Ice Cream and Frozen Desserts

SIC 2024

Companies in this industry

Industry report:

This industry classification encompasses establishments primarily engaged in manufacturing ice cream and other frozen desserts, including frozen yogurt, ice milk, ices and sherbets, frozen custard, mellorine, frozen tofu, and pops (frozen desserts on sticks).

Industry Snapshot

The $7.8 ice cream and frozen desserts industry is an important sector of the U.S. dairy industry, and the U.S. was consistently ranked as a world leader in ice cream production. Market saturation for ice cream and related frozen desserts was estimated to be greater than 90 percent of all households. About nine percent of the U.S. milk supply goes toward the production of ice cream. In 2009, the U.S. produced 930.7 million gallons of regular ice cream, 78.5 million gallons of frozen yogurt, and 57.7 million gallons of sherbet. In the late 2000s, U.S. per capita consumption of ice cream was approximately 21 pounds of ice cream (including regular and low/nonfat) and just over four pounds of frozen yogurt and other frozen dairy products.

According to industry statistics, 352 plants operated in this category and employed 18,000 people in 2009. Companies in this industry tended to be small, with nearly 63 percent employing fewer than 20 workers, while only 17 percent had more than 500 employees. Losses were expected in employment for the dairy product manufacturing industry through 2018 as efficiency in production increased and as U.S. per capita consumption of frozen products continued to decline overall. Some increases were expected in niche markets such as the low-fat and yogurt segments.

As of 2010, California was the country's largest ice cream producing state, followed by Indiana, Texas, Ohio, Pennsylvania, New York and Missouri. The largest segment of the 18 different industry sectors was packaged ice cream, followed by ice cream and frozen desserts and bulk ice cream.

Organization and Structure

The creation of ice cream begins with milk produced by America's dairy farmers, many of whom belong to large dairy cooperatives that market their milk to processors or, in some cases, operate their own processing facilities for the manufacture of ice cream and other dairy products. In 2009, the approximately 9.2 million dairy cows in the United States produced over 183 billion pounds of milk. Approximately nine percent of this milk was used to make frozen dairy products.

Traditionally a highly regionalized industry, the frozen desserts and ice cream segment began to consolidate as distribution became more advanced and national firms were formed. Still, many top producers' brand names were known only in the geographical areas in which they were distributed. Distribution to sales outlets was vital to the success of the frozen desserts, and competition for distributors remained keen.

Background and Development

Whether ice cream originated in China or Rome is a matter of debate, but there is little question that frozen desserts gained their position as one of America's favorite treats. The smooth and creamy ice cream known in the mid-2000s was introduced in the United States early in the twentieth century as a result of two technological advances: homogenization, which reduced the fat particle size in milk, and continuous freezing process, which enabled a consistent ice crystal structure. Production and manufacturing advances implemented during the next 100 years centered primarily on formulation refinements and stabilizer and process systems.

Ice cream is a frozen, pasteurized mixture of milk, cream, nonfat milk solids, sugars, and stabilizers. Its contents and manufacture are regulated by the government and must meet standards of identity (SID). To be called ice cream, a product must contain a minimum of 10 percent butterfat, which is dispersed throughout the mix to impart smooth texture. Fresh sweet cream is the best source of butterfat. Unsalted butter, which is about 83 percent fat, can replace 50 to 75 percent of sweet cream fat. Other fat sources that can be used include anhydrous butter oil, concentrated sweet cream, and dried cream. French ice cream, or frozen custard, also contains more than 1.4 percent of egg yolk solid. Consumer concerns about the negative health effects of fat in the diet, however, led to the popularity of low-fat products such as ice milk, which contains between two and seven percent butterfat. "Ice milk" as a product name, however, started to become extinct with passage of the Nutrition Labeling and Education Act of 1990.

Other standard ice cream ingredients include sugars and sweeteners, milk proteins, stabilizers, and emulsifiers. Sweetening agents can be natural (using corn sweeteners, sucrose processed from cane and beet sugars, or fructose) or artificial (using aspartame). The milk proteins used are whey proteins and casein. Milk and milk products themselves have some natural stabilizing and emulsifying properties that often eliminate the need for additional stabilizers and emulsifiers. Stabilizers help to prevent texture deterioration caused by inevitable temperature fluctuations that occur during distribution, which cause ice crystals to melt and reform into larger crystals. Emulsifiers enhance the whipping qualities of the ice cream mix by creating a smoother texture and body.

