1. EXECUTIVE SUMMARY
The following report is mainly based on the ice cream industry s manufacturing output and refers to ice cream mixes, soft serve mixes and ice confection, produced and sold to the domestic and export market.
The industry is generally growing slower than the economy so its life cycle is in a decline phase, but has been stable for the past 5 years and is forecast to grow inline with the economy. Over the past 5 years there has been considerable development in new products more so towards the premium end of the market, but generic branded products still are the largest sellers within the grocery industry. The key industries that purchase the output of ice cream are Supermarkets, Food service, Route Trade and Export.
The top 5 manufacturing companies are estimated to hold approx 40 to 55 percent of the market share. The number of establishments in the industry increased from 40 to 95 within the last 5 years, which comprises of relatively small number of large producers and a large number of small producers.
Competition is intense and increasing due to competition between ice cream and the dessert market. Also imports are a threat to the industry, which prominently come from New Zealand.
Seasonal conditions strongly influence the industry, unseasonable conditions during the warmer months and drought can have effect on consumer demand and costs. Producers manufacture the majority of their product through the cooler months in readiness for demand in the warmer months.
A full analysis of the industry is detailed in various parts of this report.
2. HISTORY
In the late 1980s the ice cream industry decreased by an average of 1.6 percent per annum. Ice cream manufacturers started to look at different ice cream products to raise revenue in the face of declining sales, with one of the first products to be introduced was high margin premium ice cream.
In 1986 Kraft was one of the first company s to introduce a super-premium ice cream range Kraft s Plumes, this was released for sale mainly through supermarkets. This caused other producers to introduce high quality, high priced products also, but they had mixed success. Streets introduced the Caprice D’Or range of exotic ice creams and sorbets in 1988, but they failed and were dropped in September 1989. In the same year, Streets purchased the Plumes range from Kraft, but this had mixed success also and subsequently failed.
With the deterioration in economic conditions in the early 1990s, it appears that consumers switched to lower quality products and to iced confection, which to the consumer this was a low cost affordable product. So due to the adverse economic conditions producers switched from the higher margin product lines to lower margin products.
In 1989 ice cream versions of some major confectionery lines were launched in Britain and the United States therefore in November 1990, Mars launched ice cream versions of its Mars Bar and Snickers Bar in Victoria and Cadbury’s launched an ice cream version of its Crunchie chocolate bar early in 1991. This then started to change the ice cream industry product lines from traditional past ice cream products to new but recognised product lines which was accepted by all segments of the market. This therefore opened up the ice cream industry with new and innovative products and from the mid 1990s even thou the growth rate fluctuated from year to year the industry has experienced a steady growth through the 1990s and the new millennium.
2.1 Market Background
The Australian Ice Cream Industry Manufacturing ranks 351 out of 478 by industry turnover and its life cycle is in a decline phase, which means that the industry is generally growing slower than the economy. Capital/labour intensity is medium and the uptake of new technology is medium. The industry’s globalisation level is high and the trend is increasing.
The industry between 1992-93 to 1999-00 has experienced a small to medium level of increases such as:
+ Turnover has increased at an average of 2.8%.
+ Number of manufacturers has increased 18.9%.
+ Exports growth increased to an average 35.4%.
+ Imports growth increased to an average 1.4%.
(Source: ABARE n.d; Ibis 2001)
The level of regulation and government assistance is medium and decreasing.
This industry is forecast to have a low average annualised growth rate over the next five years.
3. MARKET CHARACTERISTICS
3.1 Market Size
The ice cream industry s market size has been experiencing a small but consistent increase for the past 3 years, the industry expects similar growths within the next 5 years.
+ In 1999-00 the $ turnover of the Australian Ice Cream Industry was estimated to be $720 million. This represents approximately 1 per cent of the turnover of all food, beverage and tobacco manufacturers in Australia.
+ In 1999-00 the approximate volume of production for ice cream was 298 million litres and frozen confectionary was 98 million litres an approximate total of 321 million litres.
+ Retail sales of ice cream are estimated to be valued at $1 billion plus annually.
+ Around 15 percent of ice cream sales are through the food service industry 25 percent are through fast food outlets, convenience stores, milk bars, 27 per cent are bulk sales through owner operator ice cream parlours and franchise outlets such as Dairy Bell, Baskin and Robins, Wendy’s, while grocery stores account for around 33 per cent of sales.
+ The number of manufacturing establishments producing ice cream in Australia has stayed stable within the past three years it is estimated that there are 95 manufacturing establishments in 1999-00.
3.2 Domestic Markets
Over the past 10 years the domestic market has experienced on what can be described as a roller coaster ride of annual increases and decreases. The industry experienced difficult times in the late 1980s and early 1990s, however in the past three years it has made steady and consistent increases.
