“Operational rigour” bore fruit for The Magnum Ice Cream Co. (TMICC) in the first quarter as volume growth more than doubled.
Product innovation and improvements in some of TMICC’s select markets such as India helped drive organic volume growth (OVG) to 2.9% versus 1.4% in the year-earlier quarter and are expected to continue to pay dividends.
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CEO Peter ter Kulve is putting more emphasis behind ice cream freezer cabinets, an aspect he said today (30 April) was neglected somewhat by Unilever before the spin-off of the division at the end of last year.
Those efforts will help to complement TMICC’s sales in the wider retail channel, he said, using India as an example, where 50,000 freezer displays were activated in the space of two months.
“Our operational rigour is improving,” ter Kulve told analysts today as he presented the latest numbers. “I’m especially pleased with the volume contribution – this represents the kind of quality growth we aim for and reflects the work that we have done on innovation and execution.
“We are seeing this working across the business with every region contributing to our growth.”
Ter Kulve sees India as an area of opportunity, and suggested he plans investment to increase production facilities to four from one currently.
“India is the largest dairy market in the world and within time, it will also be the largest ice-cream market in the world. We will work very hard to take our fair share,” the CEO said.
“Profitability is still not very good. We are investing behind the business but especially need to make a supply chain intervention because historically we had one factory, and with our current growth rates, we need four factories.”
TMICC has now moved from a vegetable fat ice-cream company to a dairy ice cream provider in India, a shift from how the Unilever business was deemed as a “frozen dessert” business, ter Kulve explained.
Unilever’s ice-cream operations in India have also now been brought into the frame of TMICC after the business was amalgamated at the end of March followed by the Portugal business in April. Sales from those operations will be reflected in the second quarter.
In another emerging market, Brazil, TMICC also has some fixes to make to drive operational performance.
“We did have an execution problem but it’s slightly more so our pricing is not correct. We’re not in line with core snacking price points and I need to do a portfolio adjustment, which will take time,” ter Kulve said.
“Fundamentally, Brazil is a very good, fast-growing ice-cream market.”
He added: “Sales in Brazil declined in the quarter. We continue to execute our turnaround plan focused on new innovations, more targeted promotional and pricing activities and increased distribution.”
Growth in the US within the Americas division is being driven by consumers shifting out of bulk ice cream into handheld variants that are “better quality, higher price or more healthy”, ter Kulve said.
“GLP-1 strengthens this trend, so the American market is solid. Our share is good in these markets driven by some really successful innovation.”
Despite the disruption from the Middle East on energy prices and supply chains, TMICC stuck with its full-year guidance of organic sales growth of 3-5% even though that metric delivered 4.5% in the first quarter to €1.77bn ($2.07bn.)
Pricing growth eased to 1.6% from 2.4%.
Since the start of the year, TMICC has hedged its cocoa exposure, taking a benefit from lower prices, which will provide “a little bit of tailwind” from any impact from the Middle East, CFO Abhijit Bhattacharya said.
Ter Kulve added: “We expect the increase in the cost of energy across the supply chain, including raw materials, packaging and freight, to be offset by tailwinds from commodities, our mitigating actions and our productivity programme.
“Whilst we are mindful of the heightened uncertainty in the global environment, particularly in the Middle East, and the associated knock-on effects to input costs, our regional direct exposure remains limited.”
