Source: Mintel
Europe’s ice cream market continues to display relatively limited volume growth, reflecting the maturity of the market. The large German, Italian, UK and French markets, for example, have all struggled to build sales volumes in recent years, although higher rates of value growth has been achievable. In particular, moving consumers up to more premium variants of ice cream and focusing on making ice cream a year-round snack have yielded results.
Emerging markets are where multinational ice cream players are placing their attention, and within Europe it is the already large but continually developing markets of Russia and Turkey that attract most interest. Turkey especially is predicted to see strong volume growth in coming years as consumer spending escalates and as penetration of take-home ice cream in particular rises.
In terms of market players, the global and European pace-setter continues to be Unilever, whose strategy has focused on creating power brands such as Magnum, now a €1bn brand globally, as well as through engaging more aggressively in acquisition activity than its arch-rival Nestlé.
Both global giants have been active in advancing their presence in emerging markets. However, Unilever’s premium Magnum brand has been particularly successful in capturing the imagination of the growing middle class in markets such as Indonesia and Brazil, where Magnum-branded cafés are being used to deliver a luxury proposition (a tactic also employed successfully by General Mills with its Häagen-Dazs brand).
But it is also Magnum’s performance in the west which is catapulting Unilever forward and the company is dominating the innovation agenda in particular. Unilever accounted for one in 10 ice cream launches globally in 2011 and 2012; and for the first half of 2013 that had jumped to almost two in 10, but ended the year at 13% of all launches. In particular the range extensions in Europe are delivering results. From adding further layers of “premiumisation” (Magnum Gold and Magnum Infinity), to rolling out an extensive array of mini formats aimed at capturing snacking occasions and flavor varieties, as well as limited editions and tub formats, Unilever is aiming to cover all bases. It is a strategy it is also employing with other power brands such as Cornetto.
The other major global players: Nestlé, General Mills (owner of Haagen-Dazs outside North America) and European private label/licensing powerhouse R&R Ice Cream, will be looking to make a bigger impact in 2014 with their own innovation agenda. Furthermore, acquisition opportunities are still available in a market that in many cases suffers from over-capacity in the West, whilst offers significant expansion potential in the East.
Focus on ingredients
Innovation in the ice cream and frozen desserts sector continues to be shaped by the trend towards natural ingredients, e.g. no additive/preservative claims. The growth of low/no/reduced allergen claims is also prominent, although many of these claims are related to jumping on the gluten-free bandwagon, rather than lactose or dairy-free claims which, as explored later in this article, are undeveloped.
The focus on “premiumisation” is also evident (one in 10 launches globally carrying a premium claim), whilst limited editions, especially flavor-related, continue to be used to capture consumer interest. The sustained move by retailers to try and capture more of this premium and limited edition end of the market through their private label ranges is a continuing development.
Flavors grow up
The popularity of classic chocolate, vanilla and strawberry flavors in ice cream shows no sign of abating, and globally these three flavors alone were used in 60% of all ice cream and frozen dessert launches in 2013. However, beyond these stalwarts there are significant changes afoot in ice cream flavors. In particular, consumers are becoming more experimental and accepting of new ones: around seven in 10 European consumers for example state they would like to try new flavors from a brand they typically buy.
Coffee, and in particular coffee varieties such as espresso, mocha and cappuccino, is an on-trend flavor, representing a more adult approach to ice cream. It is currently seen more often in premium gelato products and is popular in the Italian market. Coffee, and especially RTD coffee, as a trendy drink for younger consumers, is clearly having a wider influence on the food and drink market. This flavor trend could move further into provenance as chocolate is doing, focusing on specific single (country/region) origin.
Spices, such as cinnamon, meanwhile are often used to try and ‘warm’ ice cream products and to “de-seasonalise” and encourage winter month consumption.
Pairing sweet and savory flavors is also an ongoing trend seen at high-end restaurants which can exert significant influence on the retail market, as with salted caramel for example. Along with coffee, another trend which represents a distinct move to catering to adult tastes is the growing use of alcohol in ice cream. Alcoholic ingredients are growing in usage on a global basis: rising from usage in around 2% of ice cream launches six years ago, to nearer 4% in the last few years. Dessert flavors have also been a strong trend in 2013. Representing a cross-over from the chilled and ambient dessert aisles, such flavors include tiramisu, cheesecake, stracciatella and crème brulée. At present most activity on this front has been in tub format, but putting such flavors into a stick/bar or cone format is likely to be something manufacturers look to as a more disruptive approach to innovation. The La Laitière French dessert brand owned by the Nestlé/Lactalis joint venture and Unilever’s Magnum brand have been two major exponents of this desserts flavor trend in 2013. Crossing dessert flavors with the emerging alcohol flavor trend, as tiramisu-themed products often do for example, could be a future direction.
