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UK stage now set for big shootout among leading ice cream marketers.

UK Stage Now Set for Big Shootout Among Leading Ice Cream Marketers

Wall's, Mars, Haagen-Dazs and Clarke square off. But will the crucial battles for market share be waged on the traditional, big money advertising front, or through "Healthy" PR campaigns?

If one wants to make an impression on the British ice cream market, the first thing to do is to figure out what makes the public tick. Many new players have joined the competition in recent months, and Quick Frozen Foods International has heard a variety of interpretations from them, including:

* "Fun products need a lot of advertising."

* "Supermarkets determine choice, so go strong on private label."

* "Build a product portfolio around hand-held or take-home lines."

* "Give the market what it wants."

The original English manufacturers made up their minds on these issues long ago, deciding that ice cream was best sold by CTNs (the small, "mom and pop" candy shops) rather than grocers, and that hand-held impulse lines provided the volume. Moreover, public taste had been weaned away from dairy ice cream by World War II butter rationing, so the cheaper fats were to be used instead. Half a century later, three major American players have entered the market, armed with the experience of a supermarket-dominated business and of ice cream made principally with dairy fat.

Unilever, through Birds Eye Wall's, now faces Mars, Haagen-Dazs and Clarke Foods PLC. The latter was put together by Henry Clarke with Lyons Maid (Wall's longtime adversary) and three additional companies: Fiesta, Horton's and Lewis Bros. They were bought initially by Hillsdown Holdings, and reformed by Clarke as Yelvertron Investments PLC. Many of the other, smaller concerns have been bought up by larger groups in what looks like a recognition that there are profits in the ice cream business after all.

The weather will not have helped in 1991, but this was the year chosen by Henry Clarke to make his boldest move. In case you hadn't heard, Clarke is the latest American to decide that the British ice cream palate is ripe for change. Acquiring Lyons Maid from Allied Lyons is a strong signal, and was described by Clarke in a press release in this way:

"In March we were successful in completing the acquisition of the ice cream division of Hillsdown Holdings PLC. We are pleased with the performance of this division which has been trading profitably since its acquisition. At the time, we expressed our intention to grow, both organically and by acquisition, in the ice cream industry. The proposed acquisition of Lyons Maid, a well known and long established brand name, will give Clarke Foods a wider spread of products and an enhanced customer base. It will add to our existing successful private label business a wide range of high profile branded products."

The arrival of Mars, Haagen-Dazs and now Clarke looks a bit like an American invasion, leaving Birds Eye Wall's and a few local brands to hold the fort in Britian. Are there then niches that British companies have failed to exploit? This reporter asked Allan S. Price, chairman of Birds Eye Wall's. "There are always unexploited niches," he responded, "the debate is whether the niche is fertile and profitable enough to sustain an entry strategy."

Some of the best food advertising has come from Birds Eye Wall's, so the time may be ripe to ask if advertising will continue to be the determinant of ice cream growth in Britain? According to Mars, which quotes MEAL, the independent advertising report published in Britain, 19,182,000 [pounds] was spent by ice cream companies between September 1990 and September 1991. The comparable figure for the preceding 12 months was 12,104,000 [pounds], so Mars shows an increase of 7,078,000 [pounds].

Wall's uses Media Register figures, except for radio, which it buys from MEAL, and these show ice cream expenditures from January to September 1991 at 12,928,487 [pounds] compared with 18,131,324 [pounds] in the same period of 1990. The 1991 numbers include Haagen-Dazs press advertising at 696,185 [pounds], Eden Vale, New England, Lyons Maid plus "Others" with a total spend of 151,909 [pounds] compared with 59,875 [pounds] in the same period of 1990.

It was pointed out that the Wall's expenditure of 6,755,001 [pounds] was about 68% of the planned level for the total year, which would include pre-Christmas advertising for Viennetta and other super premium take-home lines.

