The ice cream market in the United States is continuously expanding and changing. The magnitude of ice cream marketers varies tremendously, ranging from the small family-owned ice cream parlors to the large manufacturers of ice cream that is sold in grocery stores. Despite the variance of distribution methods and business types, a primary reality of importance remains the same: ice cream is a popular treat among most Americans. Therefore, before entering the market, businesses must analyze a variety of information about this particular market.
With a 1.3% increase in market growth during 2003, ice cream consumption in America reached a volume of 1 billion liters. In 2008, the market is forecasted to have a value of $9.2 billion, which is an increase of 4.6% since 2003; also in 2008, it is predicted that the market will have a volume of 1 billion liters, an increase of 6.5% since 2003.
The market was dominated by the industrial sector, which accounted for 90.1% of sales in 2003. In 2003, the United States remained the largest individual market in the world accounting for over 25% of global ice cream sales. 2
Based on our findings, the recommended strategy for new ice cream businesses entering the industry is to focus on extending the market to minority populations that are growing within the United States.
Table of Contents
EXECUTIVE SUMMARY 1
TABLE OF CONTENTS 2
LIST OF TABLES AND FIGURES 3
1. INTRODUCTION 4
1.1. ICE CREAM EVOLUTION 4
1.2. MARKETING HISTORY 5
2. MARKET OVERVIEW 6
2.1. MARKET DEFINITION 6
2.2. MARKET ANALYSIS 7
2.3. MARKET SEGMENTATION 8
2.4. DEMOGRAPHIC FORCES 9
2.5. MARKET VALUE 10
2.6. MARKET VOLUME 11
2.7. MARKET FORECASTS 12
2.8. SWOT ANALYSIS 14
3. MARKET POTENTIAL 15
4. MARKET COMPETITORS 16
5. MARKET ENTRY ALTERNATIVES 17
6. CONCLUDING RECOMMENDATIONS 19
7. REFERENCES 21
List of Tables and Figures
FIGURE 1 - MARKET SHARE BY SALES VOLUME 7 6
FIGURE 2 - RETAIL SALES OF PACKAGED ICE CREAM 7 7
FIGURE 3 - PROJECTED POPULATION OF THE UNITED STATES, BY RACE AND HISPANIC ORIGIN: 2000 TO 2005 8 9
FIGURE 4 - UNITED STATES ICE CREAM MARKET VALUE: $ BILLION, 1999-2003 2 10
FIGURE 5 - UNITED STATES ICE CREAM MARKET VOLUME: LITERS BILLION, 1999-2003 2 12
FIGURE 6 - UNITED STATES ICE CREAM MARKET VALUE FORECAST: $ BILLION, 2003-2008 2 13
FIGURE 7 - UNITED STATES ICE CREAM MARKET VOLUME FORECAST: LITERS BILLION, 2003-2008 1 13
FIGURE 8 - PROJECTED POPULATION OF THE UNITED STATES, BY AGE: 2000 TO 2050 8 15
TABLE 1 - UNITED STATES ICE CREAM MARKET VALUE: $ BILLION, 1999-2003 2 10
TABLE 2 - UNITED STATES ICE CREAM MARKET VOLUME: LITERS BILLION, 1999-2003 2 11
TABLE 3 - UNITED STATES ICE CREAM MARKET VALUE FORECAST: $ BILLION, 2003-2008 2 12
TABLE 4 - UNITED STATES ICE CREAM MARKET VOLUME FORECAST: LITERS BILLION, 2003-2008 2 13
Ice cream is an extremely popular treat among all ages of the American population and has been in existence in various forms long before the independence of the United States. By reviewing the evolution of ice cream and a few historical marketing techniques, one is able to begin to understand in what areas the industry may continue to progress.
