The ice cream market, which stagnated during the years of the pandemic, has barely recovered, and it already has to deal with another, even more complex crisis, pointed out the Association of Hungarian Confectionery Manufacturers. Although turnover is expected to grow due to the increasingly longer and hotter summers, as a result of the energy and climate crisis, geopolitical conflicts, faltering supply, the public health product tax levied on all ice creams, including sugar-free ones, and skyrocketing prices in the wake of a weakening Forint, the ice cream offering may become narrower, and innovation may slow down.
The whole world is contained within ice cream – from solid ice crystals, which greatly influence the enjoyment value, to fat droplets and liquid ingredients to gaseous air bubbles, it displays all consistencies – said Sándor Sánta, President of the Association of Hungarian Confectionery Manufacturers, at the organisation’s summer press conference presenting the trends in the ice cream market. Maybe that’s why we haven’t been able to resist the temptation of these cooling delicacies for a hundred years now.
At the same time, we are talking about a product that falls particularly in the impulse category, in the sale of which the presence of the point of sale is unavoidable and physical visibility is key. It is no coincidence that sales showed a temporary stagnation in the last two years of the pandemic. The world-wide ice cream market, which is worth about USD 70 billion, is otherwise expanding by an average of 5 percent per year, and in the HUF 230-250 billion domestic confectionery market it is the third largest segment with a 17% share.
To each his own
The taste of ice cream consumers in both the international and domestic markets is quite conservative. Globally, vanilla is consistently the top flavour, followed by chocolate and fruit on the podium. Customers are looking for traditional ice creams in take-away, boxed packaging, but the segment of handcrafted products is expanding the fastest. The turnover of free-from ice creams is also increasing, but their market share is not significant.
Hungarians’ favourite is chocolate, but in addition to the basic vanilla and strawberry flavours, domestic consumers are also looking for specialty ice cream flavours, most recently salted caramel was a great success. Although traditional products still account for more than 95% of sales, the domestic market is diversified by a growing variety in terms of flavour, format, size and packaging.
The most popular are 100-249 millilitre ice creams, which account for 30% of the market, but multipacks (already 21% of turnover) and ‘pint glass’ packaging are also spreading, and the share of take-away, boxed packaging already reaches 48%. Although the presence of large manufacturers is strong, the turnover of own-brand products has now reached 40% of sales – the more conservative taste of consumers is thus paired with surprising brand loyalty.
However, due to deep freezing, both the storage and transportation of ice cream is energy-intensive, which in the climate crisis is already a serious challenge. The situation is dramatically aggravated by the fact that fuel, sea and road transport, as well as ingredients and packaging materials are calculated in Euros, which, due to the rising inflation and the weakening of the Forint, has skyrocketed. The level of price increases in the food industry as a whole already exceeds 50-100%, but due to disruptions in global supply chains, confectionery and ice cream manufacturers are also struggling to procure raw materials that are at risk due to climate change, such as cocoa, coffee and vanilla.
Comparing their procurement prices on an annual basis, the domestic ice cream manufacturers experience an even higher price increase, said Tischer Thomas, Development Director of Gelato Italiano in Környe, in his presentation. For example, carob seed flour, which binds water and thus helps the formation of ice crystals as a stabiliser, now costs 600% more, but the company already pays 100-170% more for almost all ingredients and packaging materials.
So far this year, the manufacturer has responded to the challenges by raising prices in the middle of the year, unlike their previous practice, and not increasing the production volume at the beginning of the season, so that they need a smaller workforce, less external storage and transport capacity, and they only procure ingredients and packaging materials for the existing orders of customers accepting immediate payment, said the executive. As a result, the delivery slows down, but the unfavourable processes could lead to such a drastic increase in the price of ice cream next year that the demand will decrease, and the manufacturers will be forced to narrow down their product range too and postpone their planned developments.
The flavour of tomato
The icing on the cake is that there may also be a shortage of sugar in Europe as a result of market anomalies. In our region, which consumes 16.5 million tons of sugar per year, 70% of the consumption is related to the food industry; to 15,000 companies that employ a total of 700,000 people, said Gábor Intődy, Secretary General of the Association of Hungarian Confectionery Manufacturers. Following the intervention of the World Trade Organisation and the regulation of the European Union’s sugar market, the number and production of European sugar factories decreased by almost half between 2006 and 2017, and our region thus changed from an exporter to an importer. Several other factors – declining beet plantations, the climate crisis, plant diseases, decreasing beet and corn yields – are also contributing to the dwindling supply of sugar and isoglucose (corn syrup), while imports are hampered by high tariffs and tight quotas.
However, there are also encouraging developments in the market. Tischer Thomas, for example, highlighted that pastry shops and restaurants have started re-ordering gastronomic ice cream products, whose turnover suffered from lockdowns during the pandemic. Therefore, despite the current difficulties, Gelato Italiano is not completely giving up on innovation and is preparing to expand its range of sugar-free products.
In his presentation, Sándor Sánta also gave a taste of the innovations in the ice cream market. For example, manufacturers are working on non-melting, colour-changing and glow-in-the-dark products, as well as developing an ‘ice cream in an ice cream’ combination that surprises the consumer with a second flavour emerging from ice microspheres that melt in the mouth. In addition, exciting new flavours such as tomato may appear on the product palette.
Ice cream, patented in the United States in 1923, has pulled through several crises in its history – as István Bobay, Museologist-Historian of the Hungarian Trade and Catering Museum pointed out at the press conference. However, as it stands now, it looks like we’ll have a few more hot summers before we can first taste tomato ice cream.
Data sources: Association of Hungarian Confectionery Manufacturers, Association of European Confectionery Manufacturers (CAOBISCO), Association of German Confectionery Manufacturers (BDSI), Committee of European Sugar Users (CIUS), Nielsen IQ, Allied Market Research