Ice cream 'licker shock' hits industry

Already staggering from sticker shock at the gas pump, consumers may suffer "licker shock" at the ice cream stand this summer when they see some of the industry's biggest price hikes ever.

Blame it on bad timing. A combination of political unrest and natural disasters overseas, and fluctuations in the dairy industry in this country has left ice cream manufacturers grappling with higher prices for key ingredients including milk, vanilla and cocoa.

"I have been in this industry for nearly 20 years and I have never seen all of these things come together at one time," said Lynda Utterback, executive director of the National Ice Cream Retailers Association.

Although large manufacturers can absorb some of the higher production costs, consumers can still expect to pay more for everything from pints in the grocery store to cones at the stand and push-pops off the truck.

How much more? Estimates vary from 6 percent to as much as 20 percent or more, depending on region and product.

A pint of Ben & Jerry's is going up 8 percent, the most in the company's 26 years. Klondike bars will cost 10 cents more per multipack, according to manufacturer Good Humor-Breyers Ice Cream.

The rising prices also are accelerating a recent trend - companies shrinking packages but keeping prices the same in what effectively is a net price increase. In January, Wilbraham, Mass.-based Friendly's rolled out its 56-ounce half-gallon tub - down from the standard 64 ounces - and this month increased its retail prices by 5 percent.

Retail and restaurant ice cream make up a $20 billion business in the United States, where nearly 1.6 billion gallons are produced each year, according to Bob Yonkers, chief economist for the International Dairy Foods Association.

The average person eats 26 servings of ice cream a year, according to The NPD Group, a market research firm.

Until recently, the price of ice cream was moderated by a glut of milk. But low prices drove many farmers from the industry, and those who remain have fewer cattle following a mad cow-induced ban on importing them from Canada.

This year, demand is up and farmers can't keep pace. That's driving up the cost of the milk and butterfat needed to make ice cream, Yonkers said.

The industry also is squeezed by vanilla prices, Utterback said. A series of cyclones that hit Madagascar in recent years damaged much of the vanilla crop, driving the price per gallon for vanilla syrup from $75 to between $400 and $800.

And cocoa prices are up about $1 a pound because political unrest in the Ivory Coast - where roughly 40 percent of the world's cocoa crop is grown - drove many farmers from their lands, she said. The jump in prices is the highest in 17 years.

Many in the ice cream industry have some consolation in the fact that it's early in the season, and therefore easier to post higher prices than it would be during the summer.

"Once it's out on the street it's very, very hard to raise prices. A child comes out one day and it's $1. The next day it's $1.25. That just doesn't work," said Steve Feldman, owner of Houston-based Southern Ice Cream Corp.

Utterback is optimistic about sales. She said ice cream generally is protected by the comfort food factor - when the economy is bad, ice cream sales go up.

Although the price increase is painful, some manufacturers say dairy farmers are long overdue for a break.

"Obviously we're concerned, but our main concern is for the small family farms and making sure they can make a livable wage," said Chrystie Heimert, spokeswoman for Ben & Jerry's.

But people like Nick Nikbakht, owner of San Jose, Calif.-based Golden State Ice Cream, wonder how long they can hold on. His company supplies ice cream to those iconic trucks that jingle their way through neighborhoods

He said he can't pass on the price increase to the trucks' owners, who also are feeling pinched by gas prices.

"The bottom line is they will not like it and they will just complain a lot and they won't be able to absorb all the increases," Nikbakht said. "We have to absorb it and hope the price will stabilize."

So what's an ice cream lover facing a long hot summer to do? Debbie Carpenter, a Concord, N.H., woman who recently treated her 4-year-old son to an ice cream at Arnie's, said the prices mean choosing where, not whether.

"It's ridiculous," she said. "You can go to the market and buy a half-gallon for the same price as a small (cone)."