Ice cream and frozen desserts historically have been an affordable indulgence, an easy buy for consumers to numb the sorrows when times are bad. That reputation appears to have been pushed to the limit during the economic downturn of the past year.
Total sales of ice cream/sherbet were $4.15 billion for the 52 weeks ending Aug. 9, an increase of less than 1% over the same period last year. That’s still better than the 0.02% increase we reported in last year’s State of the Industry report, when we were only beginning to notice the darkness that lay ahead. Unit sales for the past year were up nearly 3% to almost 1.4 billion.
“People are eating more at home and this has helped ice cream sales, which have not been hurt by the recession,” says Michael Brown, senior product manager at Perry’s Ice Cream Co., Akron, N.Y.
It’s more of a mixed bag among individual brands in the top 10, from a 239% increase for 10th-place Dreyer’s/Edy’s Fun Flavors (with sales of about $98 million for 27.4 million units) to a 36% drop in sales for the Oakland, Calif.-based company’s Grand Ice Cream ($190 million and 54 million units).
“Our customers are looking for solutions that help them to ‘win the trip,’ as today’s shoppers are considering a larger number of formats and banners than they have in the past for their stock-up, fill-in and quick-trip needs,” says Kevin George, director of innovation at Dreyer’s Grand Ice Cream. “When the customers get these shoppers in the door, greater conversion is key in the ice cream category, as increased buy-rate leads to more rapid consumption. Ice cream is a traffic-driving category, so having the right, leading brands in stock, and the appropriate flavor and form variety is key to winning the trip, increasing conversion and building transaction size.”
George says Dreyer’s customers are also challenged by a relatively flat category, an assessment supported by the recent executive summary of the ice cream and frozen dessert category by Chicago-based Mintel. “The stagnating market is due in large measure to a high degree of maturity and also to a lull following the burst of the Splenda bubble, which drove strong sales between 2003 and 2005,” Mintel reports, forecasting the market to decline in 2009 and then show slow growth annually thereafter, reaching nearly 2% by 2012. “With a large proportion of its sales determined by distribution in supermarkets, and available shelf space fixed to the size of grocers’ freezer cases, the market has little room to grow. Yet because the market is very trend driven, those manufacturers able to move most quickly to associate themselves with the most compelling consumer trends of the day will likely see success.”
That’s a condition George says his company is prepared to meet. “Dreyer’s is bringing solutions that will help energize growth in ice cream – new products, innovative new packaging and forms, smarter aisle design and merchandising flow recommendations as well as solutions for today’s shoppers,” he says. “All that will help drive greater velocities on shelf.”
That’s fine for a company the size of Dreyer’s, with the leverage of global parent Nestlé behind it. But what of smaller ice cream manufacturers looking to make their mark with new and distinctive products?
“One-and-a-half years ago, we weren’t even producing ice cream,” says Jeff Kleinpeter, president of Kleinpeter Farms Dairy, Baton Rouge, La. “Now we have Louisiana’s only ice cream plant, and we’re incorporating Louisiana ingredients into our ice cream flavors. Talk about coming out of nowhere, in a recession, and making an impact. The acceptance of our products is growing by leaps and bounds on a daily basis. Keep in mind, too, that the cost of these ingredients is expensive, but the added value of these local ingredients is priceless as well.”
And that added value – which he says also includes being “rBST free” – is addressing one of the key consumers trend Kleinpeter sees. “The trend has always been there – added value – but the importance of getting your money’s worth in a recession is more important now than ever before,” he says. “In advertising these consumer trends, we are witnessing upward sales trends month after month, in spite of an ongoing recession.”
Offered in full half-gallon containers, Kleinpeter’s ice cream brims with locally sourced ingredients, like Louisiana sugar, strawberries, pecans and, for one of its latest flavors – Sweet Potato Pie – yams.
Meanwhile, health and wellness is fueling most of the growth at Dreyer’s, George says. “It encompasses many consumer pathways, ranging from removal of things consumers would like to see less of (fat, calories, sugar) to portion control and natural offerings,” he explains.
And George says he’s seen the concept extend to include simplicity. “Our line of seven Häagen-Dazs Five ice cream flavors, each with only five all-natural ingredients, is an example of a product that addresses that trend,” he says. “Additionally, economic pressures have forced consumers to shift their value equations and, as a result, have encouraged marketers to develop new lower priced entry-point offerings (e.g. Slow Churned and Häagen-Dazs cups) to better meet these changing needs. Cups also deliver flavor variety which is important to shared households. Now everyone can have their favorite flavor.”
