In Ice Cream Sales, No Sign of a Double Dip

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The Benito Belly Buster is back. The Royal Scoop Homemade Ice Cream shop in Benito Springs, Fla., took the 15-scoop, six-topping, three-bananas-and-a-mound-of-whipped-cream mega-dessert off its menu five years ago after orders dwindled. But with ice cream sales rising recently — this May's were 20% better than they were in May 2009 — and temperatures doing the same, owner Dave Zimmermann started offering the Belly Buster again last week. Call it an economic taste test. No one has bellied up and ordered one yet, but he's hopeful he will soon sell some of the $34.99 ice cream platters. "It doesn't seem like people are holding back on the culinary treats as a result of economic challenges," says Zimmermann.

While continued high unemployment is making economists nervous about the possibility of a double-dip recession, there appears to be no recession in the business of double dips. Official tallies in the ice cream business are hard to come by, but anecdotally, the ice cream market appears to be hot. Shop owners around the U.S. say they are packing more cups and cones this summer than last. What's more, the number of customers asking for a double dip, or two scoops, seems as high as ever.

Lynda Utterback of the National Ice Cream Retailers Association says numerous members have told her their sales are up 25% from a year ago. Dutch consumer-products firm Unilever, which sells ice cream brands Ben & Jerry's, Breyer's, Good Humor and Klondike in supermarkets, reported that its first-quarter ice cream and beverage sales rose 7.4%. "Looks like people are turning to ice cream in a big way this summer," says Harold Waxman, who owns industry newsletter Ice Cream Reporter. "When things are hard, ice cream is a relatively inexpensive way to feel good."

Still, some ice cream companies are adapting to tougher economic times. Soft-serve chain Dairy Queen recently began offering a mini version of its popular Blizzard dessert, which is a blend of toppings and ice cream. The new size is about 6.5 oz., vs. 12 oz. for a small Blizzard and 21 oz. for a large. "We are responding to two significant consumer interests — value and portion control," says Michael Keller, Dairy Queen's chief brand officer. "I don't think people are trading out of ice cream." The mini costs $1.99 to $2.49, depending on location. (A small averages $3.09.)

Even before the economy softened, frozen treats were no easy business to play in. Most "dip shops" remain small mom-and-pop operations, but corporations and private-equity firms have swallowed up the chains, with varying degrees of success. Warren Buffett's Berkshire Hathaway, for instance, owns Dairy Queen. In mid-2007, private-equity firm Sun Capital Partners bought ice cream chain Friendly's for $337 million. NexCen Brands, which franchises the superpremium MaggieMoos and Marble Slab Creamery ice cream shops, earlier this year told its investors that its cash and financial health "raise substantial doubt about our ability to continue as a going concern." In mid-May, the company struck a deal to sell those franchises and others to a private-equity firm.

But for the most part, it's been a good recession for ice cream makers and sellers. Market-research firm Packaged Goods estimates ice cream sales in supermarkets and scoop shops rose 1.1% last year, to $14.5 billion. And recent moves by ice cream companies suggest they see a sweeter future. Executives at Häagen-Dazs, which is owned by a subsidiary of food giant Nestlé, have taken advantage of falling commercial rents. In the past two years, the company has opened more than 50 stores, boosting its outlets more than 20% and expanding aggressively into malls for the first time. Late last year, Baskin-Robbins introduced the Double Header, the first cone "designed to hold a swirl of soft-serve and a scoop of ice cream" side by side.

Top economic forecaster Mark Zandi of Moody's says discretionary spending is typically a good measure of where the economy is headed. But he cautions against reading too much into the dessert market, which can be propelled by economic stress. "Ice cream sales could be a beneficiary of trading down," says Zandi. "People still want to treat themselves, and this is a pretty easy one to afford."

Nonetheless, Zandi is not predicting an economic double dip, which is when a recovery falls back into recession. While he believes the unemployment rate could rise again, Zandi says the economy will continue to grow in the second half of the year, probably around 2%. "The risk of a double dip is rising, but I still think it is less than even," he says.

At Doumar's in Norfolk, Va., which serves 300 cones a day, customer counts are up 3% this summer. Thad Doumar, whose family claims to have invented the ice cream cone at the 1904 World's Fair in St. Louis, says even if the economy freezes up this summer, he expects his sales to remain strong. "When people feel nervous, they eat more ice cream," says Doumar. "I'm in the value business."