Americans and Europeans have traditionally differed markedly in
their ice-cream eating habits and preferences. While large,
packaged tubs of ice-cream have historically held sway over
consumers in the U.S., Europeans tend to go for smaller scoops on
sticks and cones - a serving style called frozen novelties.
But the situation seems to be changing - and fast. While frozen
novelties accounted for only 19.6% of total ice-cream sales in the
U.S. in 2006, the figure rose to nearly 21.2% by mid-2012. This
shift in consumer preference spells good news for Unilever, whose
range of frozen novelty ice-creams called Magnum seems to be quite
popular in the U.S. these days.
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Unilever's Magnum range of ice-creams were brought over from
Europe around 2010. Despite apprehension surrounding consumer
uptake of an unfamiliar serving style, Magnum performed remarkably
well in the U.S. Unilever sold around 100 million Magnum bars in
the very first year of its introduction. The product's popularity
outstripped even the company's own expectations - Unilever was
forced to bring in additional supplies from factories in Italy.
The company's biggest competitor in the frozen novelty segment
in the U.S. is Nestle, which supplies similar servings through its
'Skinny Cow' brand. Magnum's popularity has allowed Unilever to
snatch market share in the segment. Skinny Cow's market share has
dipped by 0.5% over the previous year. This makes Unilever's ice
cream segment a notable exception to the company's general slump in
the food business in the United States.
Unilever's food business has been under a lot of pressure
lately. Stagnating demand and high price competition forced the
company to part with its entire frozen meals portfolio in July this
year. Unilever is also divesting non-core brands to focus more on
the names that it has become most famous for over the years. In
such a scenario, strong ice cream sales offer a glimmer of hope for
the sort of organic, competitive growth in the U.S. for the
Apart from the U.S., Magnum has also been launched in emerging
economies such as Pakistan, Indonesia and Malaysia in recent years.
With an expanding middle-class and rising consumption levels, these
geographies should also start adding to Unilever's ice-cream
segment in a big way in coming years.
Overall, we expect Unilever to successfully leverage its wide
global footprint for growing its share in the world's ice-cream
market steadily over the coming years. Currently, ice-cream
contributes around $8 billion annually to the company's total
revenues and around 7% to the total stock value. We expect the
segment to bring in close to $10 billion annually within
the next 6 years.
We currently have a Trefis price estimate of $39 for
, which is in-line with the market price.
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