Magnum Ice Cream

The Magnum Ice Cream Company delivered 4.9% organic sales growth for the second quarter and 4.7% for the first half, outpacing company-compiled consensus estimates. However, the results mark a deceleration from a comparable period last year, with shares trading roughly flat intraday on July 30.

Why it matters: Despite results coming in broadly above analysts' expectations, there are some concerning signals, including the deceleration in organic sales growth versus the 7% booked in the second quarter of 2025. Notably, volume growth in the Americas and AMEA both appeared flat, compared with 2% and 10%, respectively, in the second quarter of 2025. Management points to structural change in the US ice cream market: the large-format vanilla segment—widely used for toppings—is declining, while hand-held ice cream is gaining share, which is tilting sales growth toward price/mix rather than volume. China was affected by unfavorable weather. We believe TMICC's innovation and marketing engine has yet to prove its efficiency, but the strategic push to deliver new products faster and through the right channels is sound and should support execution toward reaffirmed full-year targets and beyond.

The bottom line: We confirm our per share fair value estimates of EUR 17/GBX 1,480/$19.80 for wide-moat TMICC. The stock has gained close to 22% year to date, reaching 3-star territory, as we view shares as fairly valued at current levels. We think TMICC's leading market position, execution focus, and strong presence in the away-from-home channel—particularly in emerging markets—should support a long-term growth runway above the broader ice cream market.

Coming up: Adjusted operating profitability remains pressured by transitional service agreements with Unilever following the separation, but we expect these headwinds to ease in the second half. Favorable cocoa price phasing should also support margin expansion.

We value TMICC's New York-traded shares at $19.80 per share. Our valuation implies an enterprise value/2025 adjusted EBITDA of 10 times.

The global ice cream market is set to deliver modest 1.5% volume growth and 2.4% price growth annually over the next five years, according to Euromonitor estimates. We forecast average organic sales growth of around 4% over the next decade, slightly above market growth, supported by a few drivers, including: the step-up in advertising investment, more focus with a dedicated sales team and category-specific trade terms, and management’s continuous emphasis on innovation that creates new consumption occasions and expands channel reach. We expect a balanced contribution from price and volume. Productivity enhancement initiatives in the supply chain should drive gradual gross margin expansion. Overall, we model around 50 basis points of annual average gross margin expansion in the 2026-30 period, normalizing afterward. On the adjusted EBITDA margin side, we model about a 40-basis-point annual improvement over the same period, driven by additional overhead efficiencies announced by the company, which we expect to be offset by investments in advertising and promotions.

Over our explicit forecast, we expect the contribution from markets in Asia to increase from 25% in 2024 to around 31% of sales in 2035, driven by volume-based expansion into Asian markets and the inclusion of India’s business in the perimeter in 2026. We view expansion in emerging markets as an important, but achievable, pillar of our thesis. It is supported by substantially lower ice cream consumption penetration compared with developed markets, at around 0.6 liters per capita for India and 11 liters per capita on average for countries such as the US, UK, Australia, Germany, and Sweden, based on the company’s analysis.

We use an 8.2% cost of capital and assume a 3.5% Stage II EBI growth rate. We think this is appropriate considering the company’s geographic footprint and our expectation that faster-growing emerging markets should account for a slightly higher share of sales toward the end of our explicit forecast.

We believe The Magnum Ice Cream Company has dug a wide economic moat based on intangible assets in the form of brand strength and entrenched retailer relationships, which have, in turn, contributed to a cost advantage. According to carve-out financial statements, this has resulted in returns on invested capital averaging 26% over the last three years, while we expect ROIC to be around 18% in the midcycle (due to capital investment in operational efficiencies and brand equity), which comfortably exceeds our estimated cost of capital of 8.2%.

For ice cream, we believe brands matter compared with some other packaged food categories, as purchases are often impulse-driven, tied to affordable indulgence, and novelty-seeking, and frequently consumed away from home. This explains why global private-label share in ice cream only edged down from 10.5% in 2016 to 10.3% in 2026, unlike dairy and baked goods, where private-label now exceeds 50% in North America and Western Europe. TMICC’s portfolio is concentrated (77% of sales) in the premium range, while the existing private-label competition comes from low-price-point, simple formats. TMICC allocates 13%-14% of sales to R&D and advertising—above the high-single-digit average for packaged food peers—and leverages that spending across regions. Continuous innovation in formats and pack sizes helps TMICC tap into new snacking occasions and scale successful regional campaigns globally, supporting its branded portfolio.