+ During the recession in the 1980s and early 1990s there was a consumer shift between products, that is from higher to lower margin products. During the past 3 years this has been largely reversed.
+ Iced cream consumption per capita is around 12.5 litres annually in Australia, this has increased slightly over the past 3 years compared this with 7 litres in Britain and 20 litres in the United States (Ibis 2001).
+ The current domestic market is at levels significantly higher than the late 1980s and early 1990s. Between the periods of 1994-95 to 1999-00 the domestic demand for ice cream and frozen confections increased by an estimated 3.7 per cent per annum.
Year Ended June Litres
1994-95 11.7
1995-96 11.5
1996-97 11.8
1997-98 11.9
1998-99 12.2
1999-00 12.5
(Source: Ibis 2001 estimates)
3.3 International Markets
The Export and Import markets comprise a relatively small proportion of turnover within the industry. Fluctuations in the value of the Australian dollar has the potential to affect both exports and imports.
3.3.1 Export Market
+ Exports are estimated to have been valued at around $43 million in 1999-00, after falling sharply in 1998-99.
+ Exports have increased from 6.4 per cent of turnover in 1994-95 to 7.3 per cent in 1997-98, before easing to be 6.0 per cent in 1999-00.
+ The main export markets are South East Asia and Japan.
1997-98 1998-99 1999-00
$47.7m $40.9m $43.0m
+7.2 % -15.2 % +2.6 %
(Source Various; Ibis 2001)
3.3.2 Import Market
+ Imports are valued at around $35 million in 1999-00.
+ Imports supplied 4.9 per cent of the market in 1999-00.
+ Imports are mainly from New Zealand (approximately 76 per cent of total volume) with the balance coming from Europe.
1997-98 1998-99 1999-00
$14.7m $32.9m $35.0m
+20.6 % +121.7 % +3.9 %
(Source Various; Ibis 2001)
3.4 Market Growth
The market growth of ice cream and frozen confection is somewhat mixed. There is a threat an increasing proportion of the production of value added products will be transferred to the retail sector via ice cream parlours who will therefore manufacture ice cream on site and so will not be included in future industry reports. Also area of concern for ice cream producers must be the increased competition from other dairy and non-dairy desserts.
One area that the industry is researching and looking more towards is vegetable oils as its raw materials and shift away from dairy fats. This is in response to consumer concerns about their health.
On the other hand, some firms may opt to develop low fat, protein-enriched dairy-based products. Such products could also be promoted as a source of calcium to combat degenerative diseases such as osteoporosis.
Exports are forecast to increase but will remain relatively small due to the nature of the product. There is little likelihood that exports will account for a significant proportion of production in the near future. Developments which increase the flexibility of handling and shipping finished products could encourage exports.
3.4.1 Barriers to Growth
The main barriers to growth for this industry are:
+ Seasonal temperatures.
+ The cost of marketing exports.
+ Possible competition in the domestic market from New Zealand.
+ Changes in tastes which have tended to favour fresh dairy desserts, including yoghurt.
3.4.2 Future Turnover Growth
Industry turnover depends on the volume of production and average unit values. Continuing export growth is assumed, however this will be constrained initially by the rate and sustainability of recovery from the Asian economic crisis.
One factor which will influence the extent to which domestic demand results in increased production is the extent to which demand is met by imports as trade between Australia and New Zealand is now unrestricted. The volume of imports is likely to increase but is unlikely to represent a significant proportion of total supplies.
Assuming no significant growth in imports, the production of ice cream and other frozen confections is forecast to increase by 3.8 per cent per annum. This means that in 2004-05, production is likely to be around 383 million litres.
Turnover is forecast to increase from $720 million in 1999-00 to $776 million in 2004-05. This is an average increase of 1.5 per cent annually.
Year Ended June Industry $ Turnover % Growth Units Production (Megalitres)
1999-00 $720.0m
2000-01 $727.0m +1.0 328
2001-02 $7.44.0m +2.3 346
2002-03 $760.0m +2.2 368
2003-04 $774.0m +1.8 375
2004-05 $776.0m +1.3 383
Average Annual Growth +1.5
(Source various; Ibis 2001; Aztec 2001)
3.5 Industry Competitors
Price competition is intense and ice cream is a key item used by retailers to promote their store on the basis of prices. There is also increasing competition between ice cream and other frozen dairy desserts.
Competition is also based on product quality, especially for premium products this is increasingly becoming important due to the growth in the premium and super premium segments of this industry.
