Is America's love of ice cream melting away? Unilever's break-up with Ben & Jerry's isn't the only sign.

By Zoe Han

Factors contributing to declining ice cream consumption may include climate change and a desire to avoid dairy products

Unilever is breaking up with ice cream. But it's not only the international conglomerate that is cooling on the sweet treat - it turns out that Americans have been slowly drifting away from ice cream over the past few decades.

The owner of many household brands, Unilever (UL) announced Tuesday that it's breaking off its ice cream business, which includes the supermarket staple Ben & Jerry's, and will shed 7,500 jobs. The company said separating the ice cream line will allow Unilever to become "a simpler, more focused company."

Also read: Unilever to cut 7,500 jobs and split off arm that makes Ben & Jerry's

But analysts also said part of the reason was that Unilever's ice cream products have not been selling well over the past year or so. Ben & Jerry's did not do well last fiscal year, nor did Unilever's two other ice cream brands, Magnum and Wall's. That could be because consumers were facing higher prices. Prices in Unilever's ice cream division were up 8.8% in the last fiscal year, while the volume of sales dipped by 6%, the company said in its latest earnings call in February. Unilever said it raised prices after input costs went up.

Unilever Chief Financial Officer Fernando Fernandez said that "it has been a very disappointing year for ice cream" when it comes to how consumers responded to the price hikes compared to other household items. Consumers have been opting instead for store brands following the price increase, he said. Researchers have pointed out in the past that ice cream is a product that people will buy less of when its price goes up.

Unilever did not immediately respond to a request for comment. The company has owned Ben & Jerry's for 24 years, and the separation could represent a "significant change," but Ben & Jerry's is "well-positioned to grow" its global company, a Ben & Jerry's spokesperson said in an email to MarketWatch.

It's also true that Americans have been eating less ice cream in the past few decades.

On a per capita basis, Americans ate 22 pounds of ice cream - including low-fat versions - in 2022, according to the latest data from the U.S. Department of Agriculture. That's down by about five pounds from 2000, when it was 27.5 pounds, and down by seven pounds from 1994, when it was 29.4 pounds - the highest personal intake since the ice cream consumption data became available in 1975.

One type of ice cream in particular seems to be losing its appeal: what the USDA calls "regular" ice cream, or the traditional kind made with full-fat milk. This is the type of ice cream that has been sold in your neighborhood ice cream parlor since your grandmother's time - it is sweet, creamy and contains full fat.

In 2022, Americans ate an average of 12.7 pounds of "regular" ice cream per capita, down from 18.2 pounds in 1975.

Why are Americans moving away from ice cream? Despite its recent price increases, Unilever itself has a theory - the summer is getting too hot; so hot that people are not buying ice cream, its former CFO Graeme Pitkethly told journalists in July 2023, when heat waves were making their way across Europe. "There's a sweet spot for temperature, " said Pitkethly. "When it gets too hot, people move away from ice cream and buy a cold drink instead."

While global summer temperatures broke records in the past few years, people may also be moving away from ice cream because they are gradually moving away from fat and dairy as a whole. A 2022 McKinsey report showed that many U.S. consumers said they were buying more premium ice cream brands for health-related reasons, because those brands often contain low-carb or low-fat ingredients.

Consumers, especially millennials, have also become increasingly interested in buying products that they feel align with their values, and for some, that means going dairy-free, McKinsey found. "Environmental, health, and animal-welfare concerns come together in shoppers' growing interest in dairy-free and plant-based yogurt and ice cream," the McKinsey researchers wrote.

However, Americans' consumption of low-fat and nonfat ice cream is relatively flat. Since 1975, consumption of alternatives has been hovering around 6.5 pounds a year per person, according to the USDA.

It could also be that people are eating less sugar, a 2023 analysis by USDA's Economic Research Service found. People have eaten fewer frozen dairy products over the past 20 years, which is in line with the downward trend of people eating less caloric sweeteners such as corn syrup, honey and sugar, ERS said. The consumption of those sweeteners went down from 150.9 pounds per capita in 2000 to 127.4 pounds in 2021, according to the USDA data.

But it may not entirely be the case that people have fallen out of love with ice cream, said Marion Nestle, a nutritionist and public health advocate as well as a professor of nutrition and food studies at New York University.

The U.S. is still up there among the countries that consume the most ice cream, according to McKinsey, and the market is growing roughly in line with the speed at which the economy grows - about 2% each year.

"Yes, consumption is down, but consumption of practically everything is down," Nestle told MarketWatch in an email. People feel stressed about the economy, and more people are taking Ozempic to lose weight, she added.

The company behind Ozempic, Novo Nordisk (NVO), told MarketWatch in an email that Ozempic is not approved for weight management, and pointed to another Novo Nordisk drug, Wegovy, which it said is "indicated to reduce excess body weight and maintain weight reduction long term."

People's belief that dairy products are not good for them could also potentially play a part in the decline of ice cream consumption, but it could also be related to something positive from a public health standpoint, Nestle said.

"Maybe the eat-less message has gotten out, finally," Nestle said. "If so, I hope whatever is getting substituted is healthier, at least."

We want to hear from readers who have stories to share about the effects of increasing costs and a changing economy. If you'd like to share your experience, write to readerstories@marketwatch.com. Please include your name and the best way to reach you. A reporter may be in touch.

-Zoe Han

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03-21-24 1257ET

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