In June, Amazon announced its acquisition of Whole Foods for $13.7 billion.
This has sparked my personal curiosity to analyze the aisles of grocery stores. This first post focuses on ice cream: the market, new healthy alternatives, the response of conglomerates, and my predictions for future innovation.
Seven years ago, the CEO of Halo Top began formulating his own ice cream recipe. He started selling it in stores 5 years ago, and has reportedly only raised $1.5 million. Now Halo Top is reportedly valued at $2 billion!
Ice Cream Market
For all of 2017, the ice cream market generated $9.94 billion in revenue, and it is projected that in 2018, this number will expand to over $10.06 billion, according to Statista.
Ice cream sales are predominantly in the U.S., as seen in the chart below of the projected global revenue of ice cream for 2018. Source
Consumers have an increased desire for healthier alternatives to regular ice cream, as we can see from the quantity and types of ice cream people purchase.
In 2016, people in the U.S. consumed 13.1 pounds per capita, down from 16.1 pounds in 2000, according to Statista. On the other hand, for the year ending in May 2017, ice cream sales with a “good source of protein” label increased by 207%, according to Statista.
Consumers have become more health conscious, and are reading more nutrition labels.
Several new ice cream brands have entered the market after realizing the opportunity for a healthier option. Halo Top is a clear leader in the new market segment.
Halo Top’s niche is that each container has between 240 and 360 calories, compared to 1,000+ calories for the average pint of Haagen-Dazs or Ben & Jerry’s. This is the result of a unique recipe:
- Base: milk & cream (with a higher percentage of skim milk). The base for vegan varieties is coconut milk.
- Eggs, adding a softer texture
- Concentrated lactose protein, to increase satiety
- Stevia, a plant based extract, and “all-natural” sweetener that is 200 times sweeter than most table sugar.
- Thickening agents (vegetable glycerin, carob gum and guar gum) to replicate the creamy sensation of traditional ice cream
- Erythritol, a sugar alcohol that has zero calories, and is 60–80% as sweet as sugar. It’s formed naturally in fruits such as watermelon and grapes, but can also be produced commercially through the fermentation of starches and yeast.
- Prebiotic fiber, specifically for Halo Top, is a residual yeast from the creation of soy sauce and sake that adds heft that otherwise would have been present from sugar. Ice cream becomes extra hard when sugar and fat are removed from the recipe.
- Air, added to ice cream to give it a lighter texture, referred to as “overrun” by ice cream producers.
- 20–30% overrun = premium brands
- 100% overrun (half ice cream and half air) = many cheap brands
- 82% overrun = Halo Top
The impact of overrun means that a pint of Ben & Jerry’s weighs about 428 grams, whereas a pint of Halo Top weighs about 256 grams.
Some nutritionists are cautious about stevia and erythritol. Zero calorie sweeteners may lead to weight gain, since it may disrupt the way the body metabolizes sugar, and cause people to crave sweets more frequently.
Additionally, a known side effect of excessive consumption of erythritol is headaches, diarrhea, and belly fat. Halo Top says that many pints need to be consumed at once to potentially experience any of these ailments.
Halo Top has leveraged its key nutrition differentiator (their number of calories) as a main driver for their marketing, to stand out from competitors.
Every pint of ice cream has the number of calories front and center, along with “good source of protein” in the lower right hand side.
Consumers may think of Halo Top more positively because the calorie count is placed dominantly, according to research by the U.S. National Library of Medicine and the National Institute of Health.
I uncovered Halo Top’s old packaging design online :
Their updated packing is more eye catching, and highlights their unique product offering: very low calories per pint. Their old cartons state the amount of protein, calories, and carbs per serving. These three numbers camouflage the one big market differentiator, and therefore is not as effective.
Halo Top is leveraging their low calorie range to add marketing messages to their seals, encouraging consumers to “Stop when you hit the bottom” and “No bowl, no regrets.”
A pint of Halo Top (240–360 calories) is equal to a few spoons of most luxury ice cream brands. Many consumers are following the marketing slogans, and eat the pint guilt free in one sitting.
Notice these seals have social media logos. Their social presence has been a big driver for their success.
Beginning in the early days, they’d reach out to Instagram fitness stars and YouTube celebrities. Today, they have at least 7 people whose sole responsibility is to offer free Halo Top to social media influencers.
They have about 650k followers on Instagram, and the #HaloTop Instagram hashtag has been tagged on almost 200k photos. Fans are excited to post all the pints they have in their freezers, and their dessert creations. But the most frequent post is actually just people holding a pint in their hand.
Beyond organic posts across social media, Halo Top has also focused on paid ads — which almost everyone is doing now. But Halo Top had the option to decide between $150 in-store demonstrations, or hyper targeted Facebook and Instagram ads that cost them about 10 cents per eyeball. They were able to drive exponentially more traffic online.
The biggest exponential sales uplift resulted from two viral press articles.
Just over a month later, BuzzFeed published an article titled, We Tried Low-Cal Ice Creams And Compared Them To Häagen-Dazs. The part describing Halo Top really stands out with the line, “OMG. LIFE-CHANGING.”