3.5.1 Major Competitors
Even thou there are currently 95 manufacturing establishments there are only a handful of major competitors within the industry.
The 4 major competitors within the industry are:
+ Nestle Australia Ltd.
+ Unilever Australia Pty.
+ Bulla Ice Cream Company.
+ Peters & Brown Foods limited (producers of Cadbury range).
The other major threats within the industry are:
+ Sara Lee Aust Pty.
+ Australian Food Group Ltd.
+ Pillsbury Ltd.
+ Dairy Farmers Group
3.4.2 Competitors Outlook
The industry is dominated by two very large producers, Peters (owned by Nestle) and Streets (Owned by Unilever). The third largest player in the industry is the Bulla Ice Cream Company, which is owned by the Regal Cream Company and Peters & Brownes is also a significant player, which produces the Cadbury range. There are a significant number of smaller producers these include Dairy Farmers Group (formerly Australian Co-operative Foods), Sara Lee, Australian Food Group, Norco and a number of other dairy co-operatives. Housebrands/generics have an estimated 22% market share in the last financial year 1999-00 it had an estimate increase of 30% (Aztec 2001).
In early to mid 1990s the first of the serious boutique ice cream parlours entered the market. Norgen Vaaz operation would open 17 to 20 outlets along the eastern coast, it is now owned of the Australian Food Group Ltd. The introduction of boutique ice cream parlours has increased significantly with the likes of Dairy Bell, Wendy s, Baskin & Robins to name a few.
New entrants such as Sara Lee and Cadbury who have established activities in other food areas and have entered niche segments of the industry only. In September 1999, Movenpick, a giant Swiss food, hotel and restaurant company, entered the Australian premium ice cream market to exploit the current under development of this segment.
The super premium ice cream segment accounts for just 5 per cent of sales, compared with 15 to 18 per cent in Asia. Movenpick is currently having its restaurant quality ice cream manufactured under licence and at the end of 2000 Movenpick had begun operations in Australia. The company plans on marketing itself as being the sole supplier of authentic Swiss ice cream.
In November 1999, Pillsbury Australia began production of its Haagen-Dazs super premium ice cream. Pillsbury spent approximately $3 million over the pursuing 12 months to launch its international prestige brand with mixed success so far.
(Source various; Ibis 2001; Aztec 2001 Estimates only)
4. MARKET SEGMATATION ANALYSIS
4.1 Product Segmentation Summary
There are essentially two industry segments, ice cream and iced or frozen confections.
Each of these can be subdivided (see below). Ice cream can be split into super premium, premium and other. Frozen confections can be split into milk ices and other.
Super premium products are valued at an estimate $25 million, which is approximately equal to 5 per cent of the ice cream market (see analysis, section 6. Sara Lee). The take home tub portion of the ice cream market is estimated at $308 million whilst the light ice cream market is estimated at $38 million.
Companies position their brands to target certain market segments some examples are:
+ Premium tub ice cream is positioned as a luxury treat therefore targeting adults.
+ Dessert ice cream like Vienetta is positioned as a special occasion indulgence treat again targeting the adults and family.
+ Confectionary style ice cream is positioned as a quality treat and an impulse product on the run for young adults and teenagers.
+ Traditional stick ice cream and ice confections like paddle pops and Calypso are positioned as a treat for children and teenagers.
(Source: various; Ibis 2001)
4.2 Retail Outlet Market Summary
The industry s retail outlet market segment is split in a variety of areas:
+ Supermarkets/Grocery Supermarkets are a major outlet for take home retail packs and tubs.
+ Franchise and Boutique Ice Cream Parlors This is an increasing segment of the market and has had steady increases over the past 3 years.
+ C stores, milk bars and fast food outlets A significant portion of production is sold through these type of outlets but this has been declining in the past 3 years.
+ Food service industries Sales are also made through the hospitality industry and to other food industry outlets and this has been on the increase in the past 3 years.
(Source: various; Ibis 2001)
4.3 Retail Packs Product Summary
Retail packs attribute 33 percent of total gross sales in Australia, the majority is sold through the supermarket/grocery industry.
Retail ice cream products are broken up into 2 segments:
+ Take Home Packs/Tubs are the largest selling lines an estimate of $318.1m for 1999-00. This category has a vast variety of products from traditional 1 and 2 liter tubs, premium variety, ice cream desserts packs, health ice creams, gelato and generics/home brand.
+ Multipacks estimate sales for 1999-00 was 144.4m and on the increase. This category has also vast variety of products as above, but the common pattern between both category s is the generics/Homebrand hold the largest share.
(Source; Retail World 2001)
Brand analysis tables cont next page.