It was probably too early to ask Henry Clarke if Lyons Maid's expenditure would be maintained. When this reporter talked to him about advertising, he spoke glowingly of his American advertising agency, WB Donner of Baltimore. But plans for the future were not divulged.

The great surprise at this time is to find that Wall's may still believe that healthy eating is not a factor of major consequence in the ice cream sector. Positioned as it is with vegetable fats (palm oil is one of parent company Unilever's strongest commodity bases) it would not be totally unexpected if the company geared up publicity to strengthen the public belief that dairy fats are harmful. That was certainly the position taken by sister Unilever company, Van den Berghs, in promoting Stork margarine a few years ago. But no, apparently the jury is still out on healthy eating. By contrast, the American ice cream industry remains unabashed in its adherence to half gallon cartons of dairy ice cream.

The incursions of yogurt and yogurt parlours, like TCBY and I Can't Believe It's Yogurt, not to mention Baskin Robbins (which Allied Lyons will retain) are seen by most as a reaction to health publicity rather than a basic move in public taste. But ice cream anyway tastes so much better in America than it does in Britain, according to this sampler, even if every mouthful does nothing to decrease the risk of heart disease! So maybe the critics who say that people give up on healthy eating two weeks after starting have a point, although they would find it hard to prove in the US. The cost of health insurance and the prevalence of heart disease are far closer to personal motivations in the States than they are in Britain.

The British are bombarded with more information, on the other hand, and the evidence on supermarket shelves, as in the US, is that healthy eating is now affecting food marketing deeply. Figuring all this out, developing appropriate products and promoting them effectively is the obvious formula. Each of the major players in the UK adopts one of those positions predominantly. For Wall's advertising is critical; for Haagen-Dazs ingredients are what count; for Mars it's super premium products; for Henry Clarke the market is what will determine strategy.

John Nicholson, Wall's marketing director, pointed out that advertising was central to selling his brand, and that supermarkets expected Wall's to shoulder this burden. Certainly 14.2 million [pounds] spent on advertising carries a lot of weight.

Justin King, managing director of Haagen-Dazs UK, agreed that advertising is important, and spoke of the company's shops as exercises in "corporate PR," mainly designed to give the company some start up visibility. The first one was opened in London's Leicester Square in 1989 and has already been visited by a million people; the second was opened in Brighton; the third in Hampstead; the fourth in Heathrow's Terminal 1; the fifth in Oxford; the sixth in Bath. The next ones are scheduled for Windsor, Chelsea, Covent Garden and Edinburgh -- all in tourist locations.

King was equally enthusiastic about Haagen-Dazs ingredients, based on formulae successfully adopted in the US. "We are hitting and virtually creating the super premium sector," he claimed (although both Mars and Wall's might dispute this), with fresh and only natural ingredients (cream, skimmed milk, eggs and sugar), minimum over-run and low fat content. The varieties sound mouth-watering enough: vanilla, chocolate, coffee, rum raisin, strawberry, chocolate chock chip, vanilla fudge, vanilla almond, macademia nut, and so on.

Haagen-Dazs, owned by Pillsbury, out of Grand Met, is a big brand in American supermarkets and was launched into UK supermarkets last summer with "full advertising support." Students of the company's marketing in America will recognize the approach.

Mars is such a familiar brand in the UK confectionery trade that not a lot of people there appreciate it is actually a leading American company (created by Forrest Mars) and now a threat to the long term position of Wall's, as it is to the major confectionery brands. Not many people know either that brands like Snickers, Milky Way, Bounty and Galaxy are all out of the Mars stable and have all now been cloned into the ice cream cabinets from the confectionery shelves.

The company says it began working in 1986 to develop an ice cream bar which retained "all the subtle, familiar tastes of the Mars Bar." Following two years of development the product was ready for test marketing and within a month it had received recognition from the World Frozen Food Congress by winning the top prize for innovation.

