“We are acquisitive…and active in deals right now” – Glacier’s Matt Frost on Europe’s ice-cream market

Formed by the recent merger of Gelato d’Italia and Ysco, Glacier sees itself as a consolidator of the “fragmented” European ice-cream industry and has its eyes on further M&A.

Aside from building its €600m ($711.7m) revenue portfolio through deals for Gelato d’Italia and Ysco, Glacier has also recently moved for Giuntoli and Castel D’ario.

Backed by Davidson Kempner Capital Management and its partner Afendis Capital Management, the combined business is focused on private-label ice cream and co-manufacturing for branded producers.

Matt Frost: Our focus is to continue to build on the successes that already existed within both Gelato d’Italia and Ysco in a private-label and co-manufacturing setting. Retailers across Europe are keen for a new player in the market to continue to build on the legacy and heritage of those two businesses around innovation and also in terms of the high levels of efficiency and cost effectiveness that have existed in Ysco for a number of years. 

Branded isn’t something that we would consider at this point and I don’t think we will do for the foreseeable future. We’ll continue to do the good job that has been done but with additional investment in different formats and different technologies for the ever-changing tastes of consumers.

Matt Frost: Gelato d’Italia had a reputation in the industry – and retains that reputation – of being a strong innovator, focused on speed to market and agility. There’s quite a high level of churn in the ice-cream industry generally, from a range perspective. Our view was that to acquire a business with Gelato d’Italia’s reputation and capability around a number of formats was too good an opportunity. 

We knew that wasn’t going to be enough, based on what we’d heard and seen from market metrics, retail customers and co-manufacturing customers, so an opportunity arose within the Italian market to make another tactical acquisition in the water ice category, which was Giuntoli. We rolled that into Gelato d’Italia. 

Milcobel then brought Ysco to the market. That asset brought a very different opportunity, which was a highly efficient, highly automated, strong private-label business to put alongside a boutique business. 

They sat neatly together in terms of our long-time aspiration, which is to create a one-stop shop for private label and co-manufacturing requirements.  

Subsequently, we made another acquisition in Italy in May with Castel D’ario, so we now have five factories across Europe.  

Our plan will be to continue to invest in developing additional formats and technologies but also additional capacity to support an ice-cream industry, which I think is in good health.

Matt Frost: We have global aspirations and we have global customers but predominantly our focus now in terms of additional acquisitions is Europe unless the right thing comes along. We’re very open. We see organic and inorganic growth being linked and, depending on what we acquire, we’ll define what we look to invest in inside the current perimeters. 

Matt Frost: Very much so. I remember working with Richmond ice cream (now R&R Ice Cream) and they did a brilliant job of consolidating significant parts of the market. There is an opportunity for a second consolidator and I see us as very much part and parcel of that, primarily because it creates a level of efficiency in the industry that appeals to customers, particularly private-label customers.

Matt Frost: It’s been a funny couple of years for the deals market but where the ice-cream industry is at this moment – you’ve got two major players in Magnum and Froneri – it’s a very fragmented industry. 

It’s been a turbulent few years for ice cream as well given input costs and various other bits and pieces. Those smaller players are certainly looking for opportunities to either sell their businesses because they can see the market is going to become even tougher if you’re a relatively small operator or be involved in a platform where they can realise those synergies.  

From that perspective, there are deals to be done. And certainly we’re very active in deals right now.

Matt Frost: I would say so, based on all the indicators we see. That doesn’t detract from some brilliant emerging brands as well. A lot of those brands are looking for co-manufacturing opportunities as opposed to actually operating and owning factories in their own right.  

There will still be emerging brands coming through and developing the category but I think that will be done in a different way to where it’s been done historically.

Matt Frost: When you look at Magnum, the last number I saw was around €9.8bn and for Froneri somewhere around €3-4bn. We will come out of this year around €600m, so that gives you a pretty clear indication. 

I would say from a private-label and co-manufacturing perspective – a pure play, no brands – we would be one of the largest, if not the largest.

Matt Frost: The ice-cream market, I would say, is relatively supply constrained. It’s very difficult, and particularly for bigger retailers, to be able to exit a supplier and go and find that product from another supplier. There is not an excess of capacity in the market.

Matt Frost: The two major trends in ice cream are around snacking and premiumisation. 

During Covid, people were at home more and consequently had more occasions for take-home ice cream than they would have done previously. A lot of the innovation went into smaller portions, handheld, etc, etc, and those trends have held firm since Covid. 

Whether that’s a Magnum-style stick, that extruded art of ice cream has grown significantly. But, to a certain extent, when you’re consuming more, you can end up with a certain amount of fatigue, so different flavours, different technologies around double dip, in terms of the outer coating with a thin layer of caramel or whatever. People were looking for something different. We see that trend continuing in terms of premiumisation. 

On the flip side of that is smaller portion sizes, mini sticks, bite-size ice cream, Sharing, as opposed to the traditional scoops from a tub. There is still a market for that but people want something different. Taste still remains very important but they are looking for different formats as usage and attitudes change.

Matt Frost: ​​​​​​​The reality is, when you look at ice cream as a category, it is a very broad church. If you took a standard water ice product or even a very basic product, from a calorific and sugar perspective it stands up to the test when you compare that with other categories such as biscuits or whatever else. 

You can make healthy choices and we’re doing more real fruit pieces and various other bits and pieces from an innovation perspective. Non-dairy ice cream has been out there for a long time, it’s still relatively small, it’s in good growth but from a very low base. The benefit of having the supply chain that we have now is that we’re able to deliver on all of those things. 

At the right time of year, there are very few categories you can interchange with to get refreshments that are any healthier than the ice-cream category when you look at it from a calorific and sugar perspective. 

Matt Frost: ​​​​​​​In recent years, inflation, and particularly in terms of raw materials, energy, etc, etc, have been a challenge. Chocolate would be one of the biggest commodities that we buy on a year in, year out basis. 

Shareholders don’t like meteorological events as an excuse generally. There’s a number of ways you can de-risk that, obviously, by having a broader customer portfolio and we’ve done a lot of work in the last two to three years to make sure we don’t have all our eggs in one basket. But also the geographical spread of those is incredibly important as well. 

Whilst it might feel like it always rains in the UK, it didn’t last summer. It doesn’t rain everywhere and it’s not cold everywhere in Europe. Clearly, the more you diversify your customer portfolio and the geography that you serve, the more insulated you are against those risks.

Matt Frost: From a retailer perspective that would be the discount sector and pan-Europe as a result of that. Our biggest markets would be around Benelux because of where we’re based but we’re fairly represented in all the big markets: France, Spain, the UK, Italy and Germany.

Matt Frost: My belief is we can outpace it, certainly from a volume perspective. Private label is in good health and particularly given the macro trends from consumers trading into private label. We’ve seen a lot of that in the narrative coming out of all the retailers post-Christmas. At the moment, Magnum and co. do not operate in private label and I’m sure they won’t going forward either. 

We are naturally acquisitive at this point and consequently, as we acquire other businesses, we’re doing that because we need the additional capacity and the additional capacity is going to drive sales. We have been growing significantly ahead of that rate for the last three or four years and I’d expect us to continue to do that. Co-manufacturing is also definitely growing.