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In the world’s living-large ice cream market, it’s always been about the tub. Well over half of the U.S.’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 U.S. 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 U.S., 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 capitalized 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 U.S. 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 U.S. 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 U.S. 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 (WMT) 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 U.S. 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. But Skinny Cow has surrendered a half point of market share just in the past year. The low-fat brand’s sales peaked in 2010 and have gone downhill since, Mintel’s Brockman says, as consumers seeking indulgent treats have gravitated toward more full-fat items. A typical Magnum, made with Belgian chocolate in flavors like Double Caramel and Mochaccino, has 240 calories and 16 grams of fat, compared with 100 calories and 1 gram of fat in a Skinny Cow Fudge Bar. “Taste has come back in,” Brockman says. “The focus on the diet brands had dragged the market down.” Nestlé spokeswoman Diane McIntyre declined to comment.
Unilever has built on its initial U.S. rollout with Magnum Minis, smaller bars with 150 calories, to tempt Skinny Cow defectors. By contrast, Nestlé’s line of more caloric Häagen-Dazs bars has recorded slower growth. That’s not to say taking control of the U.S. market away from Nestlé will be easy, but it’s made believers of once-skeptical market observers. “This brand has major legs globally and will be a story for years to come,” says Sanford Bernstein analyst Eric Scher. “Magnum has tipped the balance now to Unilever.”
The bottom line: Fueled by Magnum’s success, Unilever is chipping away at Nestlé’s lead in the $12 billion U.S. ice cream market.