Sweet as! Will ice cream be NZs export bonanza?

Kiwis are world champions at eating ice cream, with plenty of home-grown boutique brands scooping their way to success. A new report suggests ice cream could be New Zealand’s next big export earner but not everyone in the industry is convinced.Jane Phare reports.

Every Kiwi has a nostalgic ice cream memory. Mine is Sunday walks along Wellington’s Oriental Parade with parents who promised us an ice cream from the last “milk bar”.

Trouble was, back then, Oriental Parade was dotted with dairies along its full length. And my parents ambled – very slowly. It took forever to reach that far-end shop. Within minutes we were outside, fiercely licking our ice creams like thirsty labrador puppies in an effort to beat Wellington’s wind before it turned our treats into rivulets of dripping mess.

Decades later, there’s no such rationing in my home. Open the freezer and out tumble tubs of Cookies & Cream and Goody Goody Gum Drops for the teenagers. The hokey pokey is hidden at the back under the frozen veges.

Ours isn’t the only family keeping ice cream producers in growth mode. Kiwis are the largest consumers of ice cream per person in the world, ahead of the US and Australia. The most conservative figure for Kiwi consumption is 23 litres a year each, with some estimates reaching as high as 28 litres.

Much of it is eaten at home. According to Canstar research, nearly a third of us (32 per cent) tuck into tubs of ice cream several times a week. During Covid-19 lockdowns, tub sales in supermarkets boomed. And once lockdowns ended, the long hot summer has helped put millions of licks back into the industry. New Zealand householders spend $3.37 million a week on bulk ice cream, ice creams and frozen novelty products.

Boutique scoop stores are thriving throughout the country: Charlies Gelato in Matakana; Duck Island in Auckland, Waikato and Wellington; Little Lato in Auckland, Rotorua and Coromandel; Puhoi Ice Cream; Kaffe Eis in Wellington; Appleby Ice Cream in Nelson; Ollies and Patagonia Chocolate in Central Otago, to name a few.

Imagine the excitement in Wellington when, in 1866, ice cream was first offered on the menu at the Empire Hotel after the proprietor shipped in ice from the US. Since then, more than 100 ice cream brands have come and gone, mentioned in a roll of honour on the New Zealand Ice Cream Manufacturers Association website.

But there are plenty left – nearly 50 manufacturers – with new brands launched every year. The Government is keen for producers to take our ice cream to the world after Economic Development Minister Stuart Nash released a report last month outlining the dairy treat’s potential as an export earner.

The report for the Food and Beverage Information Project suggests New Zealand could export to Australia, Asia and the UK, with ice cream following the global success of premium wine and honey exports. The study says there is growing demand for premium ice creams overseas and New Zealand is in a great position to benefit.

Although ice cream exports have generally been growing in value, volume has been flat, accounting for less than 1 per cent of dairy exports. Last year ice cream exports were worth $57.9 million, down from $70.4m in 2020, according to Statistics NZ. More than 70 per cent of those exports went to China and Japan.

Compare that to the local spend, with the retail market value predicted to reach $531m by 2026. It’s that local market that most local producers want to stick with.

Ironically, the owners of Stuart Nash’s favourite place to buy an ice cream, Lick This!on Napier’s Marine Parade, say they won’t consider exporting. Nash, the MP for Napier, is a regular visitor with his family to the shop where Lick This! owners Steve and Caroline Manning serve up 40 flavours of ice cream, sorbet, gelato and ice blocks.

After 17 years in the business they’re now doing a $1m turnover in ice cream. That’s quite enough to manage, they say, without the headache of tackling the global market.

Steve Manning worked as a business coach before he started Lick This! and says upscaling for export requires major capital outlay on machinery and staff.

“It’s a very, very tricky stage. Kiwis have this interesting mentality that you’re a much more successful business if you can export. And I don’t really buy into that. You can be a very successful businessperson here in New Zealand.”

Sure, Covid-19 gave them a knock and they lost money during lockdown, despite help from government subsidies. But a loyal local following and a hot Hawke’s Bay summer has helped them recover, meaning Manning’s vast collection of antique ice cream scoops have been kept busy.

