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So what will the food companies do with all that chocolate technology?

So What Will the Food Companies Do With All that Chocolate Technology?

Highly successful Mars Bar blastoff sends traditional European ice cream makers into orbit around frozen chocolate confectionery starburst. It's a whole new universe out there.

It's becoming more and more difficult to comment on the international frozen food industry without stealing more than a sideways glance at trends in other sectors. Chocolate and confectionery used to be merchandised in a part of the store well removed from frozen food and ice cream, but in recent years it has become increasingly obvious that the multi-nationals want the kind of technology -- and the brands -- that the chocolate companies have developed.

If you watch trends by looking into the cabinets and at the supermarket shelves you can see, especially in Britain right now, a merger of interests between the manufacturers of ice cream and the makers of chocolate confectionery. Mars probably gave this trend its biggest boost by turning the familiar Mars Bar into Ice Cream Mars, but it wasn't long before Unilever followed with new chocolate and ice cream lines from its Birds Eye Wall's division, with Nestle doing likewise.

Now comes a merger that has everyone talking and wondering. In July, Philip Morris -- once only a tobacco company, but these days increasingly described as the world's biggest consumer products conglomerate -- agreed to buy Switzerland's Jacobs Suchard, the world's biggest chocolate and confectionary group, for an estimated net cost of $3.8 billion (2.2 billion [pounds]).

It was the biggest takeover in this sector in Europe since Nestle's 2.5 billion [pounds] acquisition of Britain's Rowntree in 1988, and was described by one influential newspaper as a move that would "substantially enlarge the European position of Kraft General Foods, Philip Morris' food processing arm."

Well, yes it could, if the Suchard chocolate technology is applied to Kraft General Foods' ice cream interests. In the USA that division owns both Birds Eye and the Kraft ice cream brands, Breyers and Sealtest. Selling mainly gallon packs of dairy ice cream through supermarket cabinets, its work is cut out right now competing with proliferating frozen yogurt brands, but who knows what directive they have been given with Suchard positioned in the same group. Europe may not be at the top of their minds.

Out of courtesy, and not because any enlightenment was necessarily expected, this reporter called the New York PR department and got the expected party line. The acquisition was "to give the group complementary brands; the technical people were evaluating the technology now available to them."

The acquisition will undoubtedly give Philip Morris brands such as Tobler, Toblerone, Milka and Cote d'Or on the chocolate side. In coffee the brand names are Night and Day, Jacques Vabre, Grande 'Mere and Carte Noire.

The real mega-political significance of the merger though is what it may do to the traditional European polarization of frozen food brands. Philip Morris itself pointed out that the deal gave it a big enough presence in Europe "to compete against Nestle and Unilever." Fine words but there is a longstanding arrangement between General Foods and Unilever that divides the frozen food world between the Birds Eyes of America and Europe. Will the lawyers be scrutinizing that agreement now?

The two coffee businesses fit well together since the US company, with brands such as Maxwell House, Hag and Kenco, is strong in Britain, Scandinavia and Spain, while Jacobs Suchard is a leading player in the French and German markets.

Jacobs Suchard has invested heavily in acquisitions and in modernizing its production apparatus, but said before the merger that it needed more capital to keep up the pace. Klaus Jacobs, Suchard's chairman, could not have provided the share of new capital required to keep control had the company turned to the stock market. The financial press was quick to point out that the move continues rapid growth at Philip Morris over the past six years that turned it into a leading world food business.

The deal would make it a significant player in the confectionery business, which it said was an "emerging growth" area. It has little more than a chewing gum company in France and a baking chocolate business in the USA. Last year, Philip Morris posted a consolidated net profit of $2.9 billion on total revenues of $44.8 billion. Jacobs Suchard reported consolidated net earnings of SFr275 million on a turnover of SFr.6.7 billion, of which 83% was generated in Europe.

Less is known or has been published about the Mars company and its subsidiaries. Few would have expected a key innovation to emerge from such a traditional quarter, yet they clearly knew they were breaking new ground when they rolled out the Ice Cream Mars a few years ago.

Since then, they have been actively developing variants and the media in Britain has picked up the joke about the translation of Marathon into Snickers. In America, the junior Mars Bar has been marketed under the Snickers brand, while in England it was sold as Marathon. The new ice cream version is marketed under the Snickers name, with "formerly sold as Marathon" spelled out underneath.

So, Mars is now well and truly into Europe's frozen food cabinets ...and who knows what follows. From New Jersey, Mars explained that the initial introduction of Ice Cream Mars had been augmented in Europe not only by Snickers but by the Bounty Ice Cream Bar (all made at the Doveurope plant at Steinbourg, France) and by Galaxy Dove Bars, Galaxy Rondos ("a Praline Rondo...a kind of bite size Dove Bar") and by Milky Way minis, the last three made by Dove in Chicago.

In London this August Quick Frozen Foods International found eight-packs of Bounty Bars in a Walthamstow Sainsbury's, alongside Wall's four-pack of "Dream," Dove Bars from Chicago in a Putney High St. Iceland freezer centre, Snickers alongside Wall's Sky in a Putney Sainsbury's, and Haagen Dazs in Leicester Square. Mars PR machine had been at work a week or earlier and there were major features in the Sunday Times and the Daily Telegraph celebrating the new brand war in Britain.

Wall's has made an impact in the supermarkets with Sky choc ice bars filled with Aero chocolate, but the real positioning against Mars is the Dream bar, four to a carton, and made with Cadbury's milk chocolate and chocolate dairy ice cream. Yes, dairy ice cream from Wall's.

