Cool runnings for ice cream sector

With growth of 5%, the Middle East’s ice cream sector presents an opportunity for producers and retailers.

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By  Roger Field Published  July 10, 2006

|~||~||~|“Age does not diminish the extreme disappointment of having a scoop of ice cream fall from the cone,” said American humourist Jim Fiebig. And in the Middle East, where temperatures soar above those enjoyed by most Americans, this sense of disappointment is perhaps magnified. But with the ice cream sector experiencing growth of some 5% a year in the GCC, the market is increasingly geared towards satisfying a growing appetite for numerous types of ice cream across the region. The region’s biggest market for ice cream, Saudi Arabia, was worth about SR 1 billion (US $266 million) across sales of about 61 million litres in 2005, according to Euromonitor International, a UK-based research organisation. “Strong domestic demand is stimulated by the year round hot climate and an abundance of domestically produced milk in the country,” said Utku Tansel, Euromonitor International’s research analyst for Turkey and Saudi Arabia. The ice cream sector is growing by about 5% a year across the categories of impulse products, such as individual ice cream bars, and take-home ice cream. Artisanal ice cream, which includes speciality products that tend to be eaten shortly after purchase, such as Movenpick and Haagan Daaz brands, experienced growth of about 6%. Impulse ice cream accounted for 49% of value share in Saudi Arabia in 2005, while take-home ice cream, the second biggest sector, accounted for 32%, and artisanal about 19%, according to Euromonitor International. For take-home ice cream, the biggest selling packs are two litre and one litre containers and the most popular flavours are chocolate, vanilla and strawberry, followed by mango, caramel, and pistachio, Tansel said. In the artisanal category, Baskin Robbins, Movenpick, both Western brands, are performing strongly. In terms of market share in Saudi Arabia, locally produced ice cream continued to dominate the market, in 2004 at least, with a value share of more than 80%. In locally produced ice cream, the highest share was for Sadafco, also known as the Saudi Dairy and Foodstuff Co, which had a market share of about 16% in 2004, followed by Saudi Ice Cream Factory which had about a 12% share. The Arabian Food and Beverage Factory had a share of about 9%. Another local company, Unipex, also had a market share of about 9%, and the next biggest player was Master Foods. While Nestle and Unilever closed their operations in the GCC in 2001, it does have an agreement with Movenpick, which it entered into in 2004. Master Foods meanwhile is performing strongly in the region. The company produces brands including Galaxy, Snickers, Mars and Malteser ice creams in the GCC. “These products [Master Foods ice creams] have increased their share thanks to television commercials and campaigns in daily newspapers and regional magazines,” Tansel said. “In 2004 the company had the fifth position with a value share of almost 8%.By 2010 we expect the market to be worth about SAR1.3 billion and the growth will be underpinned mainly by an increase in the consumption of bulk ice cream, population growth and a hot climate.” Saudi Arabia-based Sadafco is just one company that is seeing the benefits of being involved with a higher-end product. The company now has a 25% share of the region’s ice cream sector, according to Brian Strong, business development manager at Sadafco. As market leader in the sector, Sadafco has two brands, Saudia and Movenpick. “We have the manufacturing and the distribution rights for Movenpick for the Middle East. Saudia is mainly a mass market retail brand, and Movenpick is mainly sold through boutiques,” he said. “The Movenpick brand is doing very well. It’s growing and we see an opportunity to take it even further. The majority of the boutiques are currently owned by Sadafco, and our vision is to find an experienced partner to invest in developing the boutique business on the retail side. We see the potential as being three times greater than it currently is in terms of locations.” Sadafco, which manufactures all of its own ice cream in Jeddah, is also performing strongly in the retail ice cream sector, and this is not only with its Movenpick brand. “On the Saudia side, we basically compete in all the ice cream segments, so cones, bars, cups and tubs. We also do a new brand called More Bar.” He added that the company has more than 16,000 ice cream retail customers, which it services using a fleet of about 200 trucks. “The trends are that take-home tubs are growing in the upper-end of the trade, and in the lower end of the trade it is mainly impulse items.” Furthermore, while Saudi Arabia already represents the biggest market for ice cream, the market continues to have enormous potential. “The per capita consumption of ice cream is still very low in Saudi Arabia so there’s still a lot of room for growth. It is relatively low compared to the rest of the world,” Strong said. He added that the UAE market is also relatively small, and is lagging behind Saudi Arabia in terms of growth. “After KSA, the next best markets in the GCC are Bahrain and Qatar.” Ehab Jaber, a category marketing manager at Masterfoods, has also noticed a continued rise in sales, particularly of brands such as Galaxy, Snickers and Twix ice creams, across the GCC. “Our ice cream brands are doing very well, with sales reaching double-digit growth. This has been going on for about six months.” He added that Saudi Arabia accounts for about 60% to 65% of the market. But while some companies have attributed some of the strong growth in the sector to advertising, Ehab has other ideas. “It’s hard to say what is driving this considering we haven’t done any kind of promotional support. One of the key drivers for the sector is the freezers. We put in a significant amount of freezers in the first few months of this year which gave us extra outlets, and therefore, incremental sales.” He added that these freezers are in smaller stores that cater more for impulse sales, and that the products were already well represented in the supermarkets. For Master Foods, Galaxy and Snickers brands are the biggest selling ice cream products, followed by Twix, Mars, Maltesers, M&Ms and Bounty ice creams. The brands are also available in different formats in the ice cream sector. “They all come in a bar except for Maltesers which is in a stick and tub format,” Ehab said. “Galaxy is available as a stick, bar, cone and a tub. They all come in a tub pretty much. The bars are the biggest selling format.” He added that