Ice Cream Makers Prep for Cold War

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Ice Cream Makers Prep for Cold War

NEW YORK -- Ice cream may soon be as ubiquitous as a can of Coke, and a once quaint market will become more national and more streamlined if Nestle SA and Unilever have their way. Now that the Federal Trade Commission has approved Nestle's acquisition of Dreyer's Grand Ice Cream Inc., the two multinationals are preparing to engage in ice cream wars.

Unilever, the Anglo-Dutch giant, has been the clear ice cream leader, with its Good Humor, Ben & Jerry's and Breyers brands holding 17 percent of the U.S. market. Swiss giant Nestle, owner of the Haagen-Dazs and Drumstick brands, attains a similar share after buying Dreyer's, according to The Wall Street Journal.

Distribution headaches long made ice cream the province of small local dairies. Americans eat most of their ice cream in restaurants and scoop shops, but for the big national brands, about 80 percent of consumption occurs at home. Unilever and Nestle hope to crack more of the away-from-home market, largely by adopting Coca-Cola Co.'s mantra of selling its products wherever consumers might hanker for them.

"You always want that product to be an arm's length away," said Eric Walsh, chairman of Unilever's $1.5 billion North American ice cream business. That means exploiting on-the-go outlets, such as convenience stores, gas stations, video shops and vending machines -- a strategy the two rivals have already executed in much of Europe, where branded ice cream freezers are visible everywhere.

"There are hundreds of potential points of distribution," said Tyler Johnson, executive vice president for marketing at Dreyer's.

Unilever, Nestle and Dreyer's have been pushing to place logo-covered freezer cabinets in stores, arguing that retailers' profits on ice cream are higher than on candy bars and gum. In the United States, Unilever already sells ice cream in hundreds of Toys R Us, True Value, Blockbuster and Family Dollar stores out of branded freezers, the report said.

Under the terms of the proposed settlement with the FTC, Nestle will be allowed to keep the Dreyer's distribution network. The system delivers ice cream directly to more than 85 percent of U.S. grocers. By contrast, Unilever must go through middlemen to deliver most of its Good Humor and Breyers products. Dreyer's deep penetration with supermarkets is an ideal base from which Nestle could expand, adding more "drops" to the trucks' route, such as c-stores and gas stations, with little extra cost.

Dreyer's figures there are anywhere from 100,000 to a quarter million potential nongrocery outlets nationwide. "Our intent is to be the Frito-Lay of ice cream," said a Dreyer's spokeswoman.