Ice Cream

INDUSTRIAL CODES

NAICS: 31-1520 Ice Cream and Frozen Dessert Manufacturing

SIC: 2024 Ice Cream and Frozen Desserts

NAICS-Based Product Codes: 31-152001, 31-152002, 31-152003, 31-152004, 12-152005, and 31-15200Y

PRODUCT OVERVIEW

Ice Cream and Related Products

Strictly speaking ice cream is a frozen dairy product with at least 20 percent of its content consisting of milk solids and 10 percent butterfat. The product is required to weigh at least 4.5 pounds to the gallon. Ice cream is sweetened with sugar. Ice cream may contain egg whites and will contain a stabilizer. This is the product people call regular ice cream. Most ice cream made in the United States is regular, but a wide variety of similar products will be found in grocers' and supermarkets' freezers. The Census Bureau treats these variants as part of the same industry and calls them frozen desserts. The full range consists of ice cream; frozen custard; low fat or non-fat ice cream, sometimes called ice milk or dietary frozen dessert; sherbet; water ice; frozen yogurt; frozen pudding; and mellorine. These products differ from one another by fat content or the source of the fat. Legal definitions vary from state to state but are very similar. Ice cream is further subdivided into packaged forms and novelty products: predominantly ice cream bars, fruit bars, and ice cream sandwiches.

Frozen custard differs from ice cream in that it contains egg yolks. Custards are also cooked products whereas ice cream batter is a pasteurized and homogenized mixture. Frozen puddings contain flour in addition to egg yolks. Custards and puddings have a higher egg content and a more dense structure than ice cream. Low fat ice creams have reduced levels of butterfat; their chief ingredient is skim milk. No-fat ice creams are produced using whey or non-fat dry milk products. So-called lite varieties are aimed at the dieting public; they may be low in fat, have no fat, have reduced amounts of sugar or may be sweetened by artificial sweeteners.

According to the National Yogurt Association, citing the official definition of the Food and Drug Administration (FDA), yogurt is milk (or other dairy products) fermented with the benign bacteria Lactobacillus bulgaricus and Streptococcus thermophilus. The bacteria feed on milk sugars and release lactic acid. The acid causes yogurt's curdled character and creates an environment in which pathogens cannot thrive. Since yogurt can be produced by fermenting whole as well as skim milk, frozen yogurt products come in regular and low-fat varieties. The benefits of yogurt come chiefly from the bacterial cultures that they carry. These aid digestion, promote the immune system, increase calcium content, and have other systemic benefits. Frozen yogurt, however, does not offer dietary benefits as such.

Sherbets are slightly sour frozen fruit ices and come in milk or water-based forms. The word itself, derived from Turkish and Persian roots means drink and originally signified a fruit-drink. Sherbets contain milk solids whereas water ices don't. The term ice sherbet means a water ice and is not a sherbet, strictly speaking.

Mellorine is something of a hybrid product which combines milk-solids and only a minimum of milk fats. The fats in the dessert must be largely derived from animal or vegetable sources such as cottonseed oil or soy. The origins of this variety are obscure, but the product appears to have been introduced in the 1950s. In those days the emergence of mellorine encouraged cotton growers to hope for large new markets for their products. But mellorine never took off and is fading away with less than half of one percent of market share, and that minute share is also declining. The original motive for the formulation of this product was to take cost out of ice cream by substituting cheap sources of fat for more expensive ones.

