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By: Ildiko Szalai

Unilever has announced the launch of its Magnum ice cream brand in the US market. Currently, Unilever is the second largest ice cream player in the US, offering four of the top 10 ice cream brands in the country in Breyers, Klondike, Ben & Jerry’s and Popsicle.

The company has an established operational and distribution infrastructure to roll the label out nationwide. However, it faces the challenge of driving growth in a saturated, slow growing market with stiff competition from Nestlé, which commanded more than 20% of US ice cream retail sales in 2009.

Rapid geographical expansion of core brands drives positive financial performance in 2010

In Unilever’s 2010 financial results across all categories, growth was strongly driven by the rapid geographical expansion of core brands, especially in ice cream and personal care. Magnum Gold has been launched in 29 countries, including Indonesia and Brazil, while Dove Men+Care is now available in 30 countries. The expansion of Lifebuoy into new markets is driving double-digit global growth of that brand.

Slow growth prospects for US ice cream but premium end offers good opportunities

The newly launched Magnum commands a premium price position in the US, with the company aiming to differentiate the brand from its competitors through higher quality ingredients. In some markets, Unilever has gone a step further in its response to the indulgence and premium trend. Its new Magnum Aroma line, Aroma Café Colombia, Dark Ecuador and Java Cocoa, are sourced from different single origins, giving an extra ethical trading edge to its positioning, a strategy the group could fully employ in the US market where growth in ice cream is expected to be driven by the premium end.

In its core Western European markets, Magnum achieved its leading impulse ice cream position via the successful execution of the group’s strategy to build a premium image for the brand and benefit from its high price positioning. In its new target market, Magnum’s success will depend on whether Unilever can replicate this premiumisation strategy and differentiate itself from existing indulgent, premium labels, such as Häagen-Dazs.

Magnum currently heavily reliant on Western Europe

Magnum is the world’s leading ice cream brand with annual value sales of US$2.2 billion. It accounted for around 6% of Unilever’s global packaged food retail value sales in 2009.

Some 99% of the brand’s sales are generated in impulse ice cream, and its core geographical market is Western Europe, which accounted for over 80% of the brand’s global sales in 2009. The prospects for impulse ice cream in Western Europe are bleak, with sales predicted to grow at the second lowest regional CAGR of 1% over 2010-2015, while in Australasia, its second largest regional market, the category is expected to grow at a 2% CAGR over the same period.

Future growth opportunities in emerging markets

Unilever’s move to broaden the geographical reach of its leading brands delivered good financial results in 2010. As part of this strategy, the launch of Magnum in the US, where the company has a good ice cream infrastructure, will widen the consumer base significantly. However, in order to drive dynamic growth the brand’s emerging market presence will need to be enhanced. Rising disposable incomes, hot weather and growing product availability in convenience stores are all driving ice cream sales in developing markets.

 

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