SIC 2024
ICE CREAM AND FROZEN DESSERTS



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

NAICS Code(s)

311520 (Ice Cream and Frozen Dessert Manufacturing)

Industry Snapshot

The ice cream and frozen desserts industry is an important sector of the American dairy industry. Ice cream was a $20 billion industry in the early 2000s; Worldwide consumption of frozen desserts had risen steadily throughout the 1990s. Premium and super premium ice cream desserts, which contained higher amounts of butterfat than regular ice cream, gained popularity in the late 1990s, while frozen yogurt, a $585 million market in the mid-1990s, declined in consumption. The U.S. remained the world leader in ice cream production with more than 1.6 billion gallons in 2001. The total value of industry shipments grew from $5.4 billion in 1999 to $5.7 billion in 2000.

Organization and Structure

The production of ice cream begins with the 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 the early 1990s, America's 10 million dairy cows produced 148,526 million pounds of milk; approximately 8.6 percent of this milk, or 12.8 million pounds, was used to make frozen dairy products.

Manufacturers of ice cream and other frozen desserts range in size from small operations with sales under $1 million a year to subsidiaries or divisions of giant, diversified companies with annual sales in the billions of dollars and for which frozen desserts are only a portion of their total product lines. In the early 1990s, there were approximately 675 establishments making ice cream, 305 making ice milk, and 175 making water ice. Most of these plants made more than one type of frozen dessert product.

Traditionally a highly regionalized industry, the frozen desserts and ice cream segment began to consolidate in the late 1990s as distribution became more advanced and national firms were formed. Still, many top producers' brand names were known only in the geographic 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 was little debate in the 1990s that ice cream and other frozen desserts had regained their position as one of America's favorite treats. Ice cream as we know it—smooth and creamy—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 a continuous freezing process that enabled a consistent ice crystal structure. Production and manufacturing advancements that have since been implemented have 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. 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 lower-fat products such as ice milk, which contained between 2 percent and 7 percent butterfat. "Ice milk" as a product name, however, was headed for extinction with passage of the Nutrition Labeling and Education Act.

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 then 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. As a general rule, premium ice creams use pure extracts and fruits, nuts, candies, and syrups to add flavor. In the 1990s, mix-in flavors like Chocolate Chip Cookie Dough, Carrot Cake Passion, and Cappuccino Commotion were very popular.

The luxury, or super premium, ice creams that were regaining popularity in the 1990s were pioneered by Reuben Mattus in the early 1960s. Using all top-quality, natural ingredients, and no artificial stabilizers or other additives, Mattus created Haagen-Dazs, a highly successful product that set the pattern for rich, clean-tasting ice creams. In the 1980s, such ice cream novelties as ice pops, fudgesicles, and ice cream sandwiches, which had been originally marketed at children, were becoming popular with adults. Haagen-Dazs entered this market with such products as Dove bars and Haagen-Dazs frozen yogurt bars.

Sherbets were defined by the Federal Code of Regulations to contain between 1 and 2 percent butterfat and between 2 and 5 percent total milk-derived solids. Ices contain no milk-derived ingredients or egg ingredients other than egg white; they can be made with nonpasteurized 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 require mellorine products to contain at least 6.0 percent fat and no less than 3.5 percent protein.

Frozen yogurts are made using the bacteria cultures streptococcus thermophilus and/or lactobacillus bulgaricus . Because most refrigerated yogurts were lowfat and had a healthy image with consumers, frozen yogurt was assumed to have the same health benefits as the refrigerated product. The Code of Federal Regulations, however, which required specific starting cultures and acidity levels for refrigerated yogurt, set no such product characteristic requirements for frozen yogurt. The National Yogurt Association (NYA) endorsed a 1991 International Ice Cream Association petition to the government that would standardize manufacturing procedures and require frozen yogurt to be made with specific characterizing yogurt cultures.

Nutrition Labeling and Education Act. By defining terms that had been unclear, the U.S. Food and Drug Administration's (FDA) Nutrition Labeling and Education Act (NLEA), with its 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 that desserts getting more than half their calories from fat could be labeled "light" if their fat content had been reduced 50 percent from their reference product. The "light" label was also permitted on products getting 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 new labeling did away with the term "ice milk." Lower-fat ice creams, which previously had to be called "ice milk," are now 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 a "lowfat" product was defined as having not more than 3 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 of a reduction in fat or calories would satisfy the "50 percent less" requirement. If, on average, the leading brands contained 16 grams of fat, then a product containing 8 grams of fat could be labeled "light."