Origins

Ice cream plays such a starring role in the enjoyment of food across the world that it is almost obligatory to romanticize its origins, to see it shrouded in mystery, and to detect its appearance thousands of years ago. Alexander the Great was not the first but a later aficionado of the product. Cliff Lowe, however, writing for inmammaskitchen.com, notes that ancient references to ice cream are really references to mixes of flavored ice. Ancient humans had indeed discovered the pleasure of eating chipped ice juiced up with fruits and honey, but what they ate was a slushy mix rather than a cream. Properly speaking ice cream appears to have originated around the year 1700 in France and Italy. Recipes for ice cream batter first appeared, and then multiplied, in French recipe books around that time. The invention of the current form of ice cream appears to have required the widespread use of metal cookware made of silver and pewter. Such utensils transmit temperature quickly. People made the first batches of real ice cream using two bowls. The larger bowl held ice mixed with salt, the smaller bowl inside the larger bowl held the batter. To make ice cream the cook whipped the batter while simultaneously agitating the ice-salt mixture by moving both bowls up and down rapidly. Salt causes ice to melt. That process consumes heat. A bowl suspended in an ice-salt mixture will be cooled as the salt melts ice and draws the energy for this melting from the batter, causing the batter to freeze. The whipping of the cream introduces air into the mixture. Ice cream was no sooner invented on the Continent than it appeared in the Colonies too. There is documentation to the effect that Jefferson and Washington both served ice cream on special occasions and took interest in ice cream recipes.

Making ice cream was an arduous, lengthy process; it took approximately 40 minutes of awkward whipping and agitation. Its preparation required physical effort. Nancy Johnson, of New Jersey, is credited with inventing the first hand-cranked ice cream machine, likely modeled on a butter churn. The invention dates to 1843. On September 9th of that year Nancy Johnson received Patent No. 3254 for her invention. The first commercial producer of ice cream emerged soon after. He was Jacob Fussell, of Baltimore, Maryland. Fussell was a dairy farmer who discovered that demand for his milk was declining and parlayed this challenge into founding the first ice cream company. It became a national enterprise; eventually he sold it to the Borden Milk Company.

The Manufacturing Process

Industrial production of ice cream may be carried out in batch or continuous modes. The same basic steps are followed either way. These steps are blending of the batter, pasteurizing by heat, homogenizing the blend by pressure, cooling and flavoring the mix, freezing, packaging, and hardening. Milk either arrives already refrigerated or is held at such a temperature in cans awaiting the blending process. Milk is blended with egg whites, sugar, and stabilizers for a brief period of time. Pasteurization takes place at a temperature of 182 degrees Fahrenheit. It is accomplished by contacting the batter with plates washed by very hot water on one side. At the pasteurization temperature all bacteria in the mixture perish.

Raw milk, as it comes from cows, will naturally separate into butterfat and skim milk if left to itself. Homogenization causes fat particles to break apart into tiny particles. The process is accomplished by forcing the milk, still hot from pasteurization, through tiny orifices. Under high pressure the milk and the particles are effectively mixed in the homogenization chamber. The pasteurized and homogenized mixture is then allowed to cool and age. On the way to continuous or batch freezers, feeders add flavoring which mixes and blends in as the batter flows.

The actual creation of ice cream itself begins at this quite advanced stage. The mixture is pumped through freezers maintained at ?40 degrees Fahrenheit and rapidly cools. But the cream, at this point, is still a cold semi-liquid paste. Air is introduced into the cooling mixture during freezing. The industry calls air the overrun. The amount of air injected has a direct relationship to the quality of the ice cream. Low overrun produces denser, richer ice cream, but some air entrainment is needed to give ice cream its creaminess. If the recipe calls for the inclusion of bits of fruit, chocolate, nuts, or candied mixtures, the cold paste passes through feeders that insert and mix these ingredients into the flow. The finished product is then dispensed into packaging carried by a moving belt, be these cartons or tubs. As the packages are filled they are automatically closed, and the belt carries the products into a freezing chamber.

The freezing chamber, also called the hardening room, is maintained at a temperature of ?30 degrees Fahrenheit. The packaged ice cream must reside in such a space until it has reached at least ?10 degrees of temperature. In large applications the freezing chamber is a tunnel through which the packaging moves for two or three hours before being extracted for transport to refrigerated warehouses ahead of retail distribution. On exit from the hardening room or tunnel, the ice cream is rock hard.

Variations on this process, following the initial freezing step, produce ice cream bars, sandwiches, and other novelty products by the deployment of specialized equipment that doles out the semi-liquid ice cream, inserts wooden or plastic handles for a bar, or sandwiches the ice cream between baked sheets before sealing them in individual sacks.

