Matthew Boyle
On a warm summer night in London, Unilever said it was going to measure buxom starlet Kelly Brook’s smile and pulse.
As chief executive Paul Polman looked on, the British model got into a black oval device, dubbed the Infinity Pleasure Pod, to eat a Magnum ice cream bar at the opening of the brand’s London pop-up store. The pod “has all these lights that react to your brain and the feelings you get and it’s basically different for everybody”, Brook said.
At Unilever, the feeling about Magnum these days is all good. With a hint of sex to sell a child’s treat as an adult indulgence, the chocolate-coated ice cream bars have taken share from larger rival Nestlé in the world’s biggest ice cream market since their US introduction last year.
That will help Magnum’s sales, which have doubled since 2006, to top e1 billion (R10bn) worldwide this year, making ice cream a stand-out in Unilever’s sluggish food unit.
“This brand has major legs globally and will be a story for years to come,” said Eric Scher, an analyst at Sanford Bernstein. In the competitive US market, where Nestlé currently reigns overall, “Magnum has tipped the balance now to Unilever”.
With almost $13bn (R106.5bn) in sales across brands such as Cornetto, Breyers, Klondike, and Ben & Jerry’s, ice cream is Unilever’s single biggest category, accounting for about 15 percent of total revenue, according to researcher Euromonitor.
Conquering America has been a tougher nut for Unilever to crack. The $12bn US ice cream market is unique because more than half of total sales come from packaged tubs sold in supermarkets and eaten at home, according to Greg Miller, a senior principal at Parthenon Group, an advisory firm serving food and beverage clients. In Europe, more consumption takes place outside the home in single-serve, more-profitable portions.
So Unilever and major players such as Haagen-Dazs maker Nestlé had taken the European playbook to the US and were increasingly shifting their focus to so-called frozen novelties – single-serve treats on sticks or in cones, Miller said.
Frozen novelties command 21.2 percent of the US market, or $2.6bn, up from 19.6 percent of the market in 2006, according to Euromonitor data.
“Novelties make ice cream more of a snack,” said Chris Brockman, an analyst at market research firm Mintel. “It’s where the market has the most potential to grow.”
To get to the top of the US market, Unilever has to unseat Nestlé’s Skinny Cow, the best-selling novelty in the US. Sales of the world’s biggest food company’s low-fat offering peaked in 2010 and had gone downhill since, Brockman said, as consumers seeking indulgent treats had gravitated to break the calorie bank on full-fat items. “Taste has come back in,” Brockman said.
That’s where Magnum comes in. Introduced in 1989 and made with Belgian chocolate, Magnum’s flavours include double caramel and mochaccino. A typical Magnum has 1 000 calories and 16g of fat, compared with 418 calories and 1g of fat in a Skinny Cow fudge bar.
Sold in 50 countries, Magnum is Europe’s top ice cream brand, yet US managers for years did not think it was “strong enough” to bring Stateside, according to Kevin Havelock, the president of Unilever’s refreshments unit, which includes ice cream.
In 2008, the long-time head of Unilever’s US ice cream business retired, and Havelock prepared to bring Magnum across the pond. Magnum did so well in US test markets in 2010 that Havelock pushed up its US debut from this year to April 2011.
Supported by a marketing budget of about $15 million, Magnum became one of Unilever’s “big bets” of last year, Havelock said.
The bet has paid off. Americans snapped up more than 100 million Magnum bars, so many that supplies ran low, forcing Unilever to send boxes over from Italian factories to meet demand.
Sales hit $100m in the first year, surpassing Unilever’s forecasts by 50 percent, Havelock said.
Walmart expanded its offering from four flavours to six, and its warehouse chain Sam’s Club added the line.
Magnum’s success derives from its appeal as a tasty yet affordable treat, as well as its racy marketing, which takes a page from sister brand Axe body spray, according to Scher.
“The opportunity for Magnum was clear,” Brockman said. “The focus on the diet brands had dragged the market down. Magnum could change this stagnation and boost the emerging premium end of the market, which is not particularly crowded.”
Fuelled by Magnum, along with revamped products from Klondike and Breyers, Unilever might soon supplant Nestlé as the biggest US ice cream maker, said Havelock.
Nestlé spokeswoman Diane McIntyre declined to comment.
Beyond the US, Magnum had entered Pakistan, Thailand and Malaysia over the past year, global brand director Sophie Galvani said.
In Asian emerging markets, Magnum costs about three times as much as locally produced ice cream bars, lending it cachet among the emerging middle class, a group projected to increase from 500 million people to more than 3 billion across Asia by 2030.
Galvani said Unilever’s global use of temporary Magnum stores – they have popped up in Jakarta, Paris and Istanbul – would hit São Paulo soon.
Galvani said the cafés existed to generate buzz, as shown by the horde of photographers following Brook as she emerged from the Infinity Pod and designed her own Magnum bar topped with white chocolate and brownies. Polman chose white chocolate with chilli flakes. “Make mine healthy,” he said. – Bloomberg