In 1991, ice cream and frozen dessert sales ranked third behind the fluid milk and cheese sectors of the dairy industry, exceeding $9.0 billion and representing over 15 percent of the dairy industry's overall sales of $62.8 billion. Measured by consumption, frozen desserts led the entire dairy industry segment in 1992. Consumption of frozen yogurt, a lowfat alternative to ice cream, rose by 17 percent, and ice cream's 7 percent gain was attributed largely to reduced-fat products.

With sales of $3.2 billion in 1991, ice cream was making a comeback as America's favorite dessert. Sales of other frozen desserts (ice milk, frozen yogurt nonfat/lowfat products, novelties, sherbets and sorbets, tofu-based products, and mellorine and miscellaneous products) brought the industry total to $9.5 billion for the year. Overall, production increased 4 percent from 1990, with full-fat ice creams still leading the market at 61 percent. Frozen yogurt production, however, increased by 25 percent. In 1992, the number of reduced-fat ice creams, which represented 54 percent of all reduced-fat product introductions in 1990, dropped from 311 to only 94, or 23 percent of the market segment. Ice cream manufacturers stepped up new product introductions in the late 1990s, reversing a three-year slowdown.

Current Conditions

Americans spent $20.7 billion on ice cream and other frozen desserts in 2001. U.S. citizens were the leading consumers of frozen treats worldwide, eating 20 liters per capita, versus an average of 2.3 liters per individual globally. Not only were Americans consuming the most ice cream, but more American households were partaking in other frozen delights. According to the International Dairy Foods Association, U.S. household consumption of ice cream grew from 86 percent in 1996 to more than 90 percent by 2001.

Packaged ice cream accounted for 52 percent of total U.S. ice cream sales in 1999. Frozen novelties, consumption of which increased by 20 percent during the last half of the decade, accounted for 35 percent of total industry sales in 1999. Novelty sales grew another 7 percent between 2000 and 2001 to reach $2.1 billion. Cookie sandwiches were the fastest growing novelty item. Packaged ice cream and frozen novelty sales are expected to grow roughly 8 percent by 2004.

Super-premium ice cream accounted for 3.5 percent of total sales in 2001; premium accounted for 51.5 percent, and regular accounted for 45 percent. More than 80 percent of ice cream sold through supermarkets and groceries in 2001 was full fat. About 11 percent was reduced fat, lowfat, or nonfat ice cream. Sherbet accounted for 4.5 percent, while frozen yogurt held only a four percent share of the total frozen desserts market.

Ice cream and frozen dessert production in the U.S. totaled 1.6 billion gallons. California was the leading ice cream producing state, followed by Indiana, Pennsylvania, Texas, Ohio, New York, and Minnesota. The top five U.S. cities in terms of ice cream supermarket sales in the late 1990s were Portland, Oregon; Omaha, Nebraska; Seattle, Washington; St. Louis, Missouri; and Buffalo/Rochester, New York. The most popular flavors included vanilla, chocolate, neapolitan, butter pecan, and chocolate chip.

Australia trailed the United States in worldwide consumption of ice cream and frozen desserts, eating about 18.5 liters per head. Those in Western Europe enjoyed ice cream as well, with Sweden accounting for about 15.8 liters per capita, Italy 9.1 liters, and the Netherlands, Israel, Belgium, and the United Kingdom all consuming between 8 and 9 liters per head. Canada was next, consuming about 9.2 liters per capita. The fastest growing market, however, was Asia, where sales more than doubled in the 1990s, according to Euromonitor. In fact, by 2001, the United States was exporting roughly $21.2 million in frozen desserts to Japan, making it the largest U.S. export market. Hong Kong was the second largest market, receiving $11 million in frozen dessert exports.