Ice cream as a snack
Snacking continues to be one of the dominant consumer trends driving the food industry, with more and more people in developed economies consuming their food through snack occasions. Ice cream brands are increasingly targeting snacking occasions, especially the snacking habits of Millennial consumers.
This is principally through the development of hand-held formats, with launches such as Unilever’s Fruttare brand in the US in 2013 squarely aimed at this consumer base. Multipacks of hand-held ice cream sticks and cones have been one of the biggest growth areas in the market. In the UK for example, handheld mulitpacks for at-home use have been the growth driver in the market with sales up 26% 2009-2013 versus only 10% sales growth for the retail market as a whole.
Brands such as Unilever’s Magnum and Cornetto have become global snack successes being available in a wide variety of flavours and formats, including mini, snack sized offerings such as the Cornetto Mix-Mini brand launched in 2013. Indeed, 2013 has arguably been the year of the cone with a raft of innovation in this segment positioning cones as more snackable and indulgent with chocolate brands such as Milka and Daim being used.
On-the-go and ‘drinkable’ ice cream is another emerging area of focus, being already relatively well-developed in the innovative markets of Japan and South Korea. Some brands in these markets are positioned in a similar way to drinks, using tall cups/cartons, bottles or pouches. In many cases they are drunk, rather than eaten with a spoon. Lotte’s Coolish brand has been successful in Japan on a ‘drinkable’ platform. Coolish is a liquefied ice cream in a pouch with a spout. As such it is positioned as a portable, convenient, non-messy way to eat ice cream on-the-move.
Looking to the future
Indulgent treats like ice cream are not expected to be particularly healthy, but with healthy eating continuing to be one of the dominant consumer trends in the food and drink market, the impetus to develop healthier ice cream versions remains. Indeed, there is a significant consumer base that worries about health when eating ice cream, suggesting that consumers do at least limit consumption due to health concerns, if not actively seek out healthier options.
Current development of lower fat and lower calorie ice creams is limited. Less than 7% of product launches globally in 2011 to 2013 featured a low/no/reduced fat claim, only about 2% featured a low/no/reduced calorie claim and the same for low/no/reduced sugar. Positive health propositions are also rare. Functional and ‘plus’ claims (such as high protein or added calcium) have been made by just 2% and 1%, respectively, of global ice cream launches since 2011, and are struggling to gain traction.
There have been some attempts to cater to health concerns among ice cream consumers and with an ageing population and a growing type 2 diabetic population, low sugar and healthier ice cream formulations are likely to be in higher demand. The use of stevia in the category has been limited to date with some niche brand use in Europe, for example the Ice Crime brand in Belgium. This suggests that the use of stevia in ice cream is still in a ‘test-market’ phase in Europe at least, with no major manufacturer committing to its use but if such ice creams are successful, major players will be quick to enter the segment.
More growth in diet-specific ice creams can also be expected. With the free-from market booming in most western markets as awareness of intolerances/allergies rises and as consumers buy into the healthy lifestyle proposition of such concepts, lactose-free products are expected to develop further. The whole dairy/lactose-free sector in the UK for example has grown by over 30% in value sales between 2010 and 2013 to hit £172 million. One in 10 UK adults avoids lactose and lactose intolerance rates have been reported at higher rates in some key markets (at over 15% in the major German market for example).
Yet, as with healthy ice cream positioning, innovation in ice cream has been slow to cater to the potential demand. Of all ice cream and frozen dessert launches (including non-dairy alternatives such as soy desserts), just 2% in 2013 have featured a low/no/reduced lactose claim. In the last three years, of all low/no/reduced lactose ice creams and frozen desserts launched, almost half (44%) have been in just three countries (Finland, Germany and the US) reflecting the limited development of the claim globally.
In terms of future growth potential, at a global level the major ice cream producers are focused on the emerging markets of Asia and Latin America, although within Europe, Turkey is a significant opportunity market as previously mentioned.
The list of the predicted fastest growing ice cream markets over the next five years is led by Vietnam, India, Indonesia, Turkey and Brazil, all fast-growing emerging economies. It is no surprise therefore to see the likes of global ice cream leader Unilever and Häagen-Dazs owner General Mills prioritizing such markets for development.
In Vietnam, India and Indonesia for example, per capita consumption of ice cream is less than half a liter a year. This compares to the 17l a year consumed per capita in the world’s largest market, the US, and the 6l a year consumed per capita in Europe’s largest market, Germany.
But as the middle class consumer base grows in such markets so demand for everyday luxuries such as ice cream can be expected to increase as well. European ice cream players will need to keep a watch on such markets in order to identify new growth opportunities but also to be aware of emerging local players who may threaten them in Europe one day.