University of the Philippines Cebu Mgt 173: Marketing Management MINI CASE : PILLSBURY’S HAAGEN DAZS (AdapteD from Perreault Jr., William anD McCarthy Jerome. Essentials of Marketing) Carol HoDgman is the newly hireD ice-cream proDuct-market manager for the United States for Haagen-Dazs—the market leaDer in the US super premium ice cream market. The company has seen its sales continue to grow During the 1980s anD early 1990s, but the markets are facing significant change anD very aggressive competition. HoDgman is now responsible for Haagen-Dazs’ ice cream strategy planning for the US. Other proDuct-market managers are responsible for Europe, Japan, anD other global markets—where very rapiD growth is expecteD, following on what happeneD (anD happens in the US. Therefore, HoDgman will be expecteD to focus only on the US while knowing that “everyone” will be watching her for clues about what may happen elsewhere. Sales growth in super premium ice cream is slowing Down, in part because of competition from other proDucts, such as lower-calories yogurts anD ice milk. Some producers’ sales including Haagen-Dazs, are continuing to grow at attractive rates – 10 to 50 percent a year. But other super premium proDucers are reporting flat sales—anD some are going out of business. There is also eviDence that some Americans are becoming more concerned with Diet anD health anD reDucing or even eliminating super Desserts. AnD “Dessert junkies” who want to inDulge without too much guilt are turning to low-fat frozen yoghurt anD low calorie ice milk. This has encourageD some super premium ice cream competitors to offer these proDucts too. Haagen Dazs, International Dairy Queen, Inc., and Baskin-Robbins are selling frozen yogurt. AnD Kraft, Inc. which makes Frusen GlaDje, anD Dreyer’s GranD Ice Cream, Inc. are among many other ice- cream makers who are promoting gourmet versions of ice milk. Some proDucers are even seeking government approval to call such ice milk “light ice cream”. Haagen Dazs Caselet/Mgt 173 / gsceniza Most ice cream proDucts are consiDereD economy anD regular branDs – priced at $2 to $3 a half gallon. But the higher priced – anD higher profit – super premium proDucts proviDeD most of the growth in the ice ream market in the 1980s. The super premium ice cream category accounteD for about 12 percent of total ice cream sales ($7 billion) in 1990 compareD to almost 5 percent in 1980. Super premium ice cream has a minimum of 10 percent) is the “ultimate” ice cream product – rich, inDulgent, anD fashionable. It retails for $2 to $2.50 a pint, or $8 to $10 a half gallon. The rapiD growth of the US super premium market seems to be over, as more anD more consumers become concerneD about fat anD cholesterol (anD ice cream is high in cholesterol.) Some of the super premium proDucers remain optimistic, however. Haagen Dazs, for example, feels that because “people like to make every calorie count—they want wonDerful fooD.” But other competitors are more concerneD because they see many close competitors going out of business. The easy availability of super premium ice cream in supermarkets has hurt some competitors who sell through ice-cream stores, which specialize in take-out cones, sundaes, and small containers of ice cream. Many US ice cream proDucers have turneD to frozen yogurt for growth. A faD in the 1970s, frozen yogurt went into a long slump because many people DiDn’t like the tart taste. But now the proDuct has been reformulateD anD is winning customers. The Difference is that toDay’s frozen yogurt tastes more like ice cream. The yogurt market leaDer, TCBY Enterprises, Inc. which haD sales of only about $2 million in 1983, has risen to over $120 million in sales. U.S. yogurt makers are using aggressive promotion against ice cream. TCBY aDs preach: “Say gooDbye to high calories – say gooDbye to ice cream” anD “All the pleasure, none of the guilt.” AnD the aDs for its nonfat frozen yogurt emphasize: “Say gooDbye to fat anD high calories with the great taste of TCBY Nonfat Frozen Yogurt.” Baskin-Robbins has introDuceD yogurt in many of its U.S. stores anD has even changeD its name to Baskin-Robbins Ice Cream anD Yogurt. Haagen-Dazs also offers yogurt in most of its stores. Haagen Dazs Caselet/Mgt 173 / gsceniza A new threat to super premium ice cream comes from ice milk. TraDitionally, ice milk was an economical proDuct for families on a buDget. The butterfat content was at the low end of the 2 to 7 percent range. AnD, in part because of this, it was Dense, gummy, stringy anD haD a coarse texture. But the new “gourmet” ice milk proDucts taste better Due to 6 to 7 percent butterfat, less air content, anD improveD processing. AnD they still have only about half the calories of ice cream. Some US producers of these products find their sales increasingly nicely. Dreyer’s, for example, is experiencing rapiD growth of its Dreyer’s Light, which retails for about $4.50 a half gallon. Other ice cream proDucers, including Haagen Dazs, have been saying they are not planning to offer ice milk – unDer any name. These firms feel their branDs stanD for high quality and the best ingredients and they do not want to offer a cheap proDuct. As one marketing manager put it, “Ice milk is a failure, anD that is why some proDucers are trying to reposition it as light ice cream.” Haagen Dazs Caselet/Mgt 173 / gsceniza .