Strategic Environmental Analysis of the Ice Cream Market

Intro:

This report will provide a strategic environmental analysis on the ice cream market taking a look in particular at the up and coming low-calorie ice creams and will discuss as to whether it is a viable sector to invest in. This report will focus mainly on ice cream tubs sold in retail shops. Strategic tools such as Porters Five Forces and PESTEL analysis will be used to analyse the external environment.  It will look at the major players in the low calorie ice cream sector such as Halo Top® a company founded in the US and Oppo a company founded in the UK.

Sector Overview:

It is important that we look at the ice cream industry as a whole alongside the low calorie ice cream tub market to obtain an understanding of this vast sector. The ice cream business in the UK is a massive industry and there is evidence that this is growing. It can be seen that in 2018 the ice cream industry was valued at around £1.4 billion, this is a 26% increase from 2013 (Mintel, 2018). This is an industry that is not only big in the UK but also worldwide. In 2017 the global ice cream market was worth 57 billion U.S dollars with this only expecting to increase in the future (Conway, 2019). This market is dominated by two major players Froneri and Unilever, just under 86% of industry revenue was made by these two companies alone in 2018-19 (IBISworld, 2019).  However it is HaloTop® that dominates the low calorie market and in 2017 it was fastest-selling food brand in the US (Fantozzi,2018). It was also the

Approximatley 43% of ice cream sales in the UK are tub ice creams purchases from a supermarket (Konstantas et al. 2019). In 2018 some supermarkets ice cream sales reached £1bn and this happened to coincide with the increase in low-calorie ice cream options supplied in these stores (Fleming, 2018). Halo Top® ice creams vary between 280-360 calories per tub (473ml) (Halo Top®, 2019), roughly a third of an equivalent pint of Ben & Jerry’s or Nestlé’s Häagen-Dazs (FT,2018)

Porters five forces

Competitors:

The ice cream market as a whole is a very saturated market; however as low calorie ice cream is a fairly new product there isn’t as many products on the market and therefore in intensity of competition is lower than that of the traditional ice cream market. Although an up and coming market there are some already major players with products on the shelves. One of the big players in the ice cream market, Unilever, has launched a low calorie ice cream branded Breyers Delights (Best,2018). As Unilever is the biggest ice cream producer this should be counted as a huge competitor for any company looking to invest in the sector.

Also with the “original” low calorie ice cream brand Halo Top®

Buyer power:

• Fairly low – people are looking for healthy alternatives.

Substitutions:

Ice cream makers – cheap – healthy recipes available online

Many suppliers are noticing an increase in sales of ice cream makers with Lakeland reporting a 90% increase in sales (Sloan,2018).

Supermarket own brands

After seeing the success of low calorie ice cream with companies such as Halo Top®, supermarkets have joined in with the trend and the likes of Aldi and Asda have released own brand  low calorie ice cream at a much lower price (White, 2019). Aldi are selling at £1.99 for a 480ml tub which is a fraction of the price of Halo Top® which sells for around £5 a tub (White,2019). Asda sells both Halo Top® and their own brand online and in store and have replicated popular flavours such as cookie dough (ASDA Groceries,2019). Asda cookie dough also has less calories than Halo Top® cookie dough with just 199 calories per tub compared to 360 calories per tub with both tubs equalling 473ml. Due to all this, the threat of substitution is very high as not only are supermarket brands cheaper they are also fewer calories. A study by British Social Attitudes showed that 82% of people surveyed think that the government should be telling companies to make lower calorie products (Public Health England, 2018). It can be inferred from this that people are aware of calories and therefore may be more likely to choose the lower calorie ASDA brand over other brands such as Halo Top® with a higher calorie value.

Threat of new entrants:

• Healthy options are becoming increasingly popular with consumers (Wang, 2017).
• The threat of new entrants is very high as according to Robeco (2019) as long as investors have knowledge around the healthy consumer lifestyle it could potentially be a very sound investment for them.
• Fairly high – up and coming trend
• Existing companies selling normal ice cream will bring out a low calorie – already have reputation e.g. Ben and Jerry’s

The impacts could also be reduced by reducing the amount of cream (and therefore the milk) in the recipe, but that could affect the quality of the products and most manufacturers would not consider that option.

