This summer may be hot, but it promises to be even hotter in the supermarket dairy cases. Lured by the success of Haagen-Dazs, the super premium ice cream, ice cream companies are now battling one another for customers and for space in the frozen food cases.
Supermarket retailers say a large number of East Coast brands--large and small--have recently joined the fray. "It seems like they just discovered there's a market out here," says Richard Yates, the frozen food and dairy buyer for Gelson's, an Encino specialty food store chain.
In 1980, just two premium ice cream brands--Dreyer's Grand Ice Cream and Haagen-Dazs--were widely available here. Now, at least 23 brands--many from outside California--crowd supermarket frozen food cases.
There are so many brands, in fact, that some ice cream companies are already finding themselves frozen out. Harland Polk, vice president for sales at Hughes Supermarkets, says the premium ice cream market is near the the saturation point. "There will be some fallout," he says.
Especially vulnerable are regional California brands that lack the marketing muscle of such food industry giants as Nestle, Pillsbury and Kraft, all of which have entered the premium market recently.
"I like to say that David only had to fight Goliath once," says James McCoy, president of privately held McConnell's Ice Cream of Santa Barbara. "We have to fight him every day."
It's the prospect of profits that draws many companies to the premium ice cream market. Premium ice cream sales have increased by 20% a year since 1983, according to Find/SVP, a New York market research firm. Sales should grow to $2.21 billion this year from $1.86 billion in 1985, the concern estimates. By 1990, sales of richer and more expensive ice cream should reach $3.4 million, Find/SVP says.
The success of premium ice cream brands has lured other frozen dessert makers to the upscale end of the market, including makers of non-dairy, soybean-based products. David Mintz, president of Tofu Time, the Rahway, N.J., maker of Tofutti, says the market has become increasingly competitive. "Everyone is trying to get into the act," he said. "Last time I counted, we had about 50 competitors."
Tofu Time's profits have suffered. For the first six months ending Feb. 1, Tofu Time reported a loss of $119,787, compared to profits of $1 million a year earlier.
Premium ice cream contains more butterfat and less air than regular ice cream and is richer and more expensive than regular or economy brands. It generally retails for about $2 a pint, or $4 a quart, compared to $2 to $3 a quart for regular brands.
Yet retailers say that consumers seem willing to pay more for something that tastes good. "People are tired of belly-fillers," says Gelson's Yates. He says premium ice creams hold special appeal to health-conscious consumers because they are low on chemicals and preservatives.
At the same time, consumer buying habits have changed, according to retailers. "It used to be that consumers would buy a half-gallon of ice cream for the family," says John Turley, frozen food buyer for Vons, the El Monte supermarket chain. "Now they buy a half-gallon for the kids and a gourmet brand for themselves."
Out-of-state ice cream companies say Southern California is an especially attractive market because it has few regional brands. What's more, Southern Californians may be ready for more ice cream since they now eat 15% less than other Americans despite a balmy climate.
"We think ice cream hasn't been marketed properly in Southern California," says Robert E. Baker, director of frozen desert marketing for Kraft, which has recently launched a major campaign to promote its Breyers ice cream, the leading East Coast brand.
Kraft plans a costly television and radio advertising blitz--something that's relatively new to the industry. This year, ice cream makers will spend only $80 million advertising ice cream, says Jan Booth, marketing vice president for Oakland-based Dreyer's Grand Ice Cream, the biggest selling premium in the West. "Advertising costs are very low for the size of the market," says Booth.
Ad Costs Rising
Those costs have escalated rapidly, however, as larger and better financed national food companies have entered the market. Five years ago, the ice cream industry spent just $8 million on advertising. Pillsbury, Kraft and others "look at the market and say, 'It's a gold mine.' It's a real under-marketed category," Booth says.
That means that advertising expenditures can go a long way. Industry experts say its no secret that the two largest selling super premiums are owned by giant food companies. Haagen-Dazs, which Pillsbury purchased three years ago, sold 45% of all super premium ice cream last year, while Kraft's Frusen Gladje accounted for 10% of the sales, according to A. C. Nielson, the market research firm.