elvin, says the Competition Commission ruling has given manufacturers the confidence to launch products as they now have a chance of getting freezer space.
According to Elvin, Frederick’s Dairies’ business, of which Cadbury accounts for 70 per cent, has value sales of £60m – up 25 per cent on last year.
He is hoping to develop that business even further with the launch of the Del Monte fruit lolly and sorbet range, a move made in response to feedback from focus groups showing that there is a gap in the market for this type of product. Elvin explains: “There’s a certain amount of guilt people feel when eating ice cream – it’s an indulgent product. We wanted to create a range that is just as gratifying but without all the calories.”
Unlike Cadbury, NestlÃ© used to manufacture its own ice cream products, but in 2001 it withdrew from that side of the business and entered a licensing agreement with Rich mond Ice Cream. For ten years it had struggled to gain distribution channels in this ultra-competitive sector after following Masterfoods’ Mars, the number one confectionery brand in ice cream, into the market.
Yet, since 2001, NestlÃ© has been buying ice cream companies across the globe, such as the US company Dreyer, Germany’s Scholler and the HÃ¤agen-Dazs brand in the US and Canada.
A NestlÃ© spokesman says: “We were too small a player to have any significant role in the UK market. The business did not have the potential to become significant or profitable.”
Since acquiring the licence, Richmond has delisted some of the NestlÃ© brands and shifted the focus of the business to the take-home market and tub formats.
Richmond Ice Cream marketing director Kate Needham claims that NestlÃ©’s ice cream brands have been turned around and that profits for the year to the end of September 2002 were up 63 per cent to £8.2m. Take-home retail sales are up by 9.9 per cent for the year to the end of January to £15.8m, beating the overall market, which grew by 5.4 per cent, according to Taylor Nelson Sofres.
This summer, Richmond is launching products under the NestlÃ© Double Cream, Milky Bar and Smarties brands, as well as the NestlÃ© Ice Creamery, which will be accessible to consumers in outlets other than CTNs.
Needham says: “In research, people said that if they could find ice cream in more places, they would buy it more often.” Rival BEW has also launched a creamery but, with a huge marketing spend and a forthcoming global launch through parent company Unilever, it is unlikely that it will be unduly troubled by the NestlÃ©-branded creamery product.
For all ice cream manufacturers, the real challenge is to develop innovations in the impulse sector to match the take-home market’s success.