Flavorings may be added before or after pasteurization and may be pure flavor extracts, pure extracts with some synthetic or artificial components, or artificial flavors. Generally, premium ice creams use pure extracts and fruits, nuts, candies, and syrups to add flavor. Mix-in flavors created imaginative and popular ice cream flavors.

The luxury, or super premium, ice creams that regained popularity were pioneered by Reuben and Rose Mattus in the early 1960s. Using all top-quality, natural ingredients and no artificial stabilizers or other additives, the married couple created Haagen-Dazs, a highly successful product that set the pattern for rich, clean-tasting ice creams. Ice cream novelties such as ice pops, fudge sticks, fruit and juice bars, bite-size ice cream treats, and ice cream sandwiches, which were originally marketed for children, became popular with adults. Haagen-Dazs entered this market with products such as Dove bars and Haagen-Dazs frozen yogurt bars. In 1983, the Mattuses sold the company to Pillsbury for $70 million.

Sherbets must contain between one and two percent butterfat and between two and five percent total milk-derived solids, as defined by the Federal Code of Regulations. Ices contain no milk-derived ingredients or egg ingredients other than egg white and can be made with non-pasteurized mixes because of their typically high acidity formulation. Mellorine products, although similar to ice cream, contain a combination of vegetable and animal fat in place of butterfat. Federal standards of identity (SID) require mellorine products to contain at least six percent fat and no less than 3.5 percent protein.

Frozen yogurts are made using the bacteria cultures streptococcus thermophilus or lactobacillus bulgaricus. Frozen yogurt is assumed to have the same health benefits as the refrigerated product because most refrigerated yogurts are low fat and have a healthy image with consumers. The Code of Federal Regulations, however, which requires specific starting cultures and acidity levels for refrigerated yogurt, set no such product characteristic requirements for frozen yogurt. The National Yogurt Association (NYA) endorsed an International Ice Cream Association (IICA) petition to the government that would standardize manufacturing procedures and would require frozen yogurt to be made with specific characterizing yogurt cultures.

Nutrition Labeling and Education Act
Through the Nutrition Labeling and Education Act (NLEA), the U.S. Food and Drug Administration (FDA) defined terms that were unclear, and with a May 1994 compliance deadline, enabled many frozen food processors to call their products "lowfat ice cream." The act also separated the link between calories and fat, so desserts getting more than half their calories from fat could be labeled "light" if their fat content was reduced 50 percent from their reference product. The "light" label was also permitted on products earning less than half their calories from fat if the products had either a 50 percent fat reduction or a one-third reduction in calories.

A significant change in the labeling did away with the term "ice milk." Lower-fat ice creams, which previously had to be called "ice milk," began to be labeled as "reduced fat," "light," "lowfat," "nonfat," or "fat-free," depending on the product's fat content.

Although the definitions of the terms were clear, the actual fat content percentages were not because they were tied to the indefinite term, "reference food." Thus, "reduced fat" meant that a product had 25 percent less fat than its reference food, "light" referred to a product that had a 50 percent fat reduction from the reference food, and "lowfat" meant the product did not have more than three grams of total fat in a half-cup serving. "Nonfat" and "fat-free" were defined as products having less than 0.5 grams total fat per reference amount. The reference amount was a half-cup for ice cream and frozen yogurt products and 85 grams for flavored ices and juice bars.

To determine the reference food, processors first had to find the marketplace average fat or calorie content by looking at the leading brands in the area where the product was to be sold. For example, a processor would have to compare its "light" fudge ripple with leading brands of fudge ripple to calculate how much reduction in fat or calories would satisfy the "50 percent less" requirement. If the leading brands contained an average of 16 grams of fat, then a product containing eight grams of fat could be labeled "light."

The worldwide ice cream industry amounted to $59 billion in 2006, with North America accounting for $16.3 billion while Western Europe led with $21.5 billion. The U.S. Department of Agriculture (USDA) reported that, during 2005, the total U.S. production of ice cream and related frozen desserts experienced a small increase. Ice cream and frozen dessert sales ranked third behind the fluid milk and cheese sectors of the dairy industry.

