Ice cream chains to give McFlurry the deep freeze

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Two of the nation's most popular ice cream chains are gearing up for a frosty spring. International Dairy Queen and Friendly Ice Cream Corp. will defend their turf next year as McDonald's quietly expands distribution of a new soft-serve dessert.

Dairy Queen will spend up to $7 million on TV commercials this April to shelter Blizzard, its most profitable frozen treat. And Friendly, which built its reputation on hard-pack ice cream, is expected to dish up its first-ever soft-serve line.

The moves come as McDonald's continues to expand McFlurry, a blend of vanilla ice cream and candy, to its outlets. The dessert, first launched in Canada and introduced to U.S. franchisees last March as an optional menu item, is currently in 11,000 of the chain's 12,500 restaurants.

McFlurry could be launched nationally in 1999. That's big news for a company that hasn't seen a national product introduction since 1996, when it rolled out the ill-fated Arch Deluxe sandwich line.

While some McDonald's observers say they'd prefer a new national burger, company executives aren't complaining. "It's the greatest product since the Chicken McNugget," said an executive for a multiunit McDonald's franchise in Florida. "Customers are just eating it up."

And so are company executives. The dessert is a surprise hit. It's also reputed to be highly profitable and not labor-intensive. McFlurry is offered in a variety of "flavors." Customers can request a mix of soft vanilla ice cream with bits of Oreo cookies or Butterfinger, M&M's or Nestle Crunch candies. For the holidays, there's a peppermint candy version now in 6,000 restaurants. Initial ad support is via local TV and radio. The product has not yet been backed by national advertising, but a decision to support the product could come in early 1999.

McFlurry is a direct threat to Dairy Queen's Blizzard, a treat introduced in 1984 and now synonymous with the 5,000-unit chain. It's offered in three sizes and some 15 flavors, and priced between $1.59 and $3.59. McFlurry comes in two sizes, a 12-oz. size for $1.59 and a 16-oz. version for $1.99.

"We know McDonald's could potentially be a major threat to Dairy Queen if they launched a major campaign against the product," said Gary See, VP-marketing at Dairy Queen.

Mr. See boasted that Blizzard beat McFlurry in taste tests last summer staged by local newspapers. But DQ will have to work hard to protect its franchise given McDonald's huge advertising budget, he said. According to Competitive Media Reporting, Dairy Queen spent $27.5 million in measured media last year compared with McDonald's $598 million in spending.

"We don't have the kind of money to go up against McDonald's," he said. "We're going to have to continue marketing at the local level and make sure we put out the best possible product we can."

The chain's 1999 Blizzard campaign, via Grey Advertising, New York, launches in April with the theme, "Spring Chill Out," and will tout a flavor a week for several weeks. The campaign represents a 15% spending boost over last year, Mr. See said.

A spokeswoman for Friendly, meanwhile, confirmed it is "exploring" soft-serve ice-cream for next year, but declined to provide details. Friendly spent $14.6 million on measured media last year. Its agency is Margeotes/Fertitta & Partners, New York.

The chain attributes recent weak snack sales to its lack of soft-serve ice cream, and points to McFlurry as a threat, according to a report from NationsBanc Montgomery Securities. "It is somewhat disappointing that an ice cream-oriented chain like Friendly's has now concluded that it had a void in its product line," the report noted.

Copyright December 1998, Crain Communications Inc.

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