the company is currently focused on product availability and ensuring its freezers look right, rather than on advertising. Sudhir Chavan, general manager of UAE-based ice cream producer Unipex Dairy Products, which produces the Igloo brand of ice cream, also sees freezers as key to success in the sector. “Availability and visibility of ice cream is increasing because of the extension of the cold chain,” he said. “This is the major governing factor of selling ice cream now.” Chavan added that a turning point in the sector came when Unilever and Nestle entered the market about five years ago. “With their presence the category gained significant growth at that time because of higher availability, higher visibility, and increased awareness of ice cream because of advertising,” he said. “That was a driving factor when these two multinationals were there. All the sectors in the UAE are performing very well. The supply chain was really improved because these companies set new standards, and all the competitors had to race to achieve those standards.” Igloo ice cream is present across the GCC and the company has more than 25,000 freezers in the market, making it the number-one retail brand of ice cream in the region, according to Chavan. It has a market share of about 25% in the GCC and more than 45% in the UAE. “We have the largest frozen distribution chain in the whole GCC,” he said. “We cover almost 25,000 outlets. For selling ice cream, this is a must, especially if you’re selling to the fragmented trade. In UAE this accounts for about 55% of trade. In KSA, almost 75% of business is done in groceries. Unless you can provide the freezer, you cannot sell.” Unipex carries out its UAE distribution in house, while for the rest of GCC it uses distributors. The company supplies its retailers with freezers and its distributors have their own cold chains. It also has its own team dedicated to cold chain maintenance. “Ice cream is a very difficult product to distribute and even manufacture. If can distribute ice cream, you can distribute anything.” Unipex Dairy also exports to countries outside the GCC, including Iraq, Jordan, some African countries and Singapore. Looking forward, Chavan is optimistic about ice cream sales, particularly in emerging markets, and he views Iraq as particularly ripe for growth. “Sales have been fluctuating because of internal stability and conditions there, but there is more or less a progressive growth there, and it will continue to grow. Right now, the main problem is the power interruptions and some of the attacks in certain areas where our distributors are not able to reach.” Along with most of his peers, Chavan also notes a shift in the market towards higher end products. “If you see the trend world-wide, it is towards premium products. People want a good quality product rather than a larger portion, although the mass market product is also growing.” He added that there is also a slight shift towards healthy products such as lower fat and low sugar ice creams., a market that Unipex now caters for. Company managers involved with higher-end speciality brands of ice cream, such as Baskin Robbins, Movenpick, and Haagen-Daz, are certainly no strangers to high levels of growth in their sector. These brands of ice cream benefit from being widely available from parlours, as well as hotels, restaurants and retail outlets, allowing them to make significant headway in the Middle East. Utku Tansel, of Euromonitor International thinks that artisanal ice cream, such as Movenpick and Baskin Robbins, started to gain recognition in 2005. He also expects their sales growth to continue. “We expect the number of specialist ice cream shops to increase and currently Movenpick and Baskin Robbins are doing quite well. Movenpick had more than 120 outlets by the time we were writing this report [2005] and they are also in restaurants, five-star hotels and supermarkets.” Manoj Loya, Gulf general manager for UAE-based Galadari, which holds the license for the Baskin Robins ice cream brand in the GCC, Jordan, Egypt and Lebanon, has seen particularly strong growth in recent years. Loya estimates that sales of the Baskin Robbins brand have grown by about 20% in the past year, a figure that he attributes mainly to the economy, along with product innovations and promotional campaigns. “We have observed a huge organic growth as well as the store development,” he said. “Growth of real estate and the economy has also allowed us to open more and more outlets.” Galadari manages all 335 Baskin Robbins stores in the GCC. Loya said that Baskin Robbins’ core business comes from these parlours, which account for about 85% of the business. The company also has a significant presence in five star hotels, restaurants and retail outlets. “We’re present in 70% of the five-star hotels and higher class restaurants and we’re also sold in supermarkets, but the core business always has been and will remain the parlour business, which is our own stores.” Saudi Arabia, which is home to 185 Baskin Robbins’ outlets, is the company’s biggest market, followed by the UAE, where there are 75 stores. But the fastest growing market for the brand is Qatar. “The way it’s growing is fantastic,” Loya said. “It’s about 35% or more. We already have about 30 stores there. It’s also about how the per capita income is going up, giving a higher frequency of customers visiting the stores.” He added that this growth is likely to continue for the next couple of years. Farid Ahmadi, CEO of NTDE, which holds the UAE license for Haagan Daaz, an ice cream brand from the USA but manufactured in France, said the sector is performing well owing to growth of the population and a rise in tourism. “It’s a very upper end product that we have with Haagen Daz, so tourism helps us, especially quality tourism, together with the increase in population and the increase in the wealth of the country.” Haagen-Daz benefits from being sold in various channels, from Haagen Daz cafés, to supermarkets and the food service sector. “We own and operate the cafés ourselves. We have cafés in Mall of the Emirates, Deira City Centre, Sharjah City Centre, Palm Strip and others. We have about 10 cafés at the moment and another six under construction,” he said. On the retail side, Haagen-Daz’ best customers are the hypermarkets and supermarkets, along with five-star hotels and even gas stations. “Some of the airlines are also our customers. Duty free shops, some restaurants and catering companies,” he added. “The growth has been good. We had a slow start, but since 2002, we’ve had good growth. I think peoples’ income caught up with the price that we were asking.”||**||

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