TEANECK, N.J. -- The superpremium frozen dessert category is expanding always and all ways.
In addition to a steady increase in sales, the category has experienced a continuing rise in offerings. There was a time when the category consisted solely of ice cream. Now there's superpremium frozen yogurt, novelties and sorbet as well.
Michael Paxton, president and chief executive officer of Haagen-Dazs here, and Tony McGrath, vice president of the company's North American operations, are in ideal positions to chart the category's growth. Haagen-Dazs, the recognized leader in the category, also is credited with starting the category when company founder Reuben Mattus first introduced his product in 1961.
Paxton and McGrath see continued and increased success for superpremium frozen desserts, but not at the expense of traditional ice cream. "Many of the people who are trying the yogurts and the sorbets are not ice cream eaters. So that's creating new consumers for frozen desserts," McGrath said.
All types of frozen superpremium desserts seem to be scoring in spite of their high price tags. "We're seeing some growth in superpremium right now, but it's slowed down from what it was three or four years ago when it was growing 10% or 15%. We're growing 3% to 5%," Paxton said. "Quite frankly, that's still better than most of the industry."
McGrath said one area of the category is doing particularly well. "It's the 'good for you' part of the superpremium which is continuing to outperform the marketplace," he said. That trend hasn't been lost on Haagen-Dazs and other manufacturers.
"Our yogurt business is doing extremely well right now," Paxton said. "We just restaged it last summer and we're seeing great improvement in our turns. "We've introduced some new flavors," he continued. "We've segmented the line around kind of good-for-you yogurts and then classic yogurts, vanilla and chocolate. Then we went all the way down to 98%-fat-free with sorbet and yogurts, which have been very successful for us."
Sorbet, a product Haagen-Dazs is test-marketing, is the fastest growing segment of the frozen dessert category, said McGrath. "It's a tiny market now, about $50 million vs. $1.5 billion for ice cream. So it's a very small segment. But the interest in the category is increasing on the rising tide of the desire to have good-tasting, good-for-you products. So you get the best of both worlds; all that taste without the fat."
Because the sorbet market is so new, Haagen-Dazs is proceeding with caution. "That's one of the reasons we're doing a test-market," McGrath said. "We can go back to our customers having read the results and ensure that as they take it on, we're in a better position to tell them what kind of space, what kind of turns they're likely to see. Sorbet could well be one of those sleeper categories which, when you get it right, you invite a lot more people in."
McGrath said he's encouraged by what he's seeing from consumers and retailers in the three markets testing the sorbet, reporting the items are moving as fast, if not faster, than frozen yogurt. "The response in terms of the sell-in was extremely positive," he said. "There was no problem in persuading retailers in Chicago, Seattle or Los Angeles to support us with the launch of the sorbet. As a result, we're in most of the key chains."
Paxton and McGrath said they thought sorbet could catch on quickly, both with consumers and other manufacturers.
At the Food Marketing Institute's annual convention in Chicago last month, one or two big messages came through, McGrath said. "One of the key ones is the whole health-conscious, fat-free arena," he said.
"I can't believe people will ignore it," Paxton said, referring to other manufacturers. "We went through the same debate. Do we sit back and watch other companies because it's such a small category right now? Do we take kind of the bold approach of going out and being first? We thought we had the product to be the first." Since time is short, Paxton and McGrath said they want to make the most of their sorbet test-marketing phase.
"We're going to put advertising and promotion programs behind it as well, in varying levels by market to try and learn how much it's going to take to educate consumers -- and retailers, for that matter -- about this product," Paxton said.
One of the promotion programs is the offering of trial cups at two for $1, giving customers a chance to try the product without having to buy a full pint. "So rather than your traditional demo, we're giving our customers some income with the same goal in mind," McGrath said.
All the emphasis on the good-for-you items won't eliminate traditional ice cream.
"I don't think any of us are going to walk away from the classic lines of ice cream," Paxton said. "Consumers still want to be rewarded. I mean, let's face it: We all put in long hours, whether you're at home or whether you're in the office. It's kind of nice to just sit down and open that pint of ice cream.
"We also want to give consumers options," he continued. "We want to provide that indulgence on all levels. It's indulgence on ice cream; it's indulgence on yogurt; it's indulgence on sorbet. We'll run the gamut, from the highest indulgent products to the best good-for-you products."
Effective merchandising is critical in the superpremium dessert category, because in spite of the category's high margins, space is limited. How important is merchandising?
"It starts with the fact that in a supermarket, 70% of ice cream is impulse," McGrath said. "So the last 60 seconds of marketing as the shoppers go up and down the aisle is very important."
To that end, Haagen-Dazs is in the process of putting molded plastic displays in store freezers. The displays, with channels for stockkeeping-unit placement, have tabs in the front for flavor identification.
"We think this is a great opportunity through equipment which does us both a favor. One, it presents the brand in a dynamic and impactful way; and two, it sets the shelf for our customer," McGrath said. "Obviously, they're concerned that their image looks good. If anything, there's probably a marginal cutback on the pack-out, but we believe variety is what's important and attractive and interesting. With a brand like Haagen-Dazs, with such a strong profit story, then we should be the category leader in terms of shelf equipment." He said he expects nearly 3,000 stores to have the displays by the end of this month.
Haagen-Dazs also has had success with secondary freezers in supermarkets.
"A lot of our retailers already have freezer cases," Paxton said. "In some areas, it behooves us and them to put a single-door or double-door unit in. It provides incremental volume for us and for them and incremental profits as well. We've also had a tremendous amount of success in Europe with these freezers. I would say that's where we picked up our momentum."
McGrath said frozen dessert manufacturers are responding to the call and helping in the drive toward category management. "I think this category is so big and so dynamic and competitive that it would be arrogant to say we're the only people doing it," he said. "I mean, you're talking about companies the size of Unilever and Nestle."