Other new Dreyer’s offering include 100-calorie Skinny Cow Truffle Bars and Drumstick Li’l Drums, a version of the popular novelty in a 140-calorie snack portion.
But sometimes simplicity is the last thing ice cream lovers want. Perry’s continues to connect with sports fans in its core Western New York market with Rock Pile to the Ralph, a combination of vanilla ice cream, caramel swirls, chocolate-covered pretzels and peanuts, and praline peanuts that honors the hometown Buffalo Bills. And Texas-based Blue Bell Creameries pursues the Hispanic flavor trend with its new Mexican Praline Ice Cream, with chunks of Mexican pralines, roasted pecan pieces and a praline swirl. “There are many varieties of Mexican pralines sold throughout the U.S.,” says Carl Breed, Blue Bell’s director of marketing. “Our version has a taste similar to the leche quemada candy you find at the checkout counters at Mexican restaurants in our area.”
Beyond the scroundThe frozen novelty category overall rose nearly 1.5% in the past year, approaching $2.4 billion in dollar sales and an increase of more than 3% in unit sales to $798.6 million. Weight Watchers branded novelties led the top 10 (just below private label) with a 4% increase in sales to $178 million. The most significant high and low both came from Dreyer’s, with sales of its Häagen-Dazs novelties rising more than 23% to nearly $87.7 million and eighth place, while the No. 9 spot was taken by the company’s once-trendy Dibs, which saw sales dip nearly 16% to almost $59.5 million.
Mintel reports the frozen novelties segment grew by $201 million, or 7.5%, between 2003 and 2008 due to the launch of some very popular diet products, as well as some successful indulgence products, but is forecast to remain mostly flat between 2009 and 2013.
Products such as Wells’ Dairy’s Weight Watchers and Nestlé’s Smart Ones were strong performers, helping prop up the segment, while low-carb frozen novelties experienced a dramatic decline in sales as consumers lost mass interest in that diet trend, according to Mintel.
The strongest frozen dessert segment right now is frozen yogurt, up nearly 4.5% to $169 million, according to IRI data. Mintel sees the frozen yogurt/tofu category as having the best growth potential. “This segment will grow both because it opens up the market to added distribution space outside of the usual ice cream and frozen novelties aisle, and because it reflects an important consumer trend towards interest in non-dairy products,” Mintel reports.
Between 2003 and 2008, the frozen yogurt/tofu segment experienced a slight decline of 7.9%, owing largely to low interest in this segment prior to 2006, when the market was focused on low-carb options. And, those Mintel surveyed who had eaten a frozen treat in the past 12 months are far more likely to eat ice cream as a snack (86%) or stock it in their homes (52%) than they are to eat frozen yogurt as a snack (19%) or stock it in their homes (27%).
The sky's the limitProcessors continue to face many challenges in their quest to remain relevant to the ice cream-buying public. “The cost of procuring the wide variety of top-quality ingredients required in a category that thrives on multiple flavors is an ongoing challenge,” George says. “A second challenge is educating consumers and increasing their awareness of the better-for-you ice cream options available today, many of which are below 200 calories per serving.”
Manufacturers have a unique opportunity to level the playing field of ice cream and frozen novelty products versus dessert alternatives by offering products that actually have health benefits, rather than promising greater healthfulness simply by removing fat, sugar, or calories from the product, Mintel’s executive summary asserts: “Instead, enhancing ice cream and frozen treats with fiber, vitamins or protein can help make these products something that parents feel better about serving to their children.”
Variety and quality are key as well, Kleinpeter says. “I think the biggest problem facing our category are manufacturers who fail to think outside the box about new flavors, and those manufacturers who think that a low price is more important than adding value for their customers,” he asserts.
Brown concurs: “You must continue to meet consumers’ needs for a quality product that is a value. There are very few silver bullets in ice cream.”
And Kleinpeter is confident that, despite economic or other obstacles, the sky is truly the limit for ice cream. “The economy has tightened in every corner of our country, that’s for sure. What a great time to either cut back in your product quality to save money, or the contrary, give your customers more value than they are paying for, to solidify your relationship, to support your brand, to expand your customer base and your geographic base,” he says. “You can look at the cup as either half full or half empty, take your pick. We choose to look at the cup as half full, and to fill it up further with added satisfied customers.”