“We’ve had three record days in a row,” Steve Manning says. “Each one got bigger and bigger.”

As for exporting, why risk damaging their brand by exporting product that might not arrive in pristine condition? And the high, and unpredictable, cost of core ingredients in New Zealand makes it hard to compete on a world stage.

“If you get into exporting it will be hard to get the pricing right. Prices go up and suddenly you have no margin.”

Skyrocketing costs

His views are echoed by other boutique ice-cream makers who point to the high cost of ingredients like milk, cream and quality fresh fruit in New Zealand. Prices are “skyrocketing”, some say. Take milk powder, up from $165 for a 25kg bag last month to $190 this month. The cost of sugar and glucose has also gone up.

Added to that are the costs of frozen transport and the need for representation in foreign markets, making it difficult for Kiwi brands to compete with other high-end brands overseas.

Then there’s the Ministry for Primary Industries (MPI) itself. Ice cream makers say they need to “jump through hoops” to meet industry standards, which they claim are designed for large-scale manufacturers but too tough for small companies to afford.

Business owners say they would have to sign up for the “holy grail” of dairy exports, a risk management plan (RMP). One producer described it as “four large manuals of bureaucracy” aimed at businesses with large-scale production, such as Tip Top. One of the major costs is the need for regular visits from an RMP auditor.

“Every audit visit costs an average of $5000 for them to come for the day to look at your records and check what you’re doing,” one manufacturer says.

Those in the industry understand the need to keep incompetent people out of export markets to protect New Zealand’s brand and reputation, but say the costs are too high to encourage competent manufacturers to give it a go.

And MPI’s rules and regulations haven’t helped local business either, they say.

Manning used to do a brisk trade selling Lick This! ice cream to restaurants. “But then the rules changed when MPI got involved and categorised ice cream as a high-risk item like cheese.We all argued that it wasn’t high-risk because by its very nature it’s at minus 18 degrees.”

Manning even flew down to Wellington to argue the case. “But they weren’t prepared to move it into a sub category of its own.”

That re-categorisation made it much harder for ice cream manufacturers to wholesale because of the rigmarole they have to go through. The manufacturer needs to write a custom Food Control Plan (FCP) which is then checked by an independent auditor. The plan then needs to be verified through regular visits to the production premises.

“Those people don’t exist in Hawke’s Bay,” Manning says. “You have to fly them in so that becomes very expensive. So a lot of us pulled out of restaurants.”

And he points out that margins can be slim for ice cream makers. Not only is the product expensive and labour-intensive to make, but a third of the cost is in the packaging and nearly another third the labelling. So if an ice cream producer sells to a supermarket or restaurant, or exports, they don’t get the lion’s share of the profit. But if it melts and refreezes in transit, or before it hits a restaurant dessert menu, it’s the ice cream brand that suffers.

One Hawke’s Bay ice cream manufacturer says the company tried the export game but couldn’t compete on a global market. Vaughan Currie was Rush Munro’s general manager for almost three years before buying the business with his wife Sharon in October 2019.

During that time Currie worked alongside the then owner, the well-heeled Hawke’s Bay fruit and vegetable exporter John Bostock, looking closely at the export market.

They made a couple of attempts, sending containers of ice cream overseas but, says Currie, “we just couldn’t make it stick”. Not without compromising the quality of the recipe and brand, established by Frederick Rush Munro in 1926, he adds.

Currie points to the wide range of both local and imported brands, like Ben & Jerry’s and Haagen Dazs, on offer in New Zealand. The fact that premium foreign brands can be shipped to New Zealand and offered at a price supermarkets will accept is a good example of the competition Kiwi ice cream faces overseas, he says.

Imported ice cream on the rise

Import and export figures show that foreign ice cream manufacturers are gradually making inroads into the Kiwi market. In 2012, New Zealand exported 9.2 million kg of ice cream and imported just 3.2 million kg. By 2021, exports had risen to 11.8 million kg, but imported products had crept up to 8 million kg.