MARKET

Industrial Production

The ice cream and frozen dessert manufacturing industry shipped product valued at $9.01 billion in 2005, up from $8.2 billion in 2002. The market was $5.9 billion in 1997 and $5.2 billion in 1992. The growth rates in this period varied a great deal having been 2.1 percent per year on a compounded basis between 1992 and 1997, 7 percent per year in the period from 1997 to 2002, and slowing again to an annual rate of 3.2 percent per annum between 2002 and 2005.

In the 14-year period from 1992 to 2005, industry shipments showed negative growth in four years (1994, 1997, 1999, and 2003) and wildly different growth in ten others. Between 1997 and 1998 the industry grew 1.6 percent, for instance. Between 2002 and 2003 it grew at a heady 21.6 percent. Unless these data are the consequence of survey anomalies, one is tempted to suppose that ice cream reflects changing public moods. For instance, the period from 1992 to 1999 exhibited rather energetic growth in the economy (it was the so-called dot-com boom). During that time ice cream turned in a rather sluggish performance, growing at a compounded rate of only 0.4 percent per year. The 1999 to 2005 period, by contrast, was more troubled and somber. The economy began to show a softening in 2000 and gross domestic product turned negative in early 2001. That same year brought the 9/11 shock, military activities overseas, and in 2002 the beginning of a jobless economic recovery. Yet during this period, ice cream sales advanced at a very brisk rate of 8.6 percent per year.

Four factors influence demand for ice cream: weather, pursuit of health, flavor, and impulse-buying. Hot weather favors ice cream consumption. The desire to eat in a healthy manner either dampens ice cream buying or favors the low-fat or no-fat brands. Novel flavors can lift demand and, in effect, make small companies into dominant forces. Impulse buying is observed as a common behavior—so that a careful ice cream buyer will occasionally throw all inhibitions to the wind. Over the long run the industry is steadily growing.

One of the motives behind food selection decisions—to eat healthier foods—does find measurable support in the data available between 1997 and 2002. In that period regular ice cream lost a share of the market declining from 60.9 to 56.9 percent of total shipments. Yogurt and mellorine lost share as well. Sherbets, water ices, and low fat ice cream gained in share, 1.8, 1.3, and 0.1 percent respectively. But frozen novelties exhibited the largest growth, a 3.2 percent gain in share, suggesting that impulse buying on the one hand balanced healthy-eating tendencies on the other.

Retail Perspectives

Based on data from the U.S. Department of Agriculture (USDA), which independently monitors this industry from the dairy perspective, ice cream production in 2004 was 1.5 billion gallons, representing approximately 8 percent of total U.S. milk production. The value of this production, excluding water ices (on which USDA does not report) was approximately $4.50 per gallon at the point of shipment. For the same year, the International Dairy Foods Association (IDFA) estimates that total sales of ice cream and frozen desserts at retail were $21.4 billion, suggesting a nearly three-fold increase in value from the point of production to the point of sale. The products of the industry sold, on average (including water ices), for $13.30 per gallon.

The retail market is of necessity an estimate because retail sales of ice cream and related products are combined by the Census Bureau with the sales of other commodities in reporting on such categories of distribution as wholesalers, grocers, and restaurants; the last category includes ice cream shops along with fast-food enterprises and luxury restaurants. Bulk sales of ice cream reach ice cream shops and restaurants; such shipments are a relatively small proportion of total production (approximately 19%) but command high prices, anywhere from $35 to $150 per gallon. Expressed on a per-gallon basis, ice cream novelties will typically cost between $13 and $40 per gallon. Ice cream in 16 ounce containers will retail for around $30 on a per-gallon basis; in 56 ounce containers ice cream sells for $10 to $13 per gallon. The most popular size, the half-gallon container, sells for $6 to $9 per gallon. Popular, big-name brands have the highest prices, while store-brands come in at the lowest end of the price scale.