1.1. Ice Cream Evolution
Dating back to early origins of the second century B.C., forms of ice cream first became prevalent in Europe. Although no exact date or inventor of ice cream has ever been recorded, Alexander the Great, King Solomon, and Nero Claudius Caesar all were reported to have favored ice that was flavored by some type of sweetener, such as fruits and juices. Marco Polo obtained a recipe for a sherbet-like product after returning from an excursion from the Far East. This development was the turning point in the history of ice cream; historians believe that this recipe was adapted in the 16th century to form what we now know as ice cream. 3
The first reported appearance and mention of ice cream in the United States was in 1700, in a letter from a guest of William Bladen, the Maryland Governor. At first, ice cream was an uncommon and exotic treat that was only consumed by those who had great wealth; freezing methods were not prevalent among common society. However, after the invention of insulated ice houses in the 1800's, ice cream became more available. The 'technological innovations, including steam power, mechanical refrigeration, the homogenizer, electric power and motors, packing machines, and new freezing processes and equipment,' contributed to the increase of ice cream production. 3
With the availability of ice cream becoming widespread in the late 1800's, a variety of ice cream inventions emerged. Soda fountain shops and the ice cream sundae both became part of the American culture. During times of war, ice cream lifted the spirits the troops, as well as those on United States soil. Today, ice cream is primarily sold as a prepackaged item available in grocery stores; however, specialty ice cream stores and restaurants have also entered the American market. 3
1.2. Marketing History
The American ice cream industry has explored numerous ways to expand the growth of this popular treat. Manufacturers have conducted various types of market research to determine which flavors are popular at various times of the year. They often times introduced flavors that are available for a limited time; for example, during the Christmas holiday season, peppermint, gingerbread, and caramel flavors often are briefly available. 3
In addition to adding flavors to their products, ice cream manufacturers and distributors have divided the market into a variety of segments. Doing so allows them to capitalize on current trends; for instance, when a particular diet fad enters, ice cream manufacturers begin working with their product to satisfy the needs and wants of consumers. Ice cream manufacturers also have explored ways in adding mix-ins to ice cream; not all consumers are in the segment of the latest trend and eat ice cream as an indulgence treat.
Co-branding is another marketing technique that manufacturers have been exploring. Partnering with other cookie, candy, fruit, and flavoring manufacturers has brought recognition to not only the ice cream companies, but also to a variety of additional food products. Co-branding has proved very successful marketing tool in the ice cream industry. 3
2. Market Overview
2.1. Market Definition
The ice cream market includes all ice creams including dairy based, yogurt-based, and water -based. This includes ice cream made by both the industrial and non-industrial sector. Non-industrial sectors include ice creams made at shops and eating-houses. Market value calculations use retail sale prices. The following figures graphically display the percentages of the American ice cream eating market based on the type of ice cream they consume, and also the retail sales of packaged ice cream:
Figure 1 - Market Share by Sales Volume 7
Based on the data, regular ice cream as well as the reduced-fat, light, low-fat, and non-fat ice cream categories together account for about 90% of the market share dominating the market. Sherbet and frozen yogurts account for 4.5% and 4.0% respectively while sorbet's market share is only 0.5%.
Figure 2 - Retail Sales of Packaged Ice Cream 7
The supermarkets are the main participants in the distribution of ice cream selling 86% of the total amount of ice cream on the market. The convenience stores, the dairy stores and the other locations control 14% of the market.
2.2. Market Analysis
Ice cream sales in the United States have continued to gradually grow. From 1999 to 2003, the American ice cream market has experienced 0.93% growth. Also experiencing growth was the market value of ice cream; with an increase of 3.8% over the same time period, ice cream held the largest individual share of the global ice cream market in 2003. 2 With a value of $8.78 billion in 2003, the ice cream market grew with a compound annual growth rate (CAGR) of 0.9% from the 1999 to 2003 time period. Nevertheless, this growth was much weaker in comparison to that of the global market. This led to the decrease in market share by the United States by 1.2 percentage points from 1999 to 2003, which accounted for 25.7% of the global market by the end of this time frame. 2
The industrial sector accounted for 90.1% of the market's value in 2003, which made it the leading revenue source for the United States ice cream market. This sector also had a value of $7.92 billion in 2003; this was an increase of 3.8% since 1999. 2
As one looks toward the future, stable market growth is predicted. For example, the market is estimated to reach a value of $9.19 billion by 2008. Yet, even with a CAGR of 0.9% from 2003 to 2008, this growth will be lower than the growth being experienced by the global market. This may primarily be due to the United States decrease in share of the global market. From a 25.7% share in 2003, it is predicted that in 2008, the market will account for 24.5%. This 1.2 percentage point decrease is estimated to occur while Asia-Pacific experiences a growth of 1.5 percentage points in this same time frame. 2
2.3. Market Segmentation
The industrial sector accounts for 91.1% of the market, while the small local/specialty sector accounts for 9.9% of the market. The United States holds 25.75% of the world ice cream market share. 2
2.4. Demographic forces
Viewing the demographics of the American population is also important, for new market trends may gradually emerge:
Figure 3 - Projected Population of the United States,
by Race and Hispanic Origin: 2000 to 2050 8
2.5. Market Value
Table 1 and Figure 3 display the United States market value and growth rates from 1999 to 2003. Market growth has been steady with a 0.9% increase in each of the years except for a 1.0% increase in 2000. The market value for 2003 was 8.68 billion. 2
Year $ Billion % Growth
2000 8.55 1.00%
2001 8.62 0.90%
2002 8.70 0.90%
2003 8.78 0.90%
CAGR, 1999-2003: 0.90%
Table 1 - United States Ice Cream Market Value: $ Billion, 1999-2003 2
Figure 4 - United States Ice Cream Market Value: $ Billion, 1999-2003 2
2.6. Market Volume
Table 2 and Figure 4 show ice cream consumption and growth rates from 1999 to 2003. Growth has steadily increased at a rate of 1.30% since 2000 with a 1.40% growth rate in 1999.
