Ice cream wars: Unilever takes on Nestle in the US
In the world’s living-large ice cream market, it’s always been about the tub. Well over half of the US’s $12-billion in annual ice cream sales comes from products served up in pints and half gallons, says Greg Miller, a senior principal at the food and beverage advisory firm Parthenon Group.
Lately, though, Americans have begun to shift toward European-style single servings on sticks or in cones. So-called frozen novelties now account for 21.2 percent of the US market, according to researcher Euromonitor International, and that share is growing. This change presents a new front in the ice cream wars for Unilever (UL), the global market leader eclipsed stateside by Nestlé.
Through Breyers, Klondike, Ben & Jerry’s, Cornetto, and other brands, Unilever controls roughly one-fifth of the $85 billion worldwide ice cream market, according to data compiled by Bloomberg Industries. That nearly $13-billion in annual sales makes ice cream the single biggest seller for the London- and Rotterdam-based consumer-goods conglomerate, about 15 percent of its total revenue, according to Euromonitor.
Yet in the US, Unilever hasn’t been able to match Switzerland-based Nestlé, the world’s largest food company, which owns such brands as Häagen-Dazs and Dreyer’s. Single-serve frozen novelties, which are much more expensive per serving, give Unilever a chance to catch up.
“Novelties make ice cream more of a snack,” says Chris Brockman, an analyst at market researcher Mintel. “It’s where the market has the most potential to grow.”
Unilever has capitalised on that potential with its chocolate-coated Magnum bars. First introduced in 1989, the bars are sold in 50 countries — they’re Europe’s top ice cream brand — but only recently arrived in the US.
Kevin Havelock, president of refreshment at Unilever, says the company’s managers feared for years that the Magnum brand wasn’t “strong enough” to make it in America. They were wrong.
In 2008, the longtime head of Unilever’s US ice cream business retired, and Havelock started planning to bring Magnum across the pond. The product did so well in domestic test markets two years ago that Unilever pushed up its US rollout from 2012 to April 2011. Supported by a marketing budget of about $15 million, Magnum became one of Unilever’s “big bets” of last year, Havelock says.
The bet paid off, with Americans snapping up more than 100 million Magnum bars — so many that supplies ran low, forcing Unilever to ship more boxes from Italian factories to meet demand.
Sales hit $100-million in the first year, surpassing Unilever’s forecasts by 50 percent. Wal-Mart Stores has since expanded its offering of the bars from four flavors to six, and has begun stocking Magnum in its Sam’s Club warehouse chain. Helped by brisk US business, global Magnum sales have doubled since 2006 and are expected to top €1-billion ($1.24 billion) this year, making ice cream a standout in Unilever’s sluggish food unit.
Still, Unilever will be hard-pressed to unseat Nestle’s Skinny Cow, the best-selling frozen novelty in the country, which has 7.1 percent of that market to Magnum’s 2.2 percent, according to Symphony IRI data…..
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