Flavors

The IDFA, citing The NDP Group's National Eating Trends Services, reports that vanilla leads the flavor parade; 20 percent of consumers opt for the flavor. Next in line is chocolate with a 12.9 percent share, neapolitan with 4.8, strawberry with 4.3, and cookies-and-cream with 4 percent of the market. Baskin-Robbins' famed 31 flavors, or at least 26 of them, have to compete for the remaining 68 percent—as well as with the flavors offered by more than 360 producers in the United States.

KEY PRODUCERS/MANUFACTURERS

Based on the 2002 Economic Census, 365 companies participated in the industry in 2002, operating 407 establishments. The total number of corporate participants was down from 410 in 1997; establishment counts were down from 451. Just under one-third of establishments in 2002 (31%) were of some size, employing twenty or more people. These data indicate an industry of many small independent operations serving local or regional markets. Many are family owned, many are local dairies. Just a handful of companies have a commanding national or international market. Most of these latter have been assembled under the fold of two major food companies: Unilever N.V. and Nestlé S.A. Yet others with national name recognition are also owned by food companies. An example is Baskin-Robbins owned by Dunkin' Brands (of Dunkin' Donuts fame) which is itself owned by several investment companies (Bain Capital, Thomas Lee Partners, and the Carlysle Group). Another is Healthy Choice, owned by ConAgra.

Based on data assembled by Market Share Reporter, in 2005 Nestlé was the leading company in the United States with 23 percent of the market, followed by Unilever with 22 percent, and in 2002 Unilever was the top producer worldwide (16.3%) followed by Nestlé (11%). In 2007 both of these companies maintained their dominance, controlling half the market in the United States and more than one-third of the market globally. Nestlé owns Dreyer's and Häagen-Dazs, the second and third-ranked brands in the United States in 2006 according to Dairy Field. Dreyer's is known as Edy's in markets west of the Rocky Mountains and the brand is usually referred to as Dreyer's/Edy's. Nestlé is a leading brand in ice cream novelties in its own right, and novelties are the most rapidly growing category in ice cream.

Unilever owns Breyers, the top brand in the United States in 2006, acquired in 1993. That same year Unilever also acquired the Sealtest line and merged these into its wholly-owned Good Humor-Breyer's Ice Cream Company. Good Humor had also been an independent company and was the originator of the first-ever ice cream bar. Unilever acquired Good Humor in 1961. By the time of Breyer's acquisition, Unilever had also purchased Gold Bond Ice Cream in 1989. The company acquired Ben & Jerry's in 2000, but has been operating that acquisition as a separate company rather than as part of the Good Humor-Breyer's combination. Ben & Jerry's was the fifth-ranking U.S. brand in 2006. Like Nestlé, Unilever represents a family of ice cream brands but, unlike Nestlé, has no ice cream called by its own name.

Ice cream making is a relatively low-cost-of-entry type of business and continues to attract entrepreneurs who hope to make their mark by some unique differentiation. Two of the leading brands of the early twenty-first century began in the second half of the twentieth century. Häagen-Dazs being a new brand arising from a family already in the ice cream business since the 1920s and Ben & Jerry's, a start-up company.

The inventor of Häagen-Dazs, Reuben Mattus, a New Yorker, introduced a new high-quality brand of ice cream with just three flavors (vanilla, chocolate, and coffee) in 1961. The brand took off. It had two important features to promote it. It aimed at a market largely neglected then, a luxury market for richly textured, dense ice cream; it also had an eye-catching name that Mattus invented, giving it an umlaut, to suggest old-world quality and craftsmanship. The market was ready for such a product. The brand's reputation spread across the East Coast. In 1976 Doris Mattus, Mattus' daughter, formed the first Häagen-Dazs ice cream shop. The franchise soon became national and, after Mattus sold the business to Pillsbury, became a world-wide brand. General Mills, later the owner of Pillsbury, sold the Häagen-Dazs line to Nestlé.

Bennett Cohen and Jerry Greenfield, childhood friends, began Ben & Jerry's in 1977 in Burlington, Vermont. They were in their twenties at the time, wanted to enter the food business, and chose the ice cream business because it cost less to enter than bagel-making. They learned to make ice cream in a correspondence course—but their achievement was clearly not learned from books but flowered from talent and flair. They built their franchise by combining a great instinct for novel flavors, showmanship, and community involvement. They were members of the baby boom and well in tune with it. Within ten years they had built a $32 million business—which was just a beginning.

