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Witness the lines of tourists snaking their way toward the famous Berthillon ice cream counter on the Île Saint-Louis in Paris, and you know that in the dog days of summer, nothing beats the heat better than a refreshing scoop of ice cream.
From rich, superpremium flavors such as Ben & Jerry's Chunky Monkey to reduced-fat offerings from Dreyer's to Berthillon's to-die-for pear sorbet, sellers have blanketed the market with confections to suit every taste and budget.
What many consumers may not realize, though, is just how big a business ice cream has become around the world.
The days of mom-and-pop parlors and local brands are fading fast. Today, the $59 billion ice cream industry is dominated by two global giants: Switzerland's Nestlé (NSRGY, news, msgs) and Anglo-Dutch conglomerate Unilever (UN, news, msgs). Together, they control more than one-third of the worldwide market -- and half of ice cream sales in the United States -- and they're looking to expand as they move into developing regions in Asia and Latin America.
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It's a high-stakes battle in a growing and profitable business. Researcher Euromonitor figures that global ice cream sales are rising 2.5% annually and will hit $65 billion in 2010.
Western Europe, the world's largest market, gobbled up $21.5 billion worth of ice cream and other frozen desserts last year, while North Americans devoured $16.3 billion worth. The most promising markets for growth are in emerging economies such as China and Brazil, where annual sales are soaring 8.5% and 8%, respectively.
Neither Nestlé nor Unilever had nearly so much presence in ice cream two decades ago. But starting in the 1990s, both began aggressive acquisition campaigns. Nestlé snapped up Hagen-Dazs, Dreyer's and Swiss brand Mvenpick. Unilever bought Breyers Ice Cream and Ben & Jerry's. Today, Nestlé boasts a 17.5% share of the world market, while Unilever is close behind with 16%.
The rest of the market is highly fragmented: The No. 3 maker in the United States, Wells' Dairy, has just 5% share. Other brands of note around the world are Baskin-Robbins (a unit of Dunkin' Brands) and Japan's Lotte, which remains No. 1 at home. China's top maker, Inner Mongolian Yili Industrial Group, has a 17% domestic market share and will be the sole dairy sponsor for the 2008 Beijing Summer Olympics.
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The decision to target ice cream has paid off handsomely for both Nestlé and Unilever.The Swiss company got nearly 20% of its $42 billion in first-half 2007 revenues from its milk products and ice cream division. With pretax margins of 10.5%, the unit kicked in nearly $900 million in profits, up more than in any other part of the company. Unilever's ice cream and beverages division supplied just over 20% of its $26.7 billion in first-half revenues. Analyst Ian Kellett with brokerage Numis Securities figures ice cream alone accounted for 10% of Unilever's $3 billion of first-half profits.
To stoke growth, both companies have relied on getting consumers to pay more for frozen treats. With their tit-for-tat acquisitions of American icons Hagen-Dazs and Ben & Jerry's -- now distributed around the world -- the food giants have helped lead a consumer trend away from down-market, mass-produced brands to more profitable superpremium products.
"By focusing on superpremium brands, both companies have increased the value of their products," says Euromonitor packaged food analyst Francisco Redruello.
Continued: Better-for-you ice creams
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