Ice Cream Market Trends

By: Moira Hilliam The global market for industrially produced ice cream is over 10 billion litres a year, with a value of over US$31bn, according to Leatherhead Food International. Per capita consumption varies from 18 litres in Australia to less than 0.3 litres in India and just over 1 litre in Brazil and China. Average consumption in Western Europe is about 6.5 litres. North America has the largest market in volume terms, but Western Europe leads by value, reflecting the higher average prices in Europe and the higher level of sales of premium indulgence products, particularly in countries such as Italy. Sales of industrially produced ice cream in Italy reached about 224,000 tonnes in 2004, worth E2.3bn. After strong growth in 2003 during an exceptionally hot summer, when volume sales rose over 11% and value sales nearly 14%, volume and value fell back by about 5% in 2004. These figures exclude sales of artisanal ice cream sold in ice-cream parlours and bars, etc, which is also an unusually large market in Italy, at a similar level to the industrial market, or about 230,000 tonnes. Total per capita consumption of ice cream is about 8 kg, with industrial products accounting for half of that. The vast majority of artisan ice cream is consumed in the summer months, making it even more seasonal than industrial products. Reducing Seasons One of the key aims in the global ice cream market, not just in Italy, is to reduce seasonality by launching products suitable as year round snacks and treats. This has given rise to considerable activity in limited edition lines, with the launch of seasonal flavours, such as fruit varieties for summer and spicy variants for Christmas. Unilever has been active in this area with a number of brands, although it has perhaps had the highest profile for its Magnum, which had great success with the launch of its Seven Deadly Sins range in 2004 and has now started to market its Senses range in 2005. Senses is based on the five senses and will include Touch, Aroma, Sound, Taste and Vision variants, starting with Touch and Aroma in early 2005. Magnum was also launched in a hot variant in some countries in the winter of 2003-04, consisting of a chocolate-flavoured ice cream in 175-g plastic cups. The ice cream was tipped into a mug (as one solid block) and then microwaved to create a rich, chocolatey drink. Magnum has also been innovative in terms of extending into the chocolate confectionery market, reversing the trend whereby confectionery brands extend into ice cream. Its Magnum Praline chocolates launched in Italy in 2004 were sold with a chilli-flavoured filling.

1|Page

Confectionery Variants Meanwhile, confectionery brands continue to be developed in icecream versions, included limited edition lines and increasingly using co-branding to produce super-premium dessert-quality offerings. Walls Carte dOr, for example, extended its tub range with Toblerone and Terrys Chocolate Orange variants, and then with a Lavazza coffee variant. Spirits brands are also starting to be used in ice creams, such as Langage Farms range in the UK featuring Allied Domecq spirits brands, such as Tia Maria, Lambs Navy Rum and Malibu Rum. With growing competition in the premium ice cream tubs market, increasing attention is being turned to the single-serve ice cream market, both for hand-held and individual tub products. HaagenDazs has been active in this area, launching its Cream Crisp products in Europe in 2004. France was one of the first countries to see the product, which is a hand-held oval ice cream coated in a crispy crust, and designed to look like the oval Haagen-Dazs logo. There were a number of flavour variants, including vanilla ice cream with a chocolate crust and caramel ice cream with a caramel coating. Health Moves Although health is not felt to be a key factor in consumer selection of ice creams, as it is primarily regarded as an indulgent treat, there has been some sign of a move to healthier products. Lighter, fruit and sorbet style products have started to appear, as have low-fat, organic, soya and low-carbohydrate ice cream alternatives, although none has made a significant impact on the market in any country as yet. UK sales of healthy ice cream are reported to have fallen 7% to GB28m in 2003, but the sector saw the launch of Silhouette Brands Skinny Cow range from the US by Richmond Foods in early 2004. The range already has sales worth over $124m a year in the US. All the products contain less than 3% fat and no more than 100 calories per 100 ml. The range was launched in Asda stores and within its first year had gained a 13.5% share of the healthy ice cream market, which itself showed double-digit growth to a value of 32m by the end of 2004. The range was extended in early 2005. The UK also saw its first low-carb ice cream product in 2004, with the launch of Go Lower in October of that year. The ice creams came in three flavours, retailing at 4.29 for a 500-ml tub. It claimed 3.5 g of carbohydrates per 100 g, compared with about 15 g for traditional ice cream. The products were sugar-free and sweetened with high-grade chocolate, real fruit and fructooligosaccharides.

2|Page

Meanwhile, the market for organic ice cream has also started to develop, driven by the launch of key organic brands into the market, including the leading organic chocolate brand Green & Blacks and the leading organic yoghurt brand Yeo Valley. Dairy Alternatives As demand for dairy alternatives rises, and awareness of the health benefits of soya grows, there is also likely to be a rising demand for soya-based frozen desserts and ice cream alternatives. The bestknown brand in the UK is probably Winners Swedish Glace brand, while in France, the First Soy range from VLS, launched in October 2004, claimed to be the first range of soya ice creams available in France. The range included ice cream bars, 1-litre tubs and dessert logs. France already has one of the largest markets for soya-based yoghurt alternatives and desserts, with sales up 30% to EUR53m in 2003, and this provides a good base for the development of frozen products. The international ice cream market seems set for further growth, with Leatherhead predicting a 2.7% annual increase over the 2003 to 2007 period to a volume of nearly 11 billion litres. The mature market in Western Europe will grow much more slowly, however, with an increase of less than 1% per annum taking sales to just over 2.22 billion litres. The market is likely to remain highly concentrated and competitive, with the dominance of major multinationals set to continue. Unilever will continue to lead the market, with nearly a quarter of value sales in its main markets, ahead of Nestl, which has grown via a series of acquisitions and has its greatest presence in Central Europe and the Americas. Masterfoods is also a major player globally via its successful ice cream versions of its chocolate confectionery brands, but its overall share is much lower at about 2% internationally, ahead of General Mills, which claims just under 2% via sales of the Haagen-Dazs brand outside the US.

Per Capita Consumption of Industrial Ice Cream by Selected Country, 2003 Litres Australia US UK Germany 18 11 9 6

3|Page

Japan France Russia China Brazil India Source: Leatherhead Food International

6 6 4 1 1 0.3

Italy: Industrial Ice Cream Market, 2000-04 Volume (tonnes) 2000 2001 2002 2003 2004e 220.9 218.5 211.9 236.0 224.0 Value (EURm) 2,032 2,130 2,120 2,415 2,306

% Change - 1.1 - 3.0 +11.4 - 5.1

% Change + 3.5 + 0.8 +13.9 - 4.5

Source: Leatherhead Food International

4|Page