Thursday, June 30, 2011

Major ice cream players could threaten innovation, Keynote

Major ice cream players could threaten innovation, KeynoteIn a May 2011 report, the market analysts said that new mergers and acquisitions are making it harder for other companies to compete and also stated that “product innovation in the market could be threatened, as this requires a huge amount of money and time”.

R&R have the right to distribute brands such as Walls, and also hold a license to manufacture NestlĂ© ice cream. Similarly, Unilever owns brands such as Ben & Jerry’s and Magnum.

Estimated sales growth: Key Note estimated that the ice cream market had grown in value, with retail sales up by 5.5% from £879m to £927m in 2010 as against 2009.

The analysts attributed this to “new flavour variants for established brands, new size formats, crossovers from other food sectors and brands, such as confectionery, [and] healthy-eating products, such as frozen yoghurts or ice creams that have reduced fat and sugar levels”

Growth in the ice cream and frozen desserts market is predicted to continue, reaching £1.4bn in sales value by 2015, with Key Note attributing the increase to “inflationary pressures” and rising sales of premium brands as the economy continues to recover.

The report also notes the expected impact of the London Olympics, stating that in 2013 UK sales of ice cream are expected to top the £1bn mark for the first time.

Areas of opportunity: Key Note said that there are several opportunities to exploit gaps in the ice cream sector, with frozen yogurt one example. It noted that Unilever’s Ben & Jerry’s brand has established a range of lower-fat frozen yogurt, but the market is currently under-developed.

The development is largely due to a March 2011 Department of Health (DOH) initiative which is encouraging companies to reduce calories, replace saturated fats and to remove artificial trans fats by the end of 2011.

Key Note said Unilever and R&R Ice Cream’s dominance was further evident in new ranges exploiting well-known confectionary brands. In 2011, R&R Ice Cream launched two new products under licence from NestlĂ© using the Rolo brand name: Rolo Sticks and Rolo Cones.

Despite predicted market growth, Key Note warned about the rising price of raw ingredients used in the manufacture of ice cream, as well as spiralling fuel and energy costs, factors compounded by a VAT increase to 20% introduced in January.

Such problems were highlighted by Ice Cream Alliance (ICA) ceo Zelica Carr in a recent letter to Chancellor George Osbourne calling for the reclassification of ice cream as a food rather than a luxury item, which would make it exempt from the VAT increase. But the ICA told this morning that it has yet to receive a response.


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