Year Liters Billion % Growth
1999 1.3 1.40%
2000 1.3 1.30%
2001 1.3 1.30%
2002 1.3 1.30%
2003 1.3 1.30%
CAGR, 1999-2003: 1.30%
Table 2 - United States Ice Cream Market Volume: Liters billion, 1999-2003 2
Figure 5 - United States Ice Cream Market Volume: Liters billion, 1999-2003 2
2.7. Market Forecasts
Table 3 and Figure 5 show the United States ice cream market value forecasts through 2008. Growth is expected to continue its annual 0.90% rate as it has in the previous years. Sales are expected to hit the 9.2 billion mark in 2008. 2
Year $ billion % Growth
2003 8.8 0.93%
2004 8.9 0.92%
2005 8.9 0.91%
2006 9.1 0.90%
2007 9.2 0.91%
2008 9.2 0.90%
CAGR, 2003-2008: 0.90%
Table 3 - United States Ice Cream Market Value Forecast: $ billion, 2003-2008 2
Figure 6 - United States Ice Cream Market Value Forecast: $ billion, 2003-2008 2
Table 4 and Figure 6 show the United States ice cream market volume forecasts through 2008. Growth is expected to continue its annual 1.3% rate as it has in the previous years. Volume is expected to hit the 1.4 billion liters in 2008.
Year Liters billion % Growth
2003 1.3 1.3%
2004 1.4 1.3%
2005 1.4 1.3%
2006 1.4 1.3%
2007 1.4 1.3%
2008 1.4 1.3%
CAGR, 2003-2008: 1.3%
Table 4 - United States Ice Cream Market Volume Forecast: Liters Billion, 2003-2008 2
Figure 7 - United States Ice Cream Market Volume Forecast: Liters billion, 2003-2008 1
2.8. SWOT Analysis
Upon viewing the industry for ice cream in America, a variety of strengths about the market have emerged. For example, the United States ice cream market grew 0.93% between 1999 and 2004, and also experienced a 3.8% market value increase. 2 Factors influencing this growth include trends toward super-premium products and low-calorie, low-sugar, and low-carbohydrate products. 7
Currently, the main difficulties encountered by the ice cream businesses and manufacturers in America include the strict building codes and permits they must obtain, high employee turnover, and a heavily competitive market. Also, an issue of special importance is the fact that Food and Drug Administration (FDA) sets standards of identity for many foods; these standards follow the federal Nutrition Labeling and Education Act (NLEA), which governs all food labeling. Before a business begins to produce ice cream, it must first secure FDA approval.
Examining the market data presents a several opportunities in the already saturated ice cream market. While basic varieties of ice cream (vanilla, chocolate, etc.) lead ice cream sales, Mintel found that other ice cream products (such as frozen novelties, frozen yogurt, tofu, sherbet-type products) are growing at an extremely fast rate. Co-branding with popular chocolate and coffee brands to create ultra-premium products is increasing in popularity as well, leading to the development of numerous business partnerships in the food industry. Finally, demographic shifts create new market entry opportunities.
The market is driven by children and the Census Bureau projections of declining youth population through 2010 may force manufacturers to develop products attractive to indulging adults.
Figure 8 - Projected Population of the United States, by Age: 2000 to 2050 8
3. Market Potential
In order to determine the true market potential for ice cream in America, our group computed a Market Development Index (MDI) of 79. The MDI is based on the following calculations and assumptions:
Average US ice cream consumption per person = 22.5 liters per person 4
Average New Zealand (leader) consumption per person = 26.3 liters per person 4
Untapped markets (healthy brands, new flavors, etc...) = 2 liters per person
Maximum Potential = 26.3 + 2 = 28.3 liters per person
MDI = (22.5 liters per person) / (28.3 liters per person) = .79 * 100 = 79
While there is still room for growth in this market, following the paths that many ice cream manufacturers and distributors have previously taken will be difficult. The main task will be reaching the untapped portion of customers, which will require a market-based, customer focused approach. The ice cream market is continuously being penetrated by smaller niche companies which will make entry more difficult.