Dream, according to the Sunday Times, was launched in May, backed by an advertising outlay of 1.5 million [pounds]. "Sales should reach 15 million [pounds] this year," claimed a Wall's marketing manager. There was speculation in the Sunday Times too that Cadbury and Wall's are poised to retaliate against Mars with a fruit and nut ice cream bar later this year. So, the traditional alliance between chocolate and ice cream is leading to new alliances between multinational companies and brands.

With the dollar declining in value against sterling and other European currencies, the stage seems set for American ice cream brands -- although an American "invasion" is strongly discounted by leading ice cream players in Britain. Even so, the opening in London's Leicester Square of the first UK Haagen-Dazs ice cream parlour (a cross between a Thirties tea room and a Thirties Drug Store) brings some of the best ice cream in the world to a country whose "hand held lines" and choc ices made with vegetable fat have dominated ice cream marketing for decades.

The Daily Telegraph put it more strongly: "Wall's and Lyons Maid have been as guilty as any car, clothing or heavy goods manufacturer of believing that the only issue which matters to the British consumer is price. Until a third party found a way to break in and show that, to some people at least, quality counts more than a few extra pence, Wall's and Lyons Maid have been content to feed the British consumer for the most part on products made of vegetable fats and flavourings they would not be allowed to describe with the words `dairy ice cream' or `chocolate' in the EC or America."

But with Mars and Haagen-Dazs already there and Kraft/Breyers known to be interested in European prospects, it is hardly surprising that the existing UK companies are becoming uncomfortable.

Mars, for one thing, is used to leadership, not second place. Mars Inc. is a world front-runner in each of its main businesses -- branded snack foods, main meal foods, petcare products, electronic automated payment systems and drinks vending. It is made up of over 50 individual businesses with a total annual turnover in excess of $9 billion, and employs some 30,000 people in more than 30 countries.

The same formula that enabled Mars Inc. to widen its sphere of activities led in 1986 to the acquisition of Dove International, an ice cream manufacturer based in Chicago, and renowned in particular for its Dove Bar. This gave the Mars group the chance to gain experience in the frozen food market and to offer ice cream versions of the Mars confectionery range.

Made with real dairy cream which incorporated the Mars flavor system, Ice Cream Mars broke new ground with the introduction of a quality ice cream confection for the European market. It used the same milk chocolate and caramel as Mars but adapted it specially for ice cream temperatures. It also scored a first by the use of 100 per cent real milk chocolate for enrobing, a technique Mars had perfected in its role as a confectionary manufacturer.

Following two years of development, the product was ready for test marketing in May of 1988. Positive results led to the decision to expand rapidly into the European market and Doveurope was created with a $20 million investment in an ultra-modern factory on a green field site in Steinbourg, France. By March of 1989, just eight months after construction had begun, the first Mars Ice Cream bars were produced for the United Kingdom, Irish, Danish and French markets. Today, Doveurope's products are present in most European countries.

What we could be witnessing is the birth of a huge new market that not only crosses European borders but straddles the Atlantic, the Pacific and the Indian oceans. But some of our military analogies and language are already beginning to look ancient. Are the Americans about ready to move in on the UK ice cream industry? Ask Unilever or Nestle, who already think globally and not in chauvinistic terms. Ask Scholler Movenpick, possibly Europe's best ice cream maker, preparing to move in on the rest of Europe...and elsewhere.

Ask Brian Gregory, marketing director of Thayers in Cardiff, producers of some of the best dairy ice cream in Britain and now part of Grand Met, the UK company that bought Pillsbury in the US and with it the Haagen-Dazs company. He is quick to point out that American ice cream still represents less than 1% of the UK market and that the "premium sector" is expanding faster. There are no strict guidelines for premium ice cream; it tends to be dairy ice cream with a higher fat content (usually cream) and is often available in a wider range of more unusual flavors. In other words, what the rest of the world calls standard ice cream.

A major brand in British food marketing is still "own label" and no report on British food could be complete without reference to Marks & Spencer. It is now clear that the "food only" policy in the Tolworth Towers branch was a test bed for the smaller "food only" stores that M & S are opening up all over the south of England. There are now 30 or more. This is where food marketers learned that Britons were prepared to pay premium prices for quality and where "fresh food" distribution made a comeback. They were among the first of the store groups to re-introduce dairy ice cream and will be reading public future policies.

Just how international the ice cream business has become is illustrated by the Haagen-Dazs' `Snack Bar' purchased by this reporter at a Georgia, USA, gas station last month. (It's in all the supermarkets too...alongside the Dove Bar). This vanilla ice cream bar is made with imported Belgian semi-sweet chocolate. And as the food industry well knows, Haagen-Dazs is owned by Pillsbury, which is now owned by the British Grand Met group. Green Giant and Burger King are other Pillsbury brands.

Companies may be bought for their brands and balance sheets, but their technologies may also be even more relevant.

PHOTO : Featuring milk chocolate-covered coconut dairy ice cream, Mars' Bounty bars are made at the Doveurope factory in Steinbourg, France. Retailing for 1.99 [pounds] in the UK, eight 25 ml units come per box.

PHOTO : Made with Cadbury's milk chocolate, Wall's Dream dairy ice cream bar is competing head-on against Mars. A four-pack of FSml units sells for 1.59 [pounds] in retail stores.

GRAHAM KEMP Special QFFI Correspondent
COPYRIGHT 1990 E.W. Williams Publications, Inc.
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Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Ice Cream Marketing Trends
Author:Kemp, Graham
Publication:Quick Frozen Foods International
Date:Oct 1, 1990
Words:2168
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