Rarely does one player have such a monopoly on a market as Unilever has on ice cream. Its brand portfolio reads like a who's who in ice cream: Ben & Jerry's, Carte D'Or, Wall's, Magnum, Cornetto, Twister, Calippo, Solero and Feast.
Unilever accounted for 60% of all ad spend in the sector in 2009, according to Billetts. And this marketing muscle is paying off: data from IRI shows most Unilever brands have grown over the past year, particularly its flagships Ben & Jerry's and Magnum.
"Unilever has continued to dominate the total ice cream market, with a 44.1% value share, and its growth of 13.5%, which equals a 37.2% value share, across handheld multipacks, has driven the strong performance of the entire sector," says Mark Wilkinson, IRI business unit director for business insight. Unilever's dominance has left many smaller brands feeling fed up, bemoaning its deep marketing pockets and extensive distribution power.
There are many regional, farm-based brands in the sector. Often they feel their product is not recognised for its quality and local credentials, and can struggle to get national listings. But what can they do to compete with the big brands?
The biggest is Unilever's Magnum which has seen sales growth of 13.5% in value to £96.7 and 14.5% in volume [IRI 52w/e 26 December 2009]. This growth was driven by multipacks rather than single sticks, volumes of which were flat.
Unilever ice cream category manager Pete Harbour attributes the growth to the success of Magnum Minis, launched in 2008 and only available in a multipack.
"Minis now account for 15% to 20% of our in-home sales," he says, arguing that, although ice cream is a discretionary purchase, even in a recession it remains a relatively affordable treat.
However, the real star performer in the Unilever portfolio was Ben & Jerry's. Sales shot up 23.9% in value to £63.9m and 37.1% in volume, helped by the stellar performance of frozen yoghurts, sales of which soared 46.0% in value and 70.0% in volume [IRI 52w/e 26 December]. Separately, sales of the brand's Mini Cups almost doubled in value, up 96.3% and up 114.9% in volume [IRI].
The difference between the value and volume increases is significant. Many in the industry suggest the success of Ben & Jerry's is reliant on price promotions that are impossible for smaller brands to compete with. Fredericks Dairies' deputy MD David Taylor claims: "Unilever is trashing the brand. Consumers are now waiting for it to be on offer."
Ben & Jerry's brand manager Vicky Willis does not believe that the brand is being excessively promoted. "We're profitable for both ourselves and retailers. We're leaders of the luxury 'herd', while most brands haven't fared well," she says. She also points out that last year a few high-profile deals were actually championed and funded, at least in part, by retailers themselves. Harbour adds that ice cream has always been heavily promoted.
However, Ben & Jerry's has announced a pledge to go 100%-Fairtrade in the UK by the end of 2011 and Willis says she "hopes this will decrease the intensity [of heavy discounting] as Fairtrade should increase both retailers' and consumers' perceptions that Ben & Jerry's is even better value for money, as it remains at the same rsp".
Unilever plans to spend £4m this year on marketing for Ben & Jerry's, including its first-ever mainstream TV ad and a range of other "crazy" activities, while there are big plans for Cornetto, which will get support for the first time in 10 years. Last month it unveiled Cornetto Enigma the first Cornetto to have sauce running all the way through the centre.
The good fight
Despite Unilever's size and success, many smaller brands are keen to take on the giant. Taylor relishes the challenge. "We love the fight," he says. "It's a real David and Goliath scenario and it feels so good to take business from them."
Mike Lewis, a former ice cream buyer at Morrisons, is another optimist. Two years ago he left Morrisons to set up a retail consultancy and to develop his own brand Good Feeling Solutions.
"The ice cream market is so impulsive consumers will pick up small or unknown brands. It is exactly the type of category where brands can launch from scratch and become successful," he says. Good Feeling Solutions ice cream launched in November and is now listed in more than 200 Morrisons.
According to Lewis, many brands fail to think through the basics of product, price, place and promotion before they get in front of a retailer. Spar's trading controller Robert Neal agrees. "There are often wonderful products in this category. But the owners don't know how to market them. If they clearly targeted their offer and explained to me which consumers would buy it, they might stand a chance."
Local is a real point of difference, agrees Harbour. "If brands can offer something different that consumers want, that's when they succeed," he says. "When Ben & Jerry's came into the market it offered a genuine difference, with chunks and swirls of stuff. It was fun and different."
Many smaller brands, without big ad budgets, are hoping their focus on quality will earn them loyalty. This strategy has worked for Mackie's, which, despite a modest ad spend, is still managing to keep up with the big boys, seeing a 5.8% rise in value over the past year and 11.7% in volume. Loseley shares this approach.
"You shouldn't try and compete on promotion. We believe we add value to the category through having strong British heritage brands that we don't flog off cheap," says Dan Bly, sales director, Loseley.