4. Market Competitors
Good Humor Breyers is the only United States business that holds a double digit market share and only six other companies hold considerable shares. These include Ice Cream Partners USA, Dreyer's Grand, Blue Bell Creameries, Ben & Jerry's, Mars, and Wells' Dairy. Small local or specialized manufactures account for the largest share of the market, but their individual market shares are minimal. 2
Good Humor-Breyers is the largest manufacturer of branded, packaged ice cream and frozen novelty products in the United States. The company was formed through the merger of four strong and well-recognized businesses: Dickie Dee Ice Cream, Popsicle Industries and the ice cream/novelty businesses from Beatrice, and Natrel dairies. Some of Good Humor-Breyers products include Breyers Ice Cream, Good Humor, Klondike, and Popsicle frozen novelties. 1
Ice Cream Partners USA is Good Humor-Breyer's closest competitor. Ice Cream Partners USA is a joint venture between Nestle and The Pillsbury Company. Products include Haagen-Dazs ice cream, gelato, frozen yogurt, Nestle Drumstick ice cream sundae cones, Nestle Crunch, Butterfinger and Baby Ruth ice cream bars; Dole frozen juice bars; Nestle IceScreamers frozen treats and Push-Ups frozen novelties. 2
5. Market Entry Alternatives
Based upon the data obtained surrounding the current information available about the ice cream market in America, our group has developed two alternatives that would be valuable to those who are interested in entering the ice cream business. Because the American ice cream market is extremely saturated, both of the recommendations are based on niche market strategies.
Alternative #1 -- Target Hispanic Markets
U.S. Census data shows that Hispanics are the fastest growing population segment in America. In addition, Hispanics tend to have larger families and procreate at a greater rate than whites. Studies show that households with children are the largest consumers of ice cream; 34% of households consume four or more quarts of ice cream per month, in comparison to the 20% of households that do not have children. 7 Research by our group determined that this was still a fairly undeveloped niche in terms of availability of products. Consumer location is an advantage with this alternative as the Hispanic population is located primarily in the southwestern states. This concentrated consumer based will decrease distribution costs and allow for higher sales due to the warmer climates of the region.
Product positioning is important to this strategy. The average Hispanic family is in a lower income bracket and while the Hispanic population segment is rapidly growing, in 2000, Hispanics only accounted for 13% of the total U.S. population
Alternative #2 - Co-brand with existing successful products
Co-branding with existing successful manufacturers may lead to an increase in sales by targeting their established markets. This alternative is widely practiced in the ice cream industry so new emerging markets must be considered. One idea includes partnering with a nutrition supplement company to produce an ice cream that appeals to the recreational market. Another would be to use the name of an existing drug company, such as Lactaid, to develop a new line of ice cream for the lactose intolerant. This concept would most likely be used in the local/specialty sector with its primary advantage being increased brand awareness. Possible difficulties with this alternative include a limited market base and finding a willing name brand partner. FDA approval may also pose problems if using a drug or supplement co-brand.
6. Concluding Recommendations
After examining the advantages and disadvantages of the two alternatives, our group recognizes alternative one as having the most potential for success in the ice cream market of today and tomorrow. The following supportive arguments were the basis of our decision:
The Hispanic market provides long term growth potential, while co-branding tends to follow trends.
Demographic trends forecast continual growth in the Hispanic population segment making this an attractive alternative for long-term growth. Often times, a co-branded product will achieve early success only to experience decreased sales as the excitement wears off.
More data available for analysis and decision making.
With the availability of census information, our group was able to conduct a more thorough analysis of the Hispanic market. Having accurate data allows for more accurate market strategies, forecasts, and decision making.
Hispanic market has more potential for horizontal expansion.
If a company succeeds in marketing ice cream for the Hispanic population segment, opportunities for horizontal expansion may emerge. An example would be to expand the product line to include non-frozen deserts or beverages of Hispanic interest. Often times, this opportunity does not exist in co-branding as product mixes must be relational.
Companies wishing to enter the ice cream should note the importance of brand labeling strategies with this alternative. Branding should appeal not only to the Hispanic consumer, but also to the mainstream consumer, in order to maximize sales. In addition, the following are important trends that should be taken into consideration regardless of the strategy a company chooses to use.
Children and African-Americans prefer novelties
Consumers aged between 18-24 prefer to eat ice cream in shops and other ice cream selling venues
Majority of adults prefer the same flavor each time
Female consumers over 45 years old, African Americans and Hispanics consumers are brand-conscious
Teen girls choose healthier options like frozen yogurt while teen boys stay true to frozen novelties
In conclusion, while there are available avenues for entry into the United States ice cream, companies should proceed with caution due to saturation of the market, high competition, and strict regulations.
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5. Intini, John (2004, June 7). Money's worth. Maclean's, 117(23), 62.
6. Larson, P. (2004). Latin American franchises explore U.S. markets. Franchising World, 36(3), 23-26.
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8. U.S. Census Bureau (2004). U.S. interim projections by age, sex, race, and Hispanic origin. Retrieved July 26, 2004 from the World Wide Web: http://www.census.gov/ipc/www/usinterimproj