Oligopoly Market

Ice Cream and Oligopoly The concept of an oligopoly market in economics means that there are few top sellers of a certain product, as opposed to many competitive companies. These sellers are generally in high competition with each other, but have tremendous power in pushing their products to consumers. Because there are few sellers in the market, they tend to be hyper- aware of each other and have a high level of interactivity, and therefore require the necessity of strategic planning.

When one seller makes a change, it will directly affect the others in the market, thereby affecting the competition in some noticeable way. This can be likened to a water balloon- when you push one side in, the other sides expand to accompany the change and maintain homeostasis. Similarly, all sellers in an oligopoly market are directly affected when one makes a strategic change. In this article, an oligopoly market is demonstrated by identifying the five national brands that dominate the eaten-at-home ice cream industry.

This means that even though there are many smaller, privately owned brands of ice cream that are consumed by people in local restaurants and stores, for the rest of ice cream consumers that eat theirs in the comfort of their home, 80% will come from these five sellers, making it an oligopoly market. Furthermore, these five sellers will soon become two overarching companies who will control the market, as Unilever owns three and Nestle owns two.

The article describes how Nestle will likely come into tight competition with Unilever by buying out Dreyer's ice cream company in the near future, thereby having a similar 17% consumer's market to Unilever. This will mean that Nestle will be able to expand its current market to include all the ice cream vendors that Dreyer's had been using until now, and expand its current ownership to become an "ice cream leader" such as Unilever.

Because both Dreyer's/Nestle and Unilever have much higher profit margins than smaller brands, they are able to afford even further distribution tactics and marketing ploys such as logo covered freezers for their products. The main factors that will shape the competition in this oligopoly include the products that Nestle has had until now, as well as the edge it will get by buying out Dreyer's.

For example, if Nestle will utilize all the business connections that Dreyer's already has in place, it will increase its profit margins tremendously with little effort. The FTC settlement has already allowed Nestle to keep Dreyer's distribution network, which delivers ice cream to more than 85% of U.S. grocers, gas stations and cinemas; This alone will likely impact Unilever's actions by directly causing a higher competitive edge than either Nestle or Dreyer's had alone before.

Furthermore, the fact that Nestle has pre-existing status in stores for its candy line will likely maximize the new company's sales if they create new ice cream products using the already recognized candy. A new product with an old familiar name will mean more.