Cold comfort

Dismal weather coupled with unprecedented rises in raw materials prices made 2007 a somewhat challenging year for Europe's ice cream manufacturers. Along with other purveyors of so-called junk food, they were also in the firing line as lobbyists looked for someone to blame for the spiralling obesity epidemic.

According to Euromonitor International, value growth in ice cream has stagnated in many regions worldwide, although this is forecast to change for the better over the next few years, it says, as consumers increasingly trade up to premium variants and seek higher-quality ingredients, which come at a cost. "Stagnation has resulted from the maturation of the sector, health concerns and growing competition from cheaper own-label products."

The lousy summer didn't help, as Unilever remarked in its latest trading statement. "Third quarter growth, at 0.7%, was lower, primarily due to the effect of weather on ice cream sales, which reduced overall European growth in the third quarter by 2%."

Hill Station Ice Cream, which is based in Cwmbran in Wales, also highlights the stresses facing the sector. "Our key raw material costs almost doubled from January through April 2007. Extremely poor weather has had a seriously adverse affect on ice cream sales for all producers."

R&R Ice Cream, Europe's largest ice cream manufacturer, found 2007 particularly challenging, says sales and marketing director Neil Jones. "We had the worse summer in memory. But it wasn't just the temperature. Sunshine hours peaked in April, then declined dramatically, which makes a big difference, particularly to lollies.

"Having said that, there was growth in market share for super-premium products, although this was largely to do with a vast amount of incremental retailer promotional activity rather than a base level growth in popularity.

"This did counter the decline, even though it was retailer led, and the super-premium category in the UK grew by 53% and £13M. We've had some great success with our Skinny Cow Smoothies and our most successful launch was a product called Munchies, which achieved well over £1M in sales."

While high costs and lousy weather may have dented growth recently, there are still grounds for optimism, nevertheless.

Ice cream as an indulgent treat is more popular than ever in Europe. And thanks to the clever premiumisation of big name brands, expansion into different seasons and a well-targeted move to attract more adult consumers, it's a category which looks set for continued long-term growth.

Sales are still rising, manufacturers continue to innovate and a changing target market keeps established brands from stagnating. According to Euromonitor, global retail sales of ice cream reached $59bn in 2006, representing an increase of 4% on the previous year.

Interestingly, the increasingly sophisticated consumer has presented an unforeseen problem to big brands. Well-known products such as Ben & Jerry's and Haagen-Dazs rely on perceptions of luxury and indulgence to create a growing niche among consumers. And in previous years this created a divergence between cheap-and-cheerful supermarket own-label products and branded luxury ice creams.

But the supermarkets have fought back successfully with well-received luxury products of their own, which have done well to lure brand-conscious consumers to premium own-brand products.

"With own-label manufacturers increasingly focusing on traditionally flavoured ice cream, branded firms are opting to increase differentiation of their premium products by introducing new flavour combinations as well as health-friendly properties," says Euromonitor. "This is known as the premiumisation of flavour and health, and is aimed at a more demanding consumer who is willing to experiment with new taste sensations and pay a premium for more sophisticated products."

Interestingly, says Euromonitor, this trend is impacting countries in eastern Europe and Asia as well, underpinned by the rapid expansion of middle- class consumers in urban areas.

Ice cream for the connoisseur

So what other trends have been identified? Italian dessert style ice creams look set for gradual expansion across Europe, while gender specific targeting has proved successful for Nestlé in Spain, with implications across the board. The use of premium single-origin coffee and cocoa beans has also seen some success and looks likely to grow, with Unilever's new Magnum Aromas already capitalising on this concept. Brand extensions are also working well for established manufacturers, with the recent launch of Kit Kat ice cream in Germany just the latest in a number of chocolate bar and ice cream hybrids.

But health remains the biggest opportunity and all the big players are seeking to cash in, both through the use of healthy ingredients and more sophisticated techniques for reducing fat without compromising taste or texture. While the concept of healthy ice cream may seem anathema to some, manufacturers are finding that there is a substantial market for low fat products. With the low fat ice cream market having risen by 38% in Europe between 2002 and 2006, it's a category with real potential.

How low can you go?

"It's only in the past few years that we've really seen this sector grow, but now there are some really amazing products of 8% or even 2% fat," says Yves Maltete, dairy and ice cream category manager, Cargill Texturizing Solutions. Cargill's work on ice cream has recently seen the development of a stabiliser (Lygomme FM series) and maltodextrin (C*DryLight), which operate in tandem to negate the problems caused by removing fat.

The stabiliser uses several emulsifiers to compensate for loss of fat, by binding water into the product, slowing the melting time and preventing the growth of large ice crystals. In conjunction, the maltodextrin acts to add a mouthfeel that mimics fat as well as substituting lost dry matter.

"The traditional problem with low fat ice creams is that you take it out of your freezer, you take a scoop, and you put it back, creating what we call a heat shock," says Maltete. "With low fat products this leads to ice crystals not just on top, but inside the ice cream as well, creating an unpleasant, crunchy texture. With this new solution you don't see that - ice crystals are minimal even after weeks and months."

Different technological advances are also making headway in the production of low fat ice cream that manufacturers claim is virtually indistinguishable from full fat products. Best known is Unilever's foray into ice structuring proteins (ISPs), which affect the formation of ice crystals during manufacture and storage.

ISPs occur naturally in the blood of fish such as the ocean pout, preventing them from freezing to death by reducing the temperature at which ice crystals form. In an ice cream, they can help create a creamy product with virtually no fat by beneficially altering the size and shape of the ice crystals. As sourcing ISPs from nature is neither sustainable nor commercially viable, Unilever has developed a production system based on fermentation using genetically modified yeast.

Tetra Pak, meanwhile, has pioneered a new freezing technology called Hoyer Deep Blue, which allows more water to be frozen at a lower temperature in the production process, creating more finely textured crystals and hence needing less fat to create a creamy texture. Other companies are using Cargill's solution of replacing the fat with an emulsifying agent, with some of these such as Cremex aiming for lower saturated and trans fats.

Some of these low fat techniques are also having some surprise added benefits.

For products from Cargill and Cremex, an additional advantage is that they may allow manufacturers to save on expensive dairy ingredients. Various factors ranging from the rising price of animal feed to drought in Australia and increased demand from China have led to record price rises of milk around the globe, which many companies have been forced to pass on to consumers. But low fat ice cream techniques can allow for the substitution of dairy ingredients with vegetable fats.

"It might sound unbelievable, but we've had just as good taste results, if not better, from fats such as coconut oil and palm oil than from butter and cream," adds Maltete at Cargill. "And these are much lower cost ingredients, which is useful for manufacturers."

Healthy indulgence?

Some fat substitutes such as inulin and oligofructose are also prebiotics and could enable manufacturers to make health claims for ice cream - although the nutrient profiling clause in the Nutrition and Health Claims Regulation could potentially throw a spanner in the works here.

"Inulin and oligofructose are prebiotics, which are selectively fermented by intestinal flora," says Beneo Orafti application manager Rudi Wouters. "This means they not only promote optimal intestinal function, but also balance the body's intestinal flora by stimulating beneficial bifidobacteria. So in addition to marketing ice cream containing the ingredient on its fat-reduced or sugar-reduced status, manufacturers can focus on positive health attributes such as its prebiotic effect and high fibre content."

With the growth of yoghurt ice cream as a category noted by Euromonitor this year, it seems that consumers are becoming increasingly discerning in their purchases. They want premium low fat ice cream with additional nutritional benefits. Luckily for them, manufacturers are taking notice.