Major ice cream players could threaten innovation, Key Note

By Lawrence Morley

- Last updated on GMT

Related tags Ice cream Trans fat

Major ice cream players could threaten innovation, Key Note
The dominance of R&R Ice Cream and Unilever in the ice cream market looks set to continue and could threaten innovation, especially amongst new enterprises, according to a new report from research firm Key Note.

In the May 2011 report, the market analysts said that R&R Ice Cream and Unilever's dominance as conglomerates meant that only a few companies have a significant market share, with new mergers and acquisitions making it harder for smaller companies to compete.

In addition, product innovation in the market could be threatened, as this requires a huge amount of money and time​,” said Key Note.

Between them R&R Ice Cream (brands such as Kelly's of Cornwall, Thorntons, Ribena, Nestlé) and Unilever (Ben & Jerry’s, Carte D’Or and Walls), own or hold licences for the majority of the top ice cream brands on the UK market.

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 Nestlé 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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