Because of what the manufacturer describes as the "outstanding success" of the Mars Ice Cream Bar, with both consumers and the trade worldwide, Mars committed itself in November 1988 to the construction of Europe's largest ice cream production line -- a 20 million [pounds] investment on a green field site in Steinbourg, France. Completed in just under six months, the new factory made possible the national rollout of Mars ice cream the following April. By the end of 1989, sales had reached 25 million [pounds].

After only 18 months and the "highly successful" launches of Bounty and Snickers, Milky Way, the Galaxy Dovebar, and Galaxy Rondos in 1990, the Mars range of frozen snacks reached sales worth 100 million [pounds], "accounting for nearly all of the market growth." In 1991, the range has been augmented with the Bounty dark ice cream bar.

All of this product development has inevitably led to a new advertising strategy. Mars' PR agency is right to point out that the brands, whether in confectionery or ice cream form, will be promoted with over 29 million [pounds] of television advertising in 1991, even though this includes a new 4 million [pounds] campaign with separate TV advertisements for various ice cream ranges as well.

Wall's points out again that it hopes the newcomers will increase the total advertising spend for ice cream and so strengthen the market. But the market leader can hardly dispute that competitive brands are putting in at least as much as it is.

This reporter asked Wall's ice cream marketing dirctor, John Nicolson, what would happen if Mars took away the story told to the trade for so many years that Wall's created the ice cream market with its highly visible advertising. He confidently replied: "Wall's dominant share of the market has been maintained against many new entrants over the past twenty years. Its advertising will continue to fuel the growth of the ice cream market."

The last Wall's financial report complements this with the statement: "We surpassed frenetic and fierce competition by producing our most comprehensive portfolio ever, supported by a 14.2 million [pounds] advertising and promotion campaign, which was Wall's greatest ever."

Why frenetic and why greatest ever?

"The launch of Mars created intense trade and consumer interest," explained Nicolson, "generating additional trade promotional slots and a significant increase in consumer penetration. This increased interest allowed Wall's to restate strongly its brand and company credentials."

So how does all this affect Henry Clarke, and the positioning of his enterprise in the UK market? Hardly a newcomer to the ice cream industry, the quiet spoken, 57-year old American told QFFI that what he wanted most to change in the British market was the perception of low profitability that ice cream is associated with. He has dispensed with his US interests and explains that his primary focus now is on the UK. For the time being America and continental Europe are no longer on his agenda.

Publicity about Clarke usually brings up his involvement with the Klondike bar, which he himself describes as "a kind of choc ice," deferring to the British addiction to that commodity. The Klondike bar was born in 1929 when Samuel Isaly cut ice cream into slices and dipped them in a pan of warm Swiss chocolate. Sales quickly outpaced production and within a year Isaly decided to build a new plant in Pittsburgh.

In 1977, Henry Clarke led the purchase of the Isaly Company and expanded sales nationwide. Today, Isaly Klondike has three modern production facilities and operates as a division of Ambrit Inc., a public corporation listed on the American Stock Exchange. In 1987, Ambrit acquired Popsicle Industries Ltd. with the purpose of expanding the distribution of Klondike into international markets. Klondike sales were 810,000 [pounds] in 1977; a decade later they were 59 million [pounds] and Ambrit total turnover was 179 million [pounds].

In 1989 the company introduced two new products: Klondike Lite, 93% fat free and made with Nutrasweet, and Klondike Sensation, a super premium ice cream bar.

Something of Clarke's style emerges from this account of his American period. He is primarily a business man, determined to offer the British public a greater choice. He does not anticipate moving from ice cream into frozen foods, but does plan to grow the Lyons Maid share from its present 9.2% of value. All of the brands purchased from Hillsdown Holdings remain on the market (Fiesta, Lewis and Horton's), but Clarke was not yet ready to comment when asked if he would bring about a single sales force.