At this stage in early 2016, Halo Top was in 5,000 grocery stores, and they ordered about 1,000 gallons of their ice cream from their producer every few months. Suddenly, after the articles went viral, they started ordering 3,000 gallons, then 9,000 gallons, and then 12,000 gallons — a day.
The huge increase in orders is not only attributed to an increase in consumers, but also to an increase in the number of pints purchased per consumer.
Many consumers are having Halo Top every night, or several times a week, versus every few weeks as before, since Halo Top pints have a fraction of the calorie counts of most ice cream pints.
Additionally, consumers purchase 7 to 8 pints at once on average. Halo Top is having difficulty balancing supply and demand, and consumers don’t want to go without it!
In January 2017, Halo Top surpassed Häagen-Dazs and Ben & Jerry’s, claiming the title of best-selling ice cream by the pint across the U.S. Then by September, Halo Top became the best selling ice cream brand in the U.S., regardless of the packaging size.
There are several other brands in Halo Top’s market vertical that have been pressured by their growth.
Notice how all of these ice cream brands highlight calories and protein on the front of the pint. They took a page out of Halo Top’s playbook.
Other players in the market had another unique angle for their lower caloric content: monk fruit juice. Monk fruit is 300 times sweeter than sugar, and is a popular sweetener across Asia. It’s also substantially cheaper than sugar, but more costly and less sweet than stevia.
Brands that sweeten their ice cream with monk juice include DanoneWave’s So Delicious and Enlightened, along with Talenti’s gelato.
History of newcomers surpassing market leaders
There are an increasing number of new food brands becoming a threat to conglomerates. Here are a few:
- Chobani became a $1 billion yoghurt, just five years after entering the market. In 2016, it overtook General Mills’ Yoplait, the long-time market leader, as the largest yoghurt brand across America.
- Kind Bars took 10% of the snack bars market in five years, and Special K Bars have experienced a 39% decrease in sales since 2011.
- Campbell and Progresso by General Mills were once longtime market leaders in the soup vertical, but have been losing their market dominance since 2011.
- SkinnyPop (popcorn) is taking away market share from Smartfood popcorn from Pepsi’s Frito-Lay.
How conglomerates are responding now
Ice cream conglomerates are responding to the success of Halo Top and other similar brands by creating their own more health conscious varieties.
Unilever has lost 1.5 share points due to the rising popularity of Halo Top. One of their brands impacted is Breyers, which sold $500 million worth of ice cream in 2016. During the same time period, Halo Top had a 2,500% increase in sales from 2015 to 2016, selling 13.5 million pints for $66.1 million. Although the sales value is less than Breyers, Halo Top experienced a staggering growth rate.
In defense, Breyers has launched “Breyers delights,” marketed as low-calorie, low-sugar, and high-protein ice cream.
By the time conglomerates get to in-house innovation, it might already be too late. Acquiring the fast growing new market entrant might be the best strategy, before they get too big that they turn down an acquisition offer, and capture significant market share from the traditional market leaders.
Conglomerates acquiring rising ice cream stars
- In 2000, Unilever acquired Ben & Jerry’s for $326 million
- In 2005, Unilever acquired ice cream chain Grom for an undisclosed amount
- In 2006, Nestlé merged its ice cream brands (Häagen-Dazs and Nestlé Crunch) with Dreyers Grand Ice Cream in a $2.4 billion deal.
- In 2014, Unilever purchased Talenti, speciality low-fat gelato and sorbet in see-through plastic jars
- 2018, ???
There have been news articles that Eden Creamery LLC, owner of Halo Top, has been exploring a sale that would value the company at $2 billion. Potential buyers could include Unilever, General Mills, and Nestlé. While Halo Top acknowledges these conversations, they say they are having too much fun now to sell their company.
Here are some more insights into the metrics behind Halo Top:
- Raised $500,000 from friends, families, and previous colleagues
- $230,000 in revenue
- Raised $1 million from angel investors and CircleUp
- Sold over 17 million pints
- $100 million in revenue
- In over 17,000 stores across the U.S. and Australia
- Producing 650,000 pints a day
New opportunities for ice cream
A major gap in ice cream offerings is vegan ice cream. That’s also been the top request from Halo Top customers.
Taking a step back, there is an increased market demand for non-dairy milk sales.
- Since 2012, sales in the dairy milk vertical have decreased 15% to $16.12 billion
- In 2015, non-dairy milk sales increased 9% in the U.S., whereas dairy milk sales decreased 7%
- In 2017, non-dairy milk sales have reached $2.11 billion in the U.S., after increasing 61% over the last five years
The demand for non-dairy milk is increasing, just as the demand for vegan ice cream is increasing. There is still a market opportunity for more vegan ice cream products. I’m excited to see what’s in store in the future.
P.S. Check out my other articles:
Analyzing 15 start-up referral codes + landing pages
P.P.S. Before you go…
If you found this post interesting, please clap for it!! 😊