“We've seen all of our brands grow [Häagen-Dazs, Outshine, Drumstick, Skinny Cow, Dreyer’s/Edy’s], but what we are really seeing accelerating is the shift from packaged ice creams, a pint or larger where you can scoop ice cream into a bowl, to snack, handheld type products such as sandwiches, products on sticks or in a cone for home use, and we have more of the category than any other manufacturer.”
According to IRI data (Integrated Fresh, Total US, MULO), US retail sales of frozen novelties jumped 25% in Q2 2020 vs Q2 2019, and were still up 1.1% in Q2 2021 vs Q2 2020, a period when many other categories experienced a sharp decline YoY given the tough comparables with the first months of the COVID-19 pandemic.
Last month (October 2021), frozen novelty sales were up 5.6% vs Oct 2020 and a whopping 30.7% vs October 2019. In comparison, ice cream sales were down -6.4% in October 2021 vs Oct 2020, and up a more modest +6.4% in October 2021 vs October 2019.
'People are snacking on frozen novelties at different times of the day’
So what’s behind this move to novelties?
It’s actually been a gradual shift, Peddle Rguem told FoodNavigator-USA. “If you go back 20+ years, dinner was often at the dinner table at the same time every day, and you might have ice cream for dessert, scoop it into bowls and eat it together. But even during the pandemic there were fewer eating occasions where the whole family was sitting around a table together.
“Now if you're watching Netflix, it's easier to grab a single-serve per product from the freezer, and people are also snacking on frozen novelties at different times of the day, so dessert is no longer a traditional post dinner occasion, which has facilitated growth of the handheld options for mid-afternoon, or later in the evening,” added Peddle Rguem, who has been living and breathing ice cream for seven years, serving as VP of marketing for Nestlé USA’s ice cream division 2014-18, and president of the division from 2018-20 before taking the helm at DGIC in February 2020 following the sale of Nestlé USA’s ice cream division to Froneri (see below).
Based in California, Dreyer’s Grand Ice Cream (DGIC) was created in early 2020 following the $4bn sale of Nestlé USA’s ice cream business to Froneri, a joint venture created in 2016 after Nestlé merged its European ice cream business in 20 countries with ice cream maker R&R, a unit of private equity firm PAI Partners.
Under Froneri - the second largest manufacturer of ice cream and the number one private label producer worldwide – DGIC’s portfolio includes Häagen-Dazs,* Outshine, Drumstick, Skinny Cow, Dreyer’s and Edy’s.
* General Mills sells the Häagen-Dazs brand in non-US markets.
‘We’re growing almost 6% ahead of the category this year…’
Brands in her remit (Häagen-Dazs, Outshine, Drumstick, Skinny Cow, Dreyer’s/Edy’s) were performing well at the time of the sale to Froneri, said Peddle Rguem. “But we've accelerated the performance fairly substantially, which shows that focusing on this single category of ice cream can make a difference.”
While getting out from under the Nestlé corporate umbrella might have improved agility, didn’t it also reduce the brands’ buying power?
No, claimed Peddle Rguem: “We focus the buying power on the ingredients that matter and the vendors that matter for ice cream, so our relationships with equipment and ingredient manufacturers are just more focused now. Within Froneri, our engineering capabilities and manufacturing know how can also be shared.”
The numbers, meanwhile, speak for themselves, she said. “We’re growing almost 6% ahead of the category this year [YTD ended 11.7.21, ice cream and frozen novelties US retail sales dipped -1.4% year-on-year, while DGIC’s sales were up 4.4% over the same period according to IRI data supplied by DGIC].”
“Over the past three years, we’ve invested hundreds of millions of dollars in manufacturing improvements. In 2021 alone, DGIC is estimated to spend around $200m in manufacturing improvements, driving greater quality in our products and growing capacity, adding 11 new production lines across our four factories.”
She added: “As we build more capacity with new lines, our hiring needs will also increase. For example, we announced earlier this year our plans to invest $145m to build two new production lines for our Drumstick ice cream at our Fort Wayne, Indiana facility, adding up to 145 jobs by the end of 2024.”
