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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Magnum has been running television ads in the UK in which a woman finds to her dismay that her partner has brought home a private-label version of the chocolate-covered ice cream on a stick. “He bought fake Magnum,” she thinks suspiciously, then discovers that other things in their home are false, including his moustache.
It is amusing but rather on the nose, given that this is exactly what has been happening to Unilever’s premium ice cream brand. The discount supermarket Aldi, for example, is selling “Gianni’s Milk Chocolate Ice Creams” in remarkably similar packaging to Magnum for a third of the price by volume. They may not be as good, but they are an easy deflationary substitute.
The Magnum ad is also ironic because not even Unilever is obeying the “stick to the original” tagline. The consumer goods company this week announced that it plans to slim down by splitting off its ice cream business, which includes Magnum, Ben & Jerry’s and Wall’s. Ice cream has been lagging behind its other brands, including Dove, Sunsilk, Knorr and Hellmann’s mayonnaise.
Some of this poor performance is due to last year’s weather, and some to the fact that premium ice cream is expensive. The prices of ingredients such as milk, sugar and cocoa have risen sharply, along with the energy needed to keep products chilled. While ambient foods such as mayonnaise can be placed on the same trucks as shampoo, ice cream needs its own ride.
I like ice cream, and I don’t like to worry about it too much. In many ways, it still occupies an attractive niche. It is intended to be an occasional treat and no one would mistake even Ben & Jerry’s vanilla ice cream, with natural ingredients including cream and egg yolks, for an essential foodstuff. It is delicious in modest scoops, and there’s nothing wrong with that.
But what used to be a simple pleasure, signified by the chimes of the ice cream van, has become complex. Unilever is a victim of its own success in turning Magnum and the others into billion-euro brands and attracting many rivals that have eaten into its market share. When ice cream finally splits, I advise investors to examine the contents carefully.
In a sense, this is an everyday story of consumer goods in the 21st century. Many familiar brand names are assailed from all sides: they face discounters that imitate them with cheaper ingredients and less of a brand premium, and niche start-ups that proffer healthier, natural and luxurious choices. Shoppers have many choices of washing powders, let alone foods.
Ben & Jerry’s, which clashed with Unilever over sales in occupied Palestinian territories, was a pioneer of more authentic ice cream. But consumers of luxury ice cream, frozen yoghurt and gelato have many options now. These range from Adirondack Creamery and Van Leeuwen in the US to Hackney Gelato in my backyard: the freezer cabinets of corner stores are full of novelties.
Unilever’s oldest ice cream brand Wall’s, which dates to 1922 in London, meanwhile has plenty of budget competition: its Cornettos are more expensive than the own-label substitutes sold by most supermarkets. They are cheaper than Ben & Jerry’s or Magnum, but are made with lesser ingredients, including reconstituted milk, coconut fat and emulsifiers.
This puts them firmly in the category of ultra-processed food, along with many private-label products. It was always so, but it has become more awkward for companies such as Unilever, with its focus on nutrition and ambition to become “a world-class force for good in food”. It is difficult to reconcile a Wall’s Cornetto with that, even as an optional indulgence.
So it is simpler for Unilever to say goodbye. There is an echo of Nestlé, which folded its own brands, including Häagen-Dazs, into a joint venture called Froneri with the private equity firm PAI. Froneri is now the world’s second-largest ice cream maker after Unilever; it started with R&R Ice Cream, a North Yorkshire company that originally made ice cream for Morrisons.
I had never heard of Froneri before this week, although I am familiar with some of its products. A low profile can be a relief in today’s ice cream business, given the pressure that some shareholders are putting on Nestlé and others to make their foods more healthy. It is another example of the way in which private equity has advantages.
But Unilever, and whatever the new ice cream company ends up being called, need not be too apologetic. Making ice cream is largely an honourable trade, and it is certainly one that would be missed. Purely in health terms, it would be better for us all to buy our own equipment and start churning, but having the odd Magnum, Cornetto or other ice cream is easier.
The question is who produces them. Unilever holds 20 per cent of the world’s ice cream market and, while it has ambitions to grow, it shows signs of fading. It has created many variations of Magnum, from Ruby Chocolate to Double Gold Caramel Billionaire, but one extension of the brand has proved too much: Fake Magnum.