3 The market for impulse ice cream [per] - Competition Commission

3.78. Martin told us that during an eight-week trial ending in October 1992 it had experienced a 15 per centincrease in sales in 30 of its outlets where there was an `industry' cabinet, as compared with sales from twoseparate freezers (a large one from BEW and a smaller one from Mars). We were later told that this figure hadnot been confirmed by experience over a longer period in 1993 and in a wider range of outlets. Martin estimatedthat the increase in sales was between zero and 2 per cent. However, the move to non-exclusive freezers was stillregarded as worthwhile because of better utilization of space and savings in running costs (see also paragraph8.25).3.79. Merrett told us that 1993 had been a poor year for ice cream sales and that in 34 of its outlets sales were12 per cent below those in 1992. In the three outlets where there was an industry freezer rather than both a BEWand Mars freezer sales were lower in 1993 compared with the previous year by between 4 and 15 per cent.Merrett said that it had allocated 60 per cent of the three industry cabinets to BEW (including all but fourproducts from the BEW range) and 40 per cent to Mars. The company said that it preferred a single freezerbecause this gave a more professional service to customers as well as being cheaper to run, manage and maintainthan was the case with two cabinets (see also paragraph 8.30).Retail and pricing policyRetail prices3.80. The leading manufacturers of impulse ice cream determine recommended retail prices (RRPs) each yearwell before the start of the summer season. These prices do not change during the year save in exceptionalcircumstances such as the increase in VAT rates in the 1991 Budget.3.81. We were told that RRPs are generally observed in independent CTNs but this is not the case in leisurecentres, petrol forecourts, motorway service stations and some convenience stores, where actual retail prices canbe significantly higher than those recommended. BEW told us that one of the larger CTN chains does not adhereto RRPs in selling impulse ice cream in its outlets but adds 2p to the RRP on all lines stocked. It is not usual forretailers to charge prices below RRP.3.82. In recent years manufacturers have shown a preference for `rounded number' prices, ie multiples of 5pand 10p. However, in the children's segment of the market there is a belief that custom is particularly pricesensitiveand some prices are set below rounded numbers.3.83. Table 3.8 shows the recommended retail prices of 50 branded lines in seven categories of the impulsemarket. Within the chocolate bar category the average price of BEW brands (55p) exceeds that of Nestlé/LyonsMaid brands (46p). The average price of the five Mars brands, 57p, is the highest of these three suppliers. In thecase of cones, BEW and Nestlé/Lyons Maid each sell two brands at the same price. In the adult stick categoryMagnum is priced at a small premium to both the Mars Galaxy Dove and the Nestlé Chocolate brands. There isno price differential between Feast and Nestlé Mint Crisp and Toffee Crumble. All six brands within the adultrefreshment category have recommended retail prices of 55p or 60p. There is a wide range of prices in thecategory of children's novelty products.33