He is clearly proud of the depth of experience in the acquired companies, noting that at a recent meeting of Lyons Maid senior management he had calculated there was about 200 years of ice cream industry experience in the one room.

On product development, Clarke clearly believes that "lite" products have a great future. He cited the growth of the yogurt market in the United States as an example.

Where all of the players are in much the same place is in their recognition of a new category of premium and super premium lines, superseding the old categories of hand-held, impulse and take-home ice cream. Some of the brands Clarke has acquired already fall into this new category.

In a letter to stockholders of Yelverton investment PLC (now Clarke Foods PLC) at the time of the proposed acquisition, the directors emphasized their interest in this sector: "The ice cream industry is an innovative sector of the UK food industry with highly creative new product development and marketing . . . We believe the introduction of higher priced, better quality premium products will fuel further growth for the market as a whole and continue to foster an all-year-round appeal encompassing in particular, greater consumption of ice cream by adults."

The letter continued, "1989 consumption in the UK was approximately 7.8 liters per person, making the UK the sixth highest per capita consumer of ice cream in Europe. However, this . . . still only represents approximately one third of the per capita consumption of the US."

The document shows a recognition of the volume and value of market growth, fueled by high levels of product development and advertising. It was expected that the total market would increase by approximately 15% in the year to December 1990, but although the warm weather created a boom in consumption that took it towards that figure, the target was not achieved. Nor was the boom repeated in 1991.

According to the Wall's financial report published in 1991, the ice cream market rose by 12% to 785 million [pounds] in 1990, helped by the heatwave of July and August. The report adds further to the case for a new premium and super premium sector: "The growth of premium ice cream, complete desserts, and most especially, multipacks, fueled a successful year for "take home," and particularly Wall's brands. With an increase of 14%, the take home ice cream market reached 443 million [pounds] in 1990." Wall's says that throughout this period it maintained a 30% share and led the sector. Overall, its brand share was 41% (not 37% as given in the Yelverton prospectus). But 1991 will probably see the beginning of a new configuration, with at least three new names in the charts.

Little is said about private label's performance in the reports and prospectus documents, but with three American players in the market now, it seems at least likely that supermarkets will become a greater focus of interest with brands of their own as well as new brands from new suppliers.

UK Ice Cream Sector Performance
 1989 1990 1990 v 1989
Impulse m [pounds] m [pounds] % Change
Wrapped 207.5 237.2 +14%
Scooping/soft 106.0 105.2 -1%
 1989 1990 1990 v 1989
Take Home m [pounds] m [pounds] % Change
Multipacks 148.3 182.3 +23%
Complete desserts 34.0 36.4 +7%
Premium ice cream 53.2 62.3 +17%
Standard ice cream 152.4 161.9 +8%

Source: AGB/Wall's [Graphs Omitted]

PHOTO : "There are always unexploited niches," says Birds Eye Wall's Chairman Allan S. Price. "The debate is whether the niche is fertile and profitable enough to sustain an entry strategy."

PHOTO : American Henry Clarke is being carefully watched as his acquisitions of Lyons Maid, Fiesta, Lewis Bros. and Horton's make Clarke Foods the No. 2 marketer of branded ice cream.

PHOTO : Among the products doing double duty for Mars in the impulse and take-home sectors of the UK ice cream universe are: Galaxy, Milk Way, Bounty, Snickers and Mars bars.

PHOTO : "The launch of Mars created intense trade and consumer interest...(that has) allowed Wall's to restate strongly its brand and company credentials," says Wall's John R. Nicholson.
COPYRIGHT 1992 E.W. Williams Publications, Inc.
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Title Annotation:includes related article
Author:Kemp, Graham
Publication:Quick Frozen Foods International
Article Type:Industry Overview
Date:Jan 1, 1992
Previous Article:Nestle-Mars' merger denied; Dole role real; North American restructuring is complete.
Next Article:Solid French ice cream sales growth should continue sweetly through '90s.

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