TRENDS

The companies in the category are using all available tools to attract consumers’ attention to their products. The strong manufacturing focus on innovations and new product launches, year after year, keeps consumers interested, and continued to influence ice cream in 2016. The trend towards co-branding or cooperation between ice cream and chocolate confectionery with innovative flavours were visible in 2016.

Multi-pack dairy ice cream recorded the highest current value growth of 2016 with a 10% sales increase; however, it was still a category of low importance as it accounted for only a marginal value share of ice cream. This was because Bulgarians preferred to buy the cheaper bulk dairy ice cream for home consumption. The second-best performance in 2016 was from ice cream desserts, which recorded a rise of 5% in current value sales terms. The category is still novel and further developments are expected.

The average unit price of ice cream slightly decreased in current terms in 2016, which was the result of the launch of cheaper products. Discounting mainly occurred within the categories of bulk dairy ice cream and single portion dairy ice cream.

In the review period, including 2016, the most popular ice cream flavours were vanilla and chocolate. However, the new combination of ice cream with cookies, for example, is attracting more and more consumers. Some of the premium brands in the category are benefiting from the willingness of Bulgarian consumers to try new flavours, and players are launching products with exotic fruits or combinations.

The stick format continued to be the most popular type within ice cream in 2016. Ice cream on a stick is cheaper than the cone version. Other formats such as cups and sandwiches are less popular.

Other grocery retailers is the leading channel for impulse sales of ice cream, and in 2016 registered a 28% value share of such sales. The channel consists of kiosks and mixed stores. The second-most-important channel for impulse ice cream in 2016 was food/drink/tobacco specialists with a 22% value share. The shares of supermarkets, hypermarkets and discounters increased over the review period up to a collective 35% in 2016, with three percentage points amassed since 2015. The distribution channels for take-home ice cream differ, with supermarkets, hypermarkets and discounters leading sales with a combined value share of 65% in 2016, followed by independent small grocers with a 21% share.

Ice cream faces significant competition from confectionery, mainly from countlines and tablets. Ice cream is still seen as an indulgence product. In order to bridge the gap between confectionery and ice cream, some companies such as Nestlé Ice Cream Bulgaria and Unilever Bulgaria EOOD have developed confectionery brands within their ice cream portfolios.

PROSPECTS

The efforts and investments in the category from the leading GBO players Nestlé SA and Unilever Group could be the main driver of ice cream sales in the forecast period. The main problem for the companies is the well-established seasonal nature of consumption. Bulgarians consume ice cream mainly during the summer season.

The average unit price of ice cream is predicted to decline slightly over the forecast period. The presence of private label lines by players such as Lidl, Billa and Kaufland BulgariaEOOD will prompt other manufacturers to pay greater attention to the lowest price levels.

The importance of independent small grocers in both impulse ice cream and bulk ice cream is expected to decline over the forecast period, which is due to the strengthening position of modern grocery retailers. Take-home ice cream is likely to post the biggest growth rate in the forecast period in discounters with an 11% rise in value sales terms.

The competitive environment is set to become more intense over the forecast period. The fiercest competition will occur between Nestlé SA and Unilever Group, as the latter will try to gain share from the former.

New product development over the forecast period is expected to be very intensive. It will focus on adding indulgence or healthy characteristics to products. Additionally, while the healthy characteristics of ice cream were not previously a priority for new product development, the increasing health focus among consumers will prompt manufacturers to find ways to come up with lower fat or sugar content, but not compromise on taste.

ICE CREAM IN ROMANIA

TRENDS

The performance of ice cream continues to be impacted by strong seasonality. Perceived more as refreshments during hot days and less as desserts, sales of the products are subjected to the weather. 2016 was warmer than 2015 in the June-August period, which is when most ice cream is consumed. The premiumisation of the offering was also an important contributor to value growth in 2016.

With 11% current value growth, take-home water ice cream was the most dynamic category in 2016. The category benefited from new launches and strong growth potential, sustained by the perception that its products are suitable for consumption when dieting or during religious feasts due to the lack of animal fats. Its products also have the advantage as being perceived as better refreshments than dairy ice cream during very hot periods.

The top three flavours of ice cream in 2016 continued to be chocolate, vanilla and fruited, which all have a long tradition. Nut and strawberry flavours were also found at the top of consumer preferences, and it can be said that the top five flavours are demanded by people in all income categories. Combinations of the top flavours are also appreciated by consumers. Exotic fruits, eg mango, passion fruit and lime have improved their position, and sophisticated versions such as gin-tonic, tiramisu, macadamia nuts and biscuits are increasingly popular among consumers.

With a 47% value sales share, cones was the leading format of impulse ice cream in 2016. Cones are used by all the main players, both international and domestic. Assimilated with cones, the traditional Vafa format, popular for decades and having a strong presence in the portfolios of domestic producers, has propelled cones to the top of impulse ice cream formats. Sticks followed with a 33% share in 2016. With a 20% share, was “others”, which consists mainly of small, thin-wall cups but also paper, satisfying demand for cheap products and environmentally friendly packaging.

The distribution of ice cream shows differences when one compares impulse ice cream with take-home ice cream. Take-home ice cream is better represented in modern grocery retailers, which provides large shelf space and is frequented by mid-high-income buyers across the whole year. Thus, modern grocery retailers has succeeded in reducing seasonality and awakened consumers’ interest due to the low price per unit. Meanwhile, traditional grocery retailers dominates the distribution of impulse ice cream due to consumers’ need for refreshment on the go. Considering the big number of independent small grocers and other grocery retailers in the retailing landscape, and the high sales potential during the hot season, manufacturers have taken the initiative and provided these small outlets with labelled freezers, which have proved to be successful for sales. The big number of independent small grocers and the convenience in purchasing, due to the proximity of the outlets and to their offering of impulse ice cream, has propelled this channel to the top of sales of impulse ice cream.

PROSPECTS

The performance of the ice cream category is expected to continue to be under the influence of high seasonality. However, there are some factors that are predicted to lessen its influence in the forecast period; the expansion of modern grocery retailers is the most important. Modern grocery retailers attracts a big number of loyal consumers, stimulated by promotions and claims of low prices, and the channel provides generous freezer space, which allows the availability of ice cream during the whole year. The increasing position of premium brands thanks to economic growth and recovery in incomes is also expected to lead to forecast period value growth.

The average unit price is expected to increase slightly over the forecast period. Demand for standard and economy brands is likely to remain high, but improvement in purchasing power is estimated to create a growing demand for premium products. Because of seasonality in sales, whereby there is mass consumption during the hot seasons, the premiumisation of the offering is advancing by small steps. However, further sophistication in the offering will be seen over the forecast period, which will cause the average unit price to rise. On the other hand, the expansion of modern grocery retailers and the lower prices the channel sets for ice cream is expected to temper unit price growth.

The forecast period is not anticipated to bring important changes in the distribution of ice cream. Modern grocery retailers will continue to account for the biggest sales of take-home ice cream while independent small grocers and other grocery retailers are set to maintain the most sales of impulse ice cream.

The low consumption per capita and the seasonality are not expected to create premises for special activity for companies in the category in 2016-2021. Advertising, promotions and the expansion of distribution will remain important among the main players. Competition will remain fierce among international and domestic players and competing will require investment in advertising and distribution. The focus on independent small grocers with labelled freezers will continue to be the cheapest but also the most effective tool for advertising and improving the visibility of ice cream brands.

The varieties launched in 2015-2016 are expected to be successful in the short term. Support from owners of these products will be seen in advertising and distribution. The completion of product portfolios with different formats and flavours is set to be the main direction taken by the majority of players over the forecast period.