Other smaller names, such as Jude's and Brymor, are choosing to deal more with the on-trade. Jude's supplies to a number of top-end restaurants and delis, in a deliberate move to retain the quality of the brand.
Robert Moore, managing director at Brymor Dairy, says: "To produce a product like Brymor, the costs and logistics are fixed and cannot be compromised to compete with the rock bottom trade prices being offered by bigger competitors. That's why it proves easier dealing with the independents in terms of them wanting to work with you, rather than just dictating the commercial relationship."
But even bigger brands, such as Häagen-Dazs, are realising they can't keep up with Unilever in the promotional stakes and are changing strategy. While this brand created the luxury category two decades ago, there's a general feeling in the industry that, as Sam Noble, planning director at agency Iris, puts it, "it has lost its mojo".
This is backed up by IRI data: in the last year the brand saw a 11.5% drop in value and a 14.3% drop in volume sales. "We're very conscious of the fact our performance right now may look quite poor," says marketing director Ed Culf.
"That's frankly because we were out-discounted in a big way in the run-up to Christmas and we had to re-think some of our promotional activity. We can't afford to be selling Häagen-Dazs at less than half price repeatedly. That has caused us a short-term dip."
However, Culf says he's optimistic about the year ahead and hopes to be back in strong growth by the summer. Häagen-Dazs plans to focus on quality and experience in a bid to encourage more consumers to pay full price more often. It is going to do this primarily through a £3.2m TV ad campaign and a new chocolate flavour.
"We're endeavouring to ensure support going forward is fresh and has a higher impact," he says. "For long-term category health, we need to cultivate consumers who happily pay full price."
Phil Webster, chief operating officer at Icefresh, the licensee for WeightWatchers iced desserts, agrees and urges other brands to take this approach.
"The aim of every brand now has to be to agree to stick to a good price point so customers begin to understand the true value of products again," he says. "We have been working closely with the supermarkets to look at doing multi-buy offers, rather than straight money-off offers. These are popular but aren't loss-leaders for brands."
WeightWatchers is also investing in in-store sampling, shelf-barkers, PR and tactical couponing.
However, Derek Farquhar, category buyer for ice cream at The Co-op, says "brands have to discount to retain market share".
"Branded ice cream is now a commodity and many suppliers are offering half-price deals for summer 2010. Unilever has been the driving force behind this, and other suppliers are now following suit," he says.
While it's not going to be easy instigating a culture change in ice cream, the sector benefited from, what Kantar describes as, "a premium Christmas", growing 18.9% in the last 12 weeks of the year versus last year. Shoppers returned to premium ranges, opting for quality over value, as they treated their families.
"In 2008, 2-litre tubs of ice cream were selling well below a pound. But calling it 'ice cream' was a bit of a fallacy," says Neal.
Neal has strong opinions about how to crack the promotions conundrum. He believes "brands only have themselves to blame" and drastic action is needed to break the vicious circle. But he doesn't hold out much hope.
"If people kept saying no to heavy promotions across the industry, that might work. I don't think any retailer wants to continue sucking out the value and margin, but no retailer has the courage to say 'stop'. Brands don't have the courage, either. And if Unilever said stop, there's bound to be another who would take its place and the cycle would continue."
R&R, Nestlé's licensee, argues that Unilever's marketing has a positive halo on the category as a whole. Senior marketing manager Charlotte Hambling argues that heavy discounting results in increased penetration and frequency. "I don't think it's about devaluing brands. Bigger brands support the discounts but also run hard-hitting above-the-line messages, which drive value into the brand," she says.
R&R's products have the advantage that as brand extensions of existing confectionery lines, they do not have to work as hard to generate consumer awareness. Its Kit Kat cone was the seventh-bestselling impulse line in individual ice cream in its first season last year and, on the back of that, is launching into the take-home market this year. Lion Bar ice cream's launch replicated similar success for R&R in 2009, becoming the fastest-selling ice cream bar line.
While Neal admits it's incredibly difficult for a smaller brand to get a toehold in the market, particularly with the recent glut of confectionery-branded ice creams, he believes the situation is changing.
One reason for this at Spar is the way fixtures are planned.
"We've moved away from brand-only fixtures to industry plans. Spar owns the fixtures and puts whatever products it wants on them. This is good news for the industry. We've seen an erosion of Unilever brands over the past 18 months and that process has speeded up."
He estimates two thirds of impulse ice cream buys are now from the Unilever stable but this figure was close to 90% a few years ago, with strong recent growth by Cadbury.
It's not going to be an easy fight, but if smaller brands can prove they offer something different and worth paying for, maybe the deep discounting cycle can be, if not broken, at least dented.
Focus On Ice Cream