Industry Leaders

The leading ice cream brands in 1998, according to Information Resources, Inc., were as follows: private label brands ($855.2 million in sales); Breyer's ($443.9 million); Dreyer's/Edy's ($374.9 million); Blue Bell ($199.2 million); Haagen-Dazs ($167.9 million), and Ben & Jerry's ($137.8 million). All experienced increases in sales compared to 1997.

Haagen-Dazs Co., whose parent company, Pillsbury Company, was in turn owned by European-based Diageo PLC, set a course in the 1990s that aimed at leaving the competition trailing. The company offered something for everyone in the frozen dessert segment: premium ice creams, frozen yogurt novelties on a stick, 98 percent fat-free frozen yogurts, and a new super premium line of mix-in flavored frozen yogurts and ice creams. One of the leaders of the super premium segment, Haagen-Dazs announced plans in 1999 to form a joint venture with Nestle USA, the second-largest novelty ice cream company in the United States. The new company, tentatively named Ice Cream Partners USA, hoped to combine the strengths of Haagen-Dazs and Nestle to satiate American palates. James Dintaman, CEO and president of Nestle's ice cream group, said in Supermarket News in August 1999: "We conclude that the United States is the strongest ice cream market, and there is no question that this is a highly fragmented industry—nearly $11 billion dollars in retail sales.… We will now be a stronger player, and[the joint venture] allows us to capture all of the trends in terms of impulse and indulgence."

Hot on the heels of Haagen-Dazs was Ben & Jerry's Homemade, Inc., a leading manufacturer of super premium ice cream. Ben & Jerry's is known for both its social action programs—the company typically donates about 8 percent of pretax profits to charitable and political programs—and its unusual ice cream flavors. The company had 1998 sales of $209.2 million, up more than 20 percent from 1997. Ben & Jerry's ice cream was sold in Europe, Canada, and Japan in a variety of forms, including frozen yogurt, lowfat ice cream, sorbet, and smoothies. The company started each year with a list of up to 200 potential new flavors, and in 1999 Ben & Jerry's introduced four new premium flavors, including Southern Pecan Pie and Triple Caramel Chunk.

Dreyer's Grand Ice Cream of Oakland, California, with 1998 sales of $1.02 billion, was the leading U.S. ice-cream manufacturer. The company produced and distributed ice cream under its Dreyer's brand in 14 states in the West as well as overseas. Dreyer's also made 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. Dreyer's offered a number of frozen dessert items spanning each frozen treat category such as lowfat, 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, Nestle, 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. Godiva ice creams were introduced to supermarkets in 1999 and were labeled ultra-premium. The Godiva offerings included such fat-filled flavors as Belgian Dark Chocolate, Chocolate Raspberry Truffle, Pecan Caramel Truffle, and White Chocolate Raspberry.

Another leader in the ice cream and frozen dessert industry was Good Humor-Breyers Ice Cream Company, a subsidiary of Unilever United States, Inc. Unilever's parent company, Unilever PLC, was the global leader in the ice cream industry and spent the late 1990s acquiring numerous ice cream companies, including firms in Mexico, China, and the Philippines. In the United States, Good Humor-Breyers made and sold a number of brands, including the industry-leading Breyers, Klondike, which made ice cream sandwiches and bars; Minute Maid, which offered sorbets and bars; and Popsicle. In August 1999 Unilever published Licks, Sticks and Bricks: A World History of Ice Cream, which offered a detailed look at the development of ice cream. Breyers and Dreyer's together accounted for about 31 percent of the U.S. ice cream market in 1997.

Further Reading

"Americans Put Taste at a Premium." Harrisburg Patriot, 21 July 1999.

Billings, Alvin. "Sweet Statistical Trends in United States Ice Cream Market." Quick Frozen Foods International, 1 July 1999.

Clark, Gerry. "High-fat heaven." Dairy Foods, 1 March 1999.

Just the Facts: Ice Cream Sales and Trends. Washington, DC: International Dairy Foods Association, 2002. Available from http://www.idfa.org .

Smyth, William. "Nestle and Haagen Dazs to Join Forces." Supermarket News, 30 August 1999.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

Wellman, David. "Butterfat City." Supermarket Business, January 1999.

"With Unilever and Nestle leading the pack, ice cream intake approaches 13 billion liters." Quick Frozen Foods International, April 1998.



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