TMICC holds a portfolio of global brands and regional subbrands (90% of which are owned rather than licensed, allowing for control over brand positioning); it owns four of the six largest global ice cream brands—with the largest—Magnum and Ben & Jerry’s together generating close to EUR 3 billion in sales. Under the Heartbrand, the company operates around 30 brands; many share the same heart-shaped logo and use local names, reinforcing a unified global brand image, but with local relevance.

TMICC is the market leader with around 21% global market share based on Euromonitor data in 2026. By region, TMICC holds a leading 37% market share in Western Europe, 21% share in North America, 10% in Eastern Europe, 11% in Asia-Pacific, and 8% in the Middle East and Africa. TMICC’s global market share is around twice that of the next competitor, Froneri. The company’s dominant market share is evidenced also by our stock-keeping-unit-level analysis, which confirms that shelf space roughly tracks market share. For instance, Albert Heijn, the largest Dutch grocer, offers around 100 TMICC products, implying a minimum of 40% shelf space share. Similarly, the implied shelf space is 31% at Tesco and 15% at Walmart in the US.

The ice cream market is more concentrated than the broader global packaged food industry, although concentration levels vary by region. Globally, the Herfindahl-Hirschman Index is around 460, indicating low concentration, but in North America and Western Europe—TMICC’s largest markets—concentration is materially higher, as industry structure favors consolidation and strong brands.

We believe global scale is important in the ice cream industry and, sometimes, is an existential factor for smaller ice cream makers. The TMICC’s network of 30 production sites globally grants it the ability to attain bulk procurement and use a diversified hedging strategy for main raw materials. Lower per-unit manufacturing and distribution costs compared with smaller peers allow it to maintain a complex cold supply chain requiring products to be kept at stable temperatures of close to minus 18 C° (International Dairy Foods Association) at every stage from factory to retail freezer. The global nature of TMICC's business supports operating margin viability throughout the change in seasons, while smaller players sometimes find a fixed-cost base unbearable when demand materially lowers. Another benefit is reflected in the high density of its 3 million freezer cabinets fleet (representing 30% of ice cream freezers worldwide—based on the company’s estimate), allowing for high route density and lower unit logistics costs, evidenced by superior operating margins in Asia, the Middle East, and Africa.

Scale and strong brands reinforce relationships with retailers, as limited freezer shelf space is assigned to established vendors with a track record of assortment-driven, margin-accretive innovation while being able to replenish stock punctually.

Large freezer fleet backs TMICC’s lucrative away-from-home channel across many small and midsize retail locations, enabling the company to gain market penetration and respond to impulse-driven demand while charging markups to grocer prices. The away-from-home channel represents 40% of global revenue.

That said, we see substantial room for further improvement in operations in the future, given that TMICC’s 2024 operating margin was below that of the second-biggest player, Froneri, which more than doubled its operating margin, from 7% in 2020 to 14.7% in 2024, gaining efficiencies in operations, enabled by scale and strategic focus. With TMICC embarking on a similar productivity drive and focus, emerging as a stand-alone business, we see no structural reason why TMICC should not be able to match or surpass Froneri’s operating margin over time.

TMICC faces a structural risk from healthier eating habits and rising GLP-1 use, though evidence to date suggests the impact is manageable. Cornell University research puts GLP-1 penetration at 8%-10% of the US population versus below 1% in Europe, translating into only a 0.5% drag on US food demand by 2030. Ice cream's occasional, indulgent nature also insulates it as a treat-led category. TMICC’s acquisition of Yasso (high-protein, low-calorie) and a broader offering of lower-calorie, water-based, and smaller-format products (Magnum Bon Bon, Solero Bon Bon, Ben & Jerry's bites and sticks) should all support its solid position within the new health trends category.

TMICC’s brand portfolio is skewed toward premium, where indulgence and innovation are key purchase drivers and help insulate the business from private-label competition.

Long-standing relationships with leading global retailers, supported by robust manufacturing and distribution, translate into superior positioning in limited shelf space versus smaller, less-established brands.

TMICC has above-market margin and growth runway driven by its leading away-from-home presence and strong positions in underpenetrated, high-growth markets across Asia and South America.

Ice cream is a low underlying growth category, which faces potential consumption headwinds related to GLP-1.

TMICC’s intention to come back to club retailers in the US might put pressure on gross margins.

The ongoing dispute about Ben and Jerry’s might weigh on sales and share price performance due to reputational damage.