Brand Value Volume
Peters 15.3 15.5
Blue Ribbon 9.9 7.9
Cadbury 6.1 4.7
Bulla 5.5 6.4
Home Brand 5.3 8.8
Black & Gold 3.8 5.5
No Frills 3.7 6.3
Sara Lee Classic 3.5 1.1
Oak 3.4 4.2
Dairy Bell 2.9 3.3
Generics/Others 40.6 36.3
(Source; Retail World Annual 2001)
Brand Value Volume
Paddle Pop 10.6 8.6
Bulla Frozen Yogurt 6.6 7.9
Bulla Crunch 6.5 6.0
Magnum 6.3 1.9
Bulla splits 5.4 6.3
Dairy Farmers 5.3 6.3
Drumsticks 5.1 1.8
Peters Frosty Fruit 4.5 4.2
Peters Choc Wedge 4.5 4.0
Homebrand 3.9 8.1
Generics/Others 41.4 44.9
(Source; Retail World Annual 2001)
5. ADVERTISING SNAPSHOT
Over the last 5 years there has been a major shift in the advertising of ice cream not only within Australia but also globally. In the 1990s the traditional way ice cream company s advertised was primary through electronic media and newspapers, there were fewer players in the market and product variety was smaller so therefore company s found it easier to promote there brands to the consumer through this type of advertising avenue. Ice cream marketers are targeting more towards the adult with quality premium style products, which the advertising gives the message
Indulge yourself ..give yourself a treat . In the past the marketers focused more towards children and teenagers.
Also over the past 5 years the industry product range has expanded dramatically and company s now have such a larger variety of product to promote. Company s now will determine what the market situation is with research, identify the segment and then target that market.
Also pending the out come of the research and what that market is worth they will then determined on what to budget for promoting the product.
The shift in advertising has been moved to a variety of areas:
+ Cinema advertising has increased due to its low cost and products can be targeted to specific consumers.
+ Billboards have more prominence and have been targeted as another good source to promote a brand.
+ Public transport advertising also is low cost and can cover a vast area of consumers.
+ Intimate press weekend colour supplements and weekend review sections of the up-market press is used more to advertise premium brands.
+ Larger variety of point of sale material being more and more utilised, where some stores have there front windows sign written at no cost and company brands get prominent exposure, Unilever used this tactic when they launched there new Streets branding some 4 years ago.
+ Supermarket catalogues are used more to promote new lines.
With the development of new products in recent years, particular in the super premium and premium range will to some extent cannibalise some existing products therefore company s will be looking at further ways to promote and advertise their brands to ensure they receive the targeted market share. Company s also focus on reinventing some current products with changing its style of packaging and then promoting it not only to the current buyers of the product but to attract back past buyers and new segments of consumers which previously purchased similar branded products. As a result of stiffer competition in the industry companies are always looking for an edge in advertising from their competitors.
6. SARA LEE PREMIUM 1-LITRE ICE CREAM
6.1 Product Summary
The super premium end of the industry is one of the fastest growing segments in the ice cream and dessert market it has attracted a number of company s towards this market in recent years. One of the first company s to concentrate purely on this segment of the market was Sara Lee.
Sara Lee had researched and found that the super premium segment was growing at extraordinary levels in the United States and Europe and ice cream has ceased to be a children s treat, it now was becoming a fully-fledged adult food available in a variety of flavors. This trend promoted Sara Lee in 1995 to commission Universal Foods in Mulgrave Victoria (which Sara Lee Aust purchased in 1998) to produce under contract a range of 500ml and 1-liter super premium ice cream tubs (Sara lee Classic Ice Cream) to be sold through the retail sector.
Sara Lee strategy was to keep it simple and:
+ Launched the range in 500 ml and 1-liter tubs.
+ Produced a small range of flavors that were recognisable, attractive adult favorites: choc swirl, creamy vanilla, real strawberry, Honeycomb.
+ To be sold within the supermarkets, but also convenience stores due to its small tub size.
+ Promoted the range as an indulgence luxury treat.
+ Target the young adult Market e.g.: D.I.N.K.S.
+ Target the Impulse luxury treat for mum and dad.
6.2 Product Growth
Even thou the super premium category is increasing Sara Lee Classic 1-litre tubs is experiencing a decline in sales due to new entrants into this market in 1999-00:
+ Take-home packs/tubs market share for Sara Lee Classic 1-litre tubs was 3.4 percent a drop of 11.9 percent from 1998-99.
+ Super premium market share for Sara Lee Classic 1-litre tubs was 47.2 percent a drop of 11.9 percent from 1998-99.
+ 1- liter pack size market share for Sara Lee Classic 1-litre tubs is 78.4 percent a rise of 5.9 percent from 1998-99.