Equally representative of key producers and leaders in this industry are Blue Bell Creameries, Wells' Dairy, Inc., and Turkey Hill Dairy. In rankings of U.S. ice cream brands these three companies held fourth, sixth, and seventh rank in 2006. All three are family-owned. Blue Bell, based in Brenham, Texas, celebrated its 100th birthday in 2007. Blue Bell has been operated by the Kruse family since 1919. The Wells' Dairy's brand is the Blue Bunny. Introduced in 1935, it comes in nearly 500 flavors. The company is based in Le Mars, Iowa, a town that styles itself the Ice Cream Capital of the World, claiming to be the community with the largest ice cream production within its borders. The company has been continuously owned by the Wells family since 1913. Turkey Hill was originally a farm owned by Armour Frey in Lancaster County, Pennsylvania. It was transformed into a dairy in 1947 when Frey's sons bought out the business. Turkey Hill began manufacturing ice cream in 1980.

MATERIALS & SUPPLY CHAIN LOGISTICS

The ice cream industry's chief raw material is fresh milk, a commodity consumed by the population and reaching its market in refrigerated tanker trucks everywhere. At the same time, the finished product, just like its main input, requires refrigerated transportation to the point of sale. The product, therefore, is significantly dependent on technically advanced transportation systems in any case. For this reason ice cream is produced both at significant distances from population centers but near dairies, and in the center of urban areas relying on milk reaching it from the countryside.

DISTRIBUTION CHANNEL

Ice cream reaches the final consumer by two very distinct channels, one being the grocery store or supermarket serving those intending to eat the product at home, and the ice cream shop or restaurant where product is purchased for immediate consumption. According to the International Dairy Foods Association, as measured in dollar expenditures, expenditures away from home represent two-thirds of all ice cream purchases, one-third reaching the consumer in packages.

On a volume or gallonage basis, the divide appears to be the other way around, most ice cream being packaged and purchased for at-home consumption. This indicates that portion-bought ice cream is the most expensive. If the ice cream is made directly at the site where it is sold in cones and cups, a one-tier distribution is practiced (producer to consumer). Most ice cream reaches the consumer by means of a three-tier distribution in which producers sell to a frozen foods wholesale merchant, the merchant supplies the retailer, and the retailer sells to the ultimate user.

KEY USERS

Ice cream is eaten by many, often as a dessert or as a refreshment on a hot day. The product line includes varieties even for those who, being lactose-intolerant, can only enjoy water ices, but that product is firmly part of the ice cream universe as a whole.

ADJACENT MARKETS

Most adjacent to ice cream—indeed almost indistinguishable from the category when consumed in an ice cream shop—is the ice cream cone itself. Cones and waffles are bakery products. In the history of ice cream, the origin of the cone is typically said to be at the World Fair of 1904. According to Cliff Lowe's well-researched history, an ice cream vendor named Charles Menches found himself booth-to-booth to a waffle vendor named Ernest Hawmi. When Menches ran out clean ceramic cups he found a solution by getting waffles from his neighbor. Hawmi formed cone-shaped waffles on the spot to satisfy this sudden demand. Lowe, however, points out that a New York-based Italian named Marchiony sold ice cream in waffle cups in the late 1800s and early 1900s and, indeed, obtained a patent for such cups in 1903.

Adjacent markets to ice cream are also other forms of dessert, most closely adjacent being refrigerated creams, puddings, and whipped toppings. A market for home ice cream making machinery is another adjacent market. Such equipment may be hand-cranked or electrically operated, may be designed to be used with ice and salt or to be placed in the refrigerator's freezing compartment. High-end ice cream makers cooled by liquid gases are also available.

RESEARCH & DEVELOPMENT

Most efforts of this nature in the field of ice cream are centered on product development, strongly focused on impulse products in the novelty category. Efforts are also expended on producing ice creams and frozen desserts that have low fat and low sugar content yet produce the taste sensations associated with high-end luxury, regular ice creams.

