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

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TABLE 3.10 Recommended prices of multi-packs compared with those of individual items in 1993RSP Units per RSP RRP Differentialmulti-packs multi-pack per unit single (%)Wall's multi-packs (a) (b) (c) (d) ((d)-(c))÷(c)×100Cornetto 1.95 4 0.49 0.65 32.65Kick 1.99 4 0.50 0.65 30.00Sky 1.99 4 0.50 0.55 10.00Magnum 2.19 3 0.73 0.85 16.44Cadbury's Dairy Milk 1.99 4 0.50 0.65 30.00Chunky Choc Ice 1.65 5 0.33 0.45 36.36Feast 1.79 5 0.36 0.50 38.89Calippo 1.69 4 0.42 0.50 19.05Boomy 1.79 4 0.45 0.55 22.22Mini Milk 1.85 12 0.15 0.20 33.33Mini Juice 1.85 12 0.15 0.18 20.00Source: MMC.Differential (%) 26.27Note: RSP = recommended selling prices of multi-packs; RRP = recommended retail price of a single item.Trade terms3.88. BEW and other manufacturers negotiate on price with their major customers. Table 3.11 shows thebasic discount structure for different types of distributors expressed as an index with reference to RRPs.TABLE 3.11 Trade terms for different types of outletMultiple Symbol Small independent outletConcessionaire Wholesaler CTN grocer Using company- Usingsupplied freezer own freezerBEWRRP ex VAT [Trade price list (TPL)Discount off TPL:Maximum %Figures omitted. See note on page iv.Minimum %Net price to customer ]Multiple Symbol Small independent outletWholesaler CTN grocer Using company- Usingsupplied freezer own freezerNestléRRP ex VAT [Trade price list (TPL)Discount off TPL:Maximum %Minimum %Figures omitted. See note on page iv.Net price to customerranges from ]MarsRRP ex VAT [Trade price list (TPL)Discount off TPL:Maximum %Minimum %Figures omitted. See note on page iv.Net price to customer ]Source: MMC based on company data.*These figures relate to a level of sales on which the highest stepped bonus rate is payable.37
3.89. Table 3.11 indicates that in the case of both BEW and Nestlé small independent outlets obtain a higherlevel of bonus if they have their own cabinet rather than use a manufacturer-supplied cabinet. The bonusdifferential is not a constant but depends on the level of turnover and is paid in arrears. In the case of BEW,Table 3.12 shows the bonus payable on a sliding scale with reference to the size of annual sales of BEWproducts.TABLE 3.12 Bonuses to small independent outlets and ownership of freezer cabinetsSize of BEW Ownpurchase from BEW freezer freezer Differential0-799 Nil Nil -800-1,069 Nil 6 6.01,070-1,579 2.5 6 4.51,580-1,959 3 7 4.01,960-2,389 3.5 7 3.52,390-2,919 4 8 4.02,920-3,469 5 8 3.03,470-4,059 6 9 3.04,060-4,609 7 9 2.04,610+ 8 10 2.0Source: BEW.3.90. A typical small retailer, usually a CTN, who stocks BEW's impulse ice cream obtains the discountsshown in Table 3.12. These terms apply to about 35 per cent of cabinets. There are three categories of customersand customer buying groups on special terms. First, there are multiple chains that receive volume-related bonusesand one or more allowances for merchandising and promotion. Secondly, there are outlets that operate on aseasonal basis or with high sales in theme parks, theatres and cinemas. Some independent retailers with whichspecial terms have been negotiated comprise a third category.3.91. Nestlé's bonus structure is similar to BEW's, but, as noted in paragraph 2.42, the method of calculationdiffers. Mars recognizes no distinction within independent outlets as to whether it has supplied a cabinet or not.Mars stated that it wished to encourage keen competition between the distributors of its products.3.92. Many independent CTNs and other retailers belong to buying groups which negotiate on behalf ofmembers. Bridewell UK has obtained an extra discount from BEW. A new company, Bridewell IcepowerLimited, was formed in October 1993 to promote ice cream sales through the outlets of members. This newbuying group also obtains a discount on sales made through supplier-owned cabinets. However, as yet no buyinggroup is involved in purchasing bulk quantities of freezer cabinets on behalf of its members.Advertising and marketingProduct innovation3.93. The ice cream market in general, and the impulse sector in particular, is characterized by a high degreeof consumer brand awareness maintained, as in many other consumer goods industries, by expenditure on alltypes of advertising, marketing and special promotions. This expenditure is mainly incurred in support of thenew products and range extensions which have been become an even more marked feature following Mars' entryin 1989.3.94. During the period 1985 to 1988 BEW introduced 22 new products of which 14 were aimed at children.Lyons Maid launched 19 new lines including 12 for children. Since 1989 BEW and Lyons Maid have maintainedtheir rate of new product introductions. However, the entry by Mars and other producers into the market hasresulted in an increase in the total of new product launches. This significant increase in the rate of new productintroductions is shown in Table 3.13. The table indicates that over half of all new product launches have beenchocolate bar products aimed at the adult category of the market following the launch of Mars ice cream38
Page 1 and 2: 3 The market for impulse ice creamC
Page 3 and 4: Other ice cream products3.5. Soft m
Page 5 and 6: The structure of the industryThe MM
Page 7 and 8: 3.28. Treats seeks to compete with
Page 9 and 10: Small-scale manufacturers3.39. Tabl
Page 12 and 13: TABLE 3.4 Annual rates of change in
Page 15 and 16: (o)Cups comprise paper or plastic c
Page 17 and 18: mobile ice cream vans which are ser
Page 19 and 20: 3.70. Less than one-fifth of respon
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Page 27 and 28: £3 million marketing support for t
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