(Source: Aztec 2001)
Brand Market Share % Growth %
Sara Lee Classic 47.2 -11.9
Brownes Cnnssr 25.0 – 6.5
Streets Blue Ribbon 7.9 N/A
Cape Byron 15.5 – 48.0
Haagen dazs 0.2 N/A
Others 4.7 + 48.8
(Source; Aztec 2001)
Pack size Market Share % Growth %
100ml 249ml 0.3 + 422.3
250ml 499ml 0.3 + 53.6
500ml 699ml 20.9 + 18.4
700ml 999ml 0.1 – 11.9
1 Lt 1.9 Lt 78.4 + 5.9
2 Lt 2.9 Lt N/A N/A
(Source; Aztec 2001)
7. CONCLUSION
The shift away from economy products and with the premium market developing the fastest during the past five years and while the economy is traveling healthy ice confections will have slight decreases as consumers up grade to more higher quality products. So it is assumed that the industry will be successful in introducing higher value added products.
Even thou imports are a threat it is assumed that they will play significantly small role within the industry, however exports are forecast to continue to increase, but this depends on fluctuations in the value of the Australian dollar which has the potential to affect exports.
The industry will continue to be dominated by large producers, but pressure by some overseas manufacturers entering niche segments of the market will play an interesting role over the next 5 years. Sales will continue to grow within the grocery and food service industry, but is declining in the route trade.
Advertising and promoting products has changed within the past 5 years with more inventive styles from company s to differentiate products and to attract consumer s awareness.
With increases in efficiency, new product development and the introduction of new, higher margin products the industry is forecast to have consistent increases in production and turnover over the next 5 years.
TEXT OF REFERENCES
+ Anna Floate, 1999, Brands Play a Key Role in the Ice cream Market . Retail World, June 21 July 2, 1999,
+ Australian Grocery Industry Marketing Guide, Edition, 1998,
Ice Cream Annual Report 1998.
+ Australian Grocery Industry Marketing Guide, Edition, 1999,
Ice Cream Annual Report 1999.
+ Australian Grocery Industry Marketing Guide, Edition, 2000,
Ice Cream Annual Report 2000.
+ Aztec Information Systems, Aust, 2000, Premium Ice Cream Annual Report 2000.
+ Dawn Coulter, IPA, 1996. How Advertising helped revive interest in Viennetta across Europe . USA, www.WARC, [online],
(16 March 2001).
+ IBIS Business Information Systems, Aust, 2001, Ice Cream Industry Annual Report 2001
+ John Burgess, Food Service Plus, Personal Interview, 15 March 2001.
+ Nick Kendall,1992. Dedicated to Pleasure . Haagan Daz,
USA www.WARC, [online], (16 March 2001).
+ International Trends , 2000. Retail World, June 26 7 July 2000.
+ Premium Products Grow , 1999. Retail World, Sept 27 Oct 8, 1999.
+ Sara Lee Aust Web Site. www.saralee.au, [online], 15 March 2001.
BIBLIOGRAPHY
+ Anna Floate, 1999, Brands Play a Key Role in the Ice cream Market . Retail World, June 21 July 2, 1999,
+ Australian Grocery Industry Marketing Guide, Edition, 1998,
Ice Cream Annual Report 1998.
+ Australian Grocery Industry Marketing Guide, Edition, 1999,
Ice Cream Annual Report 1999.
+ Australian Grocery Industry Marketing Guide, Edition, 2000,
Ice Cream Annual Report 2000.
+ Aztec Information Systems 2000, Premium Ice Cream Annual Report 2000.
+ Bill Pickett, Laney, Pickett & Associates. Personal Interview, 12th March, 2001.
+ Dawn Coulter, IPA, 1996. How Advertising helped revive interest in Viennetta across Europe . USA, www.WARC, [online], (16 March 2001).
+ IBIS Business Information Systems, Ice Cream Industry Annual Report 2001.
+ International Trends , 2000. Retail World, June 26 7 July 2000.
+ John Burgess, Food Service Plus, Personal Interview, 15 March 2001.
+ Larry Ottaway, State Manager Sara Lee Foods, Personal Interview, 11th March, 2001.
+ Nick Kendall, 1992. Dedicated to Pleasure . Haagan Daz,
USA www.WARC, [online], (16 March 2001).
+ Premium Products Grow , 1999. Retail World, Sept 27 Oct 8, 1999.
+ Sara Lee Aust Web Site. www.saralee.au, [online], 15 March 2001.
+ Brenda Wardlaw, 1996, Dairy Profiles . Standard & Poor s Industry Profiles, 1996, Swinburne Library, 2001.