'Häagen-Dazs is our fastest growing brand right now across all formats'
So how does Peddle Rguem viewing the dynamics in the ice cream category, where major brands such as Häagen-Dazs and Ben & Jerry’s (Unilever) now slog it out with regional brands and a flurry of VC-backed startups in a market offering a bewildering array of options from plant-based, keto and lactose-free, to ‘animal-free’ options from brands such as Brave Robot?
“Different brands [tapping into the permissible indulgence trend popularized by brands such as Halo Top] have come and gone over the years,” said Peddle Rguem, "and I'm proud of the fact that Skinny Cow has had staying power, but another trend we've really seen in the last 18 months to two years is that people are looking for comfort food, and they are actually less focused on that calorie count.
“When you look at our portfolio, Häagen-Dazs is our fastest growing brand right now across all formats, packaged and snacks, and the ethos of Häagen-Dazs is five simple ingredients, and it has just been doing exceptionally well.
“Drumstick is also doing incredibly well partly because of this move to hand-held products, but it’s also about texture... the wafer cone, the ice cream, the chocolate coating, and then the core product has peanuts. People are looking for a multi-texture sensory experience, and so Drumstick resonates with consumers of all ages.”
Plant-based: ‘If you look at pure dollars generated, a lot of products are over-spaced’
When it comes to plant-based frozen desserts – an area in which Häagen-Dazs now plays with its coconut cream- and almond-based non-dairy products – there’s growth, but there could be some course-corrections from retailers in the coming months that have maybe given some dairy-free brands slightly more space than they deserve based on how productive they are on shelf, predicted Peddle Rguem.
“If you look at pure dollars generated, a lot of products are over-spaced, so it'll be interesting as we see the new shelf sets for the summer months of 2022. I think there has to be a pruning down in some cases because you've got a variety of brands and offerings that just don't turn as well.”
However, DGIC's fruit-based Outshine brand of novelties is performing very well, she said: “Our aspiration is to make that a half billion dollar brand. It has an entire door in many ice cream aisles and it’s only five years old, and what people are telling us is that they will pick an Outshine bar instead of a granola bar or trail mix or another snack, and it has a huge consumer following.”
Retailers are asking for ‘more products on sticks’
So what does all this mean for the innovation pipeline?
“What I would say is in the last two years, we did see a return to a lot of core SKUs, core flavors, vanilla, strawberry, chocolate, coffee, so I think what we'll see is maybe fewer new items in the category than we've seen in years past, so we’re putting a lot of focus and attention on pure quality in our core items. How do we make them even better?”
More generally, said Peddle Rguem, there will be a renewed focus on indulgence, and more launches of hand-held products “because our retailers are asking for it. ‘Bring us more cones, more products on sticks!’”
Inflation and supply chain pressures: Contingency planning, relationship building
Asked about inflation and supply chain pressures, she said: “It’s been an incredible ride over the last year and a half, so what we've been spending a lot of time on is contingency planning and relationship building with a broad array of suppliers so we’re not single sourcing things.
“Certainly the labor shortage has impacted us, but we've spent time making sure we have sister Froneri factories that can supply product on an as needed basis so we make sure we're bringing service to our retailers.
“So we have product coming in 2022 from multiple other Froneri factories and we're eating those costs, but we think of it as an investment in our brands.
“I'm extremely proud that through all the ups and downs, our factories remained operational and we've added new production lines.”
As for pricing, she said: “We have raised some prices to cover rising costs and tried to adjust promoted prices to make sure consumers can still access the product the way that they have before and we're continuing to see strong demand behind our brands. But a lot of it we’ve tried to absorb internally by doing things differently.”
Ice cream post-pandemic: ‘We see the growth absolutely continuing’
Should things ever return to ‘normal’ as COVID-19 recedes, or at least some kind of new normal, what will that mean for ice cream?
“If anything,” said Peddle Rguem, “The last few years have reminded people that sometimes just that smile on your face, a little bit of joy that ice cream brings, it makes life a whole lot better, whether you're a child, a senior or anyone in between, and so we see the growth absolutely continuing.”