“When you can ship premium ice cream across from other markets and still deliver a competitive margin, I think it’s a fairly good indicator that we’re not as competitive,” Currie says.

However one South Island ice cream producer started exporting to Japan last year, spurred on by Covid-19 destroying some of their regular wholesale business. Brian and Linzi Thomas, and their business partner Anna Howard, bought Pure New Zealand ice cream in September 2018, supplying 140 supermarkets and distributing through Bidfood, which supplies the tourism and hospitality industry, scoop outlets, hospitals and even prisons.

When lockdowns hit hospitality, the Wanaka-based team were forced to rethink their sales strategy and look for new markets. They hooked up with pizza chain Domino’s so Pure New Zealand is offered on the menu, and sent several shipments to Japan last year.

Brian Thomas says the growth potential is “phenomenal”, given Japan’s population and that country’s growing demand for New Zealand dairy products.

“It’s a significant portion of our business and the potential to increase revenue is exponential. It all comes down to our ability to execute it at our end.”

If the company gets that right, Thomas can see the export market soon eclipsing the local wholesale business. He’s adamant that the company has not had to compromise on the quality of ingredients and the recipe has not been altered “one iota” for export. He advises others considering exporting to have confidence in the brand and know that people will pay for quality.

“There will always be a market for high quality food products which have health and wellbeing and lifestyle benefits.”

Pure New Zealand is benefitting from a trend in Japan to move away from the customary “micro-sized” tubs, some as small as 80ml, to larger take-home packs. The Japanese are not quite ready to stuff large tubs of ice cream in their freezers, but they will buy a 500ml pack. So the company designed a smaller tub with a tamper-evident lid and stylish labelling in Japanese.

Tip Top exports to seven markets but won’t say how much or whether sales are rising. Information requested by the Herald was deemed “commercially sensitive”. It’s the largest producer in New Zealand, making a whopping 55 million litres a year and it too benefited from increased sales in supermarkets during lockdowns, and the hot summer.

The company opened its first Tip Top Milk Bar in Wellington’s Manners St in 1935, selling ice cream and milkshakes. More than 80 years later, in 2019, global ice cream company Froneri bought Tip Top from Fonterra for $388m, which included $151m for goodwill.

At the time the company had generated $18m-$22m in earnings in 2018 – before interest and tax (EBIT) – on annual sales of $150m. But earnings don’t look quite so healthy now. Tip Top’s latest accounts show revenue in 2020 was $157.13m but with an after-tax loss of $7.67m.

Covid-19 and lockdowns weren’t great news for ice cream scoop outlets either. Vaughan and Sharon Currie had to close the Rush Munro Ice Cream Gardens in Hastings but say they have managed to hold their own thanks to a dream summer and plenty of domestic visitors.

Although the number of till orders is down by 10-15 per cent, the value of business has stayed the same. Vaughan Currie puts that down to larger groups, mostly families, coming in for a treat with money to spend after being stuck at home.

He’s optimistic about future growth, confident that scoops of maple and walnut, malted milk, and passionfruit ice cream will keep hitting the spot.

“If we can trade effectively flat during Covid we’re optimistic that we can experience a lift once the borders reopen.”

He was particularly chuffed to be voted the favourite ice cream shop by Herald readers in its Best of Summer 2022 poll and is keen to expand the brand to other centres – strictly within New Zealand.

Mr Whippy back on the streets

Sticking very much with Kiwi customers are the 26 Mr Whippy franchise holders operating more than 50 ice cream trucks throughout the country. The iconic soft-serve vanilla ice cream, with its array of confectionery toppings, has been a favourite on New Zealand streets since 1964.

With the price of petrol going up and competition on every corner from new ice cream parlours, the Mr Whippy drivers had increasingly relied on big events, school fairs, parties and festivals to make a decent snow-freeze living.

Then along came Covid-19, lockdowns and traffic light settings. With large gatherings forbidden, many of the Mr Whippy van owners have gone back to basics, driving streets with their customary Greensleeves tune playing. And the customers, stuck at home with their kids, have been lining up, albeit masked and socially distanced.