Pestel

Social:

Social demographics are constantly changing year after year and with the UK epidemic of obesity (Jones, 2016) and the rise in people with diabetes (World Health Organisation, 2018) this presents a good opportunity for healthy alternatives to those foods classically deemed as unhealthy. Alongside the increase in health related problems there are also people who are consciously living a healthier lifestyle (Quick,2018).

• Obesity increase
  • Cancer research UK (2016) have shown that the prevalence of adults over the age of sixteen that are either overweight or obese has increased from 53% of the population in 1993 to 63% of the population in 2015. Approximately 1 in 4 adults in the UK are classed as obese (NHS, 2019). This could increase to half the population as soon as 2050 (Government Office for Science, 2007)
  • Matt Hancock the Health and Social Care secretary has a plan to prevent retailers from promoting unhealthy foods. This is a good time to introduce healthy products in to the market as retailers will no longer be able to promote unhealthy food and therefore may promote healthier products.
• Diabetes
  • In the UK “someone is diagnosed with diabetes every two minutes” (Diabetes UK, 2019). Therefore there is always a want/need for sugar alternatives. Previously, low calorie/sugar free ice creams did not exist, this cannot be dated exactly.
• More health conscious
  • People are becoming a lot more health conscious with every third item bought by consumers being chosen due to a health related need (Quick,2018)

Government:

• Sugar tax
  • In Mexico the sugar tax was introduced in 2014 which lead to a 6% average decrease in purchases of sugary products with lower income houses decreasing these purchases by 9% (Boseley, 2015).
  • When Jamie Oliver mentioned the idea of the sugar tax on Facebook in 2016 and it was met with a very negative reaction from the public with 73% reacting to the post negatively (Crimson Hexagon, 2016).

Environment:

• Global warming – hotter summers?
  In the UK the 10 hottest years on record since 1884 have all been in the last 17 years. This is good news for the ice cream industry as the weather has a massive impact on ice cream sales and it is clear that warmer weather increases sales and likewise cooler weather decreases sales with Unilever blaming poor weather for them not achieving their profit estimate in the first half of the year in 2019 (Hancock,2019)

VRIO

The VRIO framework is used in companies to see what sets them aside from others within the same sector. It identifies resources and capabilities that are unique to that company and that give them a sustainable competitive advantage in the market place (

Companies noticed the success of HaloTop® in the US and many offered to take over the company however the two founders Woolverton and Bouton have kept a lot of control as they managed to raise $1.5 from donations from the public, family and friends (Abboud,2019). The willingness of the public shows the likeability of the brand and founders, an asset that many big companies do not have. This is a very distinctive resource that HaloTop® have as and that is public support. They have been able to obtain this support by being “more local and more authentic” and they have done this through the use of social media (Abboud,2019). By using social media to advertise the brand they have been able to target customers within certain demographics and has to spend very little in doing so (Wohl, 2017). This advertising has also led to them having over 325,000 Instagram followers and over 400,000 likes on Facebook in 2017 (Wohl,2017). In 2019, the number of Instagram followers has risen to approximately 730,000 which is over double the amount in 2017. When starting out HaloTop® used a very clever marketing strategy, they hired influencers with a following of over 1000 that aimed their posts towards healthy lifestyles and fitness (Gilliland,2019). The influencers were sent coupons with the hope that they would then post on their Instagram or YouTube channel (Cassidy,2018)

Another factor that puts HaloTop® in a desirable position in the market is their independence, they are able to be reactive to the market and take a more chances as they have no board or venture capital, as opposed to bigger companies that would be unable to take those risks. (Fleming,2018)

Peoples people – other large companies will not get this support.

Marketing

• Large calorie value on front

The key players in the low calorie ice cream industry use the fact that its low calorie as the main selling point rather than taste and luxury. The majority of brands selling low calorie ice cream including Halo Top® and Oppo are very clever with their packaging and display the calorific value in large font on the front.

• Slogans
• Peoples people (not men in suits)
• Social media

Social media is becoming a very popular way to advertise products. 1 in 3 minutes spent online are spent on social media (find reference)

“Trendy” flavours.

New flavours are now beginning to take over the traditional “old favourites” such as mint choc chip and Neapolitan (Sloan,2018). Top selling low calorie brand Halo Top® recognise this change in flavour habits and sell many non-traditional flavours such as cinnamon roll and red velvet (Halo Top®, 2019)

SWOT

References

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