California continued to be the leading ice cream producing state in the late 2000s, producing more than 153 million gallons, or nine percent, of the U.S. total in 2007. Other top-producing states included Indiana, Texas, Pennsylvania, Missouri, and New York. The most popular flavors were vanilla (with an overwhelming 30 percent) and chocolate (10 percent), followed by butter pecan (four percent), strawberry (3.7 percent), and chocolate chip mint (3.2 percent). Regular ice cream accounted for the lion's share of 2008 production at nearly 65 percent, followed by low-fat ice cream (26 percent), frozen yogurt (five percent), and sherbet (four percent). Other miscellaneous frozen products made up the remaining market. Leading retail brands, in terms of supermarket sales, included private-label companies, accounting for 23 percent of revenues, followed by Breyers (16 percent), Dreyer's/Edy's (seven percent), and Slowchurned Haagen-Dazs (six percent).

According to the International Ice Cream Association, total U.S. exports of ice cream reached approximately 57 million pounds in 2007 with a value of approximately $58 million. Mexico was the largest importer of U.S. ice cream exports at $28 million, followed by Canada at $8.2 million. Also importing high quantities were the United Kingdom ($4.8 million), the Russian Federation ($1.1 million), and Jamaica ($1.5 million). Although overall exports in the dairy industry were down significantly in the first quarter of 2009, exports in the ice cream segment were up seven percent, compared to the first quarter of 2008.

Many ice cream and frozen dessert makers were capitalizing on the ongoing popularity of "better-for-you" products. While none of them could produce an ice cream product that could be classified as "healthy," many worked to put out new products that had reduced fat or sugar to meet the demand of Americans who were looking to live a healthier lifestyle. Other specialty products included those with reduced carbohydrates and added calcium. Novelty and single-serve items were an important part of this trend, according to the International Dairy Foods Association (IDFA), as many consumers preferred the prepackaged portion when counting calories, carbs, or fat grams.

Another trend in the late 2000s in the ice cream and frozen dessert industry involved co-branding. The IDFA described co-branding as "partnering with successful branded companion products for increased product awareness" and most often involved creating new ice cream products that used ingredients from well-known candy or cookie manufacturers. For example, in late 2008, the Rocky Mountain Chocolate Factory and Cold Stone Creamery agreed to offer co-branded products in some of the latter's U.S. stores, and Baskin-Robbins sold popular co-branded flavors such as Oreo Cookies and Cream.

Current Conditions

Recent trends in ice cream consumption continued through the late 2000s. In 2009, regular ice accounted for 61 percent of the market, followed by lowfat/nonfat ice cream (25 percent), frozen yogurt (five percent), and sherbet (four percent). Specifically, the U.S. producers churned out 920 million pounds of regular ice cream, 381 million pounds of lowfat ice cream, 74 million pounds of frozen yogurt, and 53 million pounds of sherbet. Production of ice cream--both regular and lowfat--declined by about one percent from 2008, and production of sherbet and frozen yogurt experienced an eight percent and a five percent drop, respectively. Not only had health-conscious Americans passed by frozen treats more often in 2009, due to a recessive economy, they were also more often staying at home, eating in, watching their spending, and skipping the trip to the ice cream parlor.

To differentiate among brands and even within a company's own label, ice cream manufacturers in 2010 offered a wide variety of flavors and qualities of ice cream. Although most consumers still sought ice cream as a "comfort" food and looked to indulge, "better for you" products that were lower in sugar or fat continued to be introduced to the market. In addition, labeling distinguished between superpremium, premium, regular, and economy ice creams. Besides quality of ingredients, the amount of overrun, or air, in ice cream dictates quality. According to federal regulations, ice cream producers must limit overrun so that the finished product does not weigh less than 4.5 pounds per one gallon. Higher quality ice creams (i.e., superpremiums) have the least overrun whereas the lowest quality reach the government standard. In addition to the quality (and quantity, in the case of flavored varieties) of ingredients, adjusting overrun is one method that manufacturers used to reach different segments of the ice cream market, catering to both high-end and economy purchasers.