CURRENT TRENDS

The dominant trends in this industry are toward richer and better-tasting products on the one hand and healthier frozen desserts on the other. These trends are somewhat in conflict. If the recent decades of ice cream history are representative of the future, major success will reward those who bet on richer and more delicious products, as exemplified by the triumphs in market-penetration achieved by Häagen-Dazs and Ben & Jerry's.

In the food industry as a whole, snack foods are under intense development because evolving life styles are marginalizing food consumption at regularly scheduled family meals. The search for new snack foods is reflected in the ice cream industry in the rapid growth of ice cream novelties. Currently available market data also suggest that healthy ice cream will, at the very least, establish a major segment for itself and, aided by innovation, will hold its own.

TARGET MARKETS & SEGMENTATION

The three major markets are regular ice cream, novelties, and healthy formulations—targeted at the general buyer who is interested in taste alone and feels little guilt for indulgence, at the impulse buyer looking for five minutes of pleasure, and at those minding their dietary budgets. Within the health-minded segment, non-fat and low- or no-sugar products represent one extreme. Within regular ice cream, high-end luxury brands represent the other. The same divide is present in novelties which come in regular, sherbet, and low-fat varieties. There is, thus, a high, a middle, and a low end, each with its clientele.

RELATED ASSOCIATIONS & ORGANIZATIONS

International Association of Ice Cream Vendors, http://www.iaicv.org/indlinks.htm

International Dairy Foods Association (IDFA), http://www.idfa.org/about/index.cfm

National Ice Cream Retailers Association, http://www.nicyra.org

National Yogurt Association, http://www.aboutyogurt.com/lacYogurt/facts.asp

BIBLIOGRAPHY

"Ben Cohen—Co-founder of Ben & Jerry's Ice Cream." Ben & Jerry's. Available from ?http://www.benjerry.com/our_company/about_us/our_history/benbio.cfm?.

"A Brief History of Ice Cream." Zinger's Homemade Ice Cream. April 2006. Available from ?http://www.zingersicecream.com/history.htm?.

Dairy Products 2002 Summary. U.S. Department of Agriculture. April 2003.

Darnay, Arsen J. and Joyce P. Simkin. Manufacturing & Distribution USA, 4th ed. Thomson Gale, 2006, Volume 1, 927-929.

"Ice Cream Manufacture." University of Ghuelph. Available from ?http://www.energiemanagertraining.com/dairy/pdf/Ice_Cream03.pdf?.

"Just the Facts: Ice Cream Sales and Trends." International Dairy Foods Association. Available from ?http://www.idfa.org/facts/icmonth/page2.cfm?.

Lazich, Robert S. Market Share Reporter 2006. Thomson Gale, 2006, Volume 1, 80-81.

Lowe, Cliff. "The History of Ice Cream, How to Make Ice Cream at Home: Ice Cream Makers Past & Present." inmammaskitchen.com. Available from ?http://www.inmamaskitchen.com/FOOD_IS_ART_II/food_history_and_facts/ice_cream.html?.

Petrak, Lynn. "The Cold Truth: Although Sales Dip Slightly, Diverse Products Keep Rolling Out to a Splintered Marketplace." Dairy Field. January 2007.

??????. "Freezing Points: Better-for-you and Decadent Ice Cream Products Continue on Parallel Growth Tracks as the Category Churns Ahead." Dairy Field. January 2006.

Scott, Mark and Cassidy Flanagan. "Ice Cream Wars: Nestlé vs. Unilever." BusinessWeek. 24 August 2007. Available from ?http://www.businessweek.com/globalbiz/content/aug2007/gb20070824_230078.htm?.

Smith, Pamela Accetta. "What's in a Name?" Dairy Field. February 2007. Available from ?http://www.dairyfield.com/content.php?s=DF/2007/02&p=15?.

Wilson, Steve. "Doc Wilson's Ice Cream Page." Doc Wilson's Ice Cream Site. Available from ?http://www.users.nwark.com/?piperw/icpage.htm.?.

see also Milk & Butter, Snack Foods