Cold war puts Mars in a sticky situation: Nigel Cope reports on a heated ice-cream battle

DOWN at your corner shop it's getting hot and dirty. The latest incarnation of the long-running ice-cream wars, 'confectionery' ice-cream - Mars bars and the like turned into ice- cream - has arrived with a vengeance.

A market that did not exist four years ago, confectionery ice-cream is estimated to be worth more than pounds 150m a year, one of the fastest-growing areas in Britain's pounds 770m ice-cream sector.

Created by Mars, which was first with its Mars Bar creation in 1989, confectionery ice-cream enables chocolate companies to balance the seasonal fluctuations in their business - sales blossom in winter, only to melt away when the weather heats up. So far this summer, they have enjoyed a bonanza.

But what could have been a triumphant march for Mars has turned into a trench battle with the invasion this year by two rivals. Nestle, which bought the Lyons Maid business from Clarke Foods, the American company that collapsed into receivership last November, is setting about revitalising the brand. Walls, part of the giant Unilever group and producer of Magnum, Europe's best-selling ice-cream, has teamed up with Cadbury to produce ice-cream versions of its chocolate lines.

Worse than that, Mars is having difficulty even getting its players on the pitch. Walls, which has more than 60 per cent of the impulse market (lollies bought from shops) and Nestle's Lyons Maid (12 per cent) supply freezers free of charge to small retailers and corner shops on condition that they stock only their ice-cream in the cabinet. Mars cannot get a look-in.

The practice was referred to the Monopolies and Mergers Commission in May and a report is expected early next year. At stake is a European market worth an estimated pounds 4bn and dominated by Walls.

The squabble has helped to shake up what was a dull sector. Sales were flat and few product launches captured the public imagination. Then two things happened. In the take- home market the launch of premium brands like the erotically advertised Haagen-Dazs transformed the sector.

In the impulse sector, the Mars bar arrived. Ice-cream versions of Snickers, Milky Way and Bounty followed in 1990, then Twix this year.

Mars is backing its chocolate ice- creams with a pounds 9m advertising spend including a poster campaign featuring four brands - Mars, Bounty, Twix and Snickers.

Nestle is pushing an ice-cream version of the Milky Bar, backed by a pounds 2m television campaign featuring the Milky Bar Kid. Other Cadbury brands, including KitKat and Aero, could be transformed into ice-cream.

Walls so far only has one confectionery ice-cream brand - Cadbury's Dairy Milk, new this year. But it has the product that its rivals all covet, Magnum, a jumbo-sized confection covered in dark or white chocolate. At a premium price of 80p, Magnum is the biggest seller in Europe.

But the battle is now more about freezers than lollies. Manufacturers do not just supply freezers to newsagents and corner shops, they maintain and service them too. The shop just has to pay the electricity bill.

Mars says ice-cream merchandising is stuck in the 1930s and wants retailers to have one freezer stocked with the top sellers. 'We just want to compete.' says Bob Eagle, a spokesman. 'We're quite happy to lose sales to rivals if people prefer other manufacturers' products.'

Walls, not surprisingly, supports the current system, as does Nestle. Mars is stuck on the outside. 'Mars has got a bit of a problem,' says Clive Richardson, an analyst at the brokers Henderson Crosthwaite. 'If Mars had had access to the freezers earlier it could have made its position almost impenetrable. Now it is just another player.'

Walls has spent more than pounds 20m on freezer cabinets over the past 10 years. 'We have spent a lot of money on freezers so it is fair that only our products are sold in them,' says Michael Hebel, Walls ice-cream's marketing director. Hebel says that shopkeepers are free to buy their own freezers and stock them as they like. 'It's an open game.'

Who will win? With the European Commission looking at freezer deals as well as the MMC, it seems unlikely that the system will remain unchanged.

In the short term, what the ice- cream makers need is more of June's weather. Sales go up 7 per cent with every degree centigrade.

(Photograph omitted)