Mr Whippy franchisee Rebecca Russell, who used to work at events in her Hibiscus Coast patch, now patrols the suburbs, parks and beaches in her area. It’s a return to the original business model that saw barefoot Kiwi kids fly out of front doors when they heard the jingle. And she thinks bringing neighbours and beach-goers together has not been a bad thing.

“In terms of mental health, when just about everything else was closed down we were bringing a smile to people’s faces and getting them out of the house. I don’t think that can be underestimated.”

And there were other upsides to Covid hardships. Big logistic and freight companies, and warehouses staffed by essential workers, regularly hired the Mr Whippy vans pre-Christmas to hand out ice creams – all behind a plastic shield and with no money changing hands because the companies were footing the bill.

And then there were the vaccination centres. Get a jab, get a free ice cream – a strategy introduced by the Ministry of Health and South Seas Healthcare in Ōtara.

New owners happy with Mr Whippy

The Mr Whippy company was bought in October 2020 by a group of Kiwi investors, right in the thick of the pandemic but Nathan Brand, the company’s New Zealand director, says there are no regrets. Existing Mr Whippys have expanded their territories and new franchisees have come on board in the past few months.

“We have seen tremendous growth over the past year. It absolutely surprised me.”

However since the rapid increase of Covid-19 cases in the past fortnight, Mr Whippy franchise owners have reported a marked drop-off in business, including birthday parties and work functions.

A franchise territory costs around $40,000, which buys a five-year licence. A Mr Whippy truck can cost anywhere up to $150,000 but some newcomers will lease or borrow a truck until they get their business going.

Owners buy the “secret” Mr Whippy ice cream mix from head office and the decorative confectionery from a distribution company. Apart from a levy of about $150 to $200 a month to cover head office running marketing, Brand says each franchise owner runs their own business and keeps the profits.

Rebecca Russell has made a good living in her nine years as a Mr Whippy, but in the summer season she can do 14-hour days by the time she’s driven to the Hibiscus Coast, worked for eight hours, cleaned the van, restocked and dealt with admin. In summer it’s seven days a week. In the winter she might only work weekends.

“You have to make the money while the trade’s there,” she says. Since the rapid increase of Covid-19 cases in the past fortnight, Mr Whippy franchise owners have reported a marked drop off in business, including bookings for birthday parties and work functions.

Kiwis, it seems, are creatures of habit when it comes to their favourite ice cream. In past years Mr Whippy has introduced novelty options, including a Richie McCaw ice cream during one Rugby World Cup. The McCaw cone included two chocolate fingers as rugby posts, chocolate-covered almonds to represent rugby balls and a black wafer cone. It didn’t score – either with the customers or the Mr Whippys.

The chocolate biscuits and almonds melted so had to be kept in the fridge, meaning they took extra time to make. People had a laugh, Russell says, then said, “I’ll have a chocolate dip thanks”.

“It doesn’t matter what you put on the menu. Mr Whippy customers will have the same thing every single time.”

Would you like sprinkles with that?

Right now, Brand’s biggest problem is navigating a deeply political tussle going on within Mr Whippy – whether to use hundreds and thousands or rainbow sprinkles as a topping. Head office is trying valiantly to standardise the confectionery but didn’t count on the ingrained views on both sides. Hundreds and thousands roll off the ice cream, bounce around the van and are a nightmare to clean up. On the other hand, rainbow sprinkles stay firm but leach colour over the soft-serve ice cream. And neither side will give way.

Brand gives a watch-this-space laugh. He knows there are worse things he could be dealing with in the middle of a pandemic. Take fuel costs, particularly high for street cruising and running the truck all day to power the fridge and ice-cream machine.

Going electric is Brand’s project this year. He’s considering hybrid vans as an option and developing a battery pack that will run the ice cream operation for a day.He’s looking forward to the day when he can drive a fully electric Mr Whippy van into a shopping mall.

“Absolutely no emissions.”

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