In 2009, Mexico was the primary recipient of U.S. exports of ice cream, receiving nearly 13,000 tons in 2009, followed by Canada, which received over 3,100 tons. Besides Mexico and Canada, the Caribbean was the destination of the most U.S. produced ice cream, receiving over 4,000 tons in 2009. For example, the Bahamas brought in 923 tons and Trinidad & Tobago imported 705 tons, up from just 370 tons in 2008.

Overall exports remained roughly level during the last half of the 2000s. However, the United States experienced some losses to key markets between 2003 and 2009. Exports to European countries, which received over 7,439 tons of U.S. ice cream in 2003, fell to just 1,256 tons in 2009. China and Japan also were once significant importers of U.S. ice cream. In 2003, Hong Kong imported 1,422 tons and Japan imported 2,198 tons; in 2009, the Hong Kong imported 108 tons and Japan's imports had fallen to 206 tons. Thus, the Far East market declined from 4,856 tons in 2003 to 1,618 in 2009. Although the United States lost these markets, U.S. producers increased exports to North America and the Caribbean, which helped offset some of the losses. Nonetheless, in 2009, total exports were 25,528 tons, down from 29,199 tons in 2003.

Industry Leaders

In 2010, about 40 percent of the ice cream industry was made up of regional and local companies. Another 18 to 20 percent of ice cream sales were private label. The remaining 40 percent of ice cream sales are controlled by Unilever (through its subsidiaries that include Ben & Jerry's, Good Humor, and Breyer's Ice Cream), Nestle (through its subsidiaries that include Dreyer's Ice Cream and Haagen-Dazs), and Blue Bell Creameries.

Ben & Jerry's Homemade, Inc., a leading manufacturer of super premium ice cream based in South Burlington, Vermont, became a subsidiary of Unilever United States Inc. in 2000 and had $85 million in 2004 sales. Unilever's parent company, Unilever PLC, was the global leader in the ice cream industry and acquired numerous ice cream companies, including firms in Mexico, China, and the Philippines. Known for both its social action programs--the company typically donates a percentage of pretax profits to charitable and political programs--and its unusual ice cream flavors, Ben & Jerry's ice cream is sold in Europe, Canada, and Japan in a variety of forms, including frozen yogurt, low fat ice cream, sorbet, and smoothies.

Another leader in the ice cream and frozen dessert industry was Good Humor-Breyers Ice Cream Company, another subsidiary of Unilever United States Inc. In the United States, Good Humor-Breyers makes and sells a number of brands, including the industry-leading Breyer; Klondike, which makes ice cream sandwiches and bars; Minute Maid, which offers sorbets and bars; and Popsicle. Based in Green Bay, Wisconsin, the company reported 2006 sales of more than $1.2 billion with 3,500 employees in nine U.S. manufacturing facilities. In 2009, Unilever's revenues totaled nearly $57.1 billion.

In 2006, Dreyer's Grand Ice Cream of Oakland, California, with sales of $2 billion and 6,000 employees, became a wholly owned subsidiary of Nestle. This followed Dreyer's 2004 purchase of the U.S. Haagen-Dazs franchise business, which amounted to 236 ice cream parlors around the country. The company produced and distributed ice cream under its Dreyer's brand in western states as well as overseas while also making ice cream under the Edy's brand, which was sold in eastern states and in markets where Dreyer's was not available. In 1998, the company launched its premium line of ice cream, named Dreyer's Homemade Ice Cream, and in 2004, Slow Churned Grand Light Ice Cream debuted. Dreyer's offered a number of frozen dessert items spanning each frozen treat category, such as low fat, sugar-free, and fat-free ice creams; ice cream pies; and frozen novelties. The diversified company had numerous partnerships with other ice cream manufacturers and handled distribution for Ben & Jerry's ice cream and Healthy Choice. In addition, Dreyer's manufactured ice cream for Starbucks, the gourmet coffee company, and Godiva Chocolatier, Inc., the maker of gourmet chocolates and coffees. In 2008, Dreyer's posted revenues of $1.6 billion.

Blue Bell Creameries, founded in Brenham, Texas, in 1907, is only available in about one-fourth of U.S. supermarkets but was one of the top three brands in the nation in 2010. Blue Bell products are sold in Alabama, Arizona, Arkansas, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, and Virginia. In line with its reputation for high quality and high consumer satisfaction, Blue Bell continued to offer half-gallon containers (66 ounces), bucking the industry trend to downsize containers to 48 ounces.

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