The Ice Cream Industry: An Overview

In 2007, the global market of ice creams was pegged at $61.6 billion in terms of retail value or 15 billion liters in terms of volume. Of this, the AsiaPacific ice cream market was worth $13 billion in terms of retail value and 5,128 million liters in terms of volume. Coming to India, the Indian ice cream industry is currently estimated to be worth Rs. 2,000 crores, growing at a rate of approximately 12%. Mr. Sodhi, Chief General Manager of Gujarat Co-operative Milk Marketing (GCMMF), the makers of Amul, explains, The ice cream market in India can be divided into: the branded market and the grey market. The branded market at present is 100 million liters per annum valued at Rs. 800 crores. The grey market consists of small local players and cottage industry players. In 2008-09, in the branded ice cream market, Amul held the number one spot, with a market share or 38%, followed by Kwality Walls at 14%, Vadilal at 12% and Mother Diary at 8%. Despite a decent growth rate, the ice cream industry faces the challenge of low per capita consumption. The ice cream industry in India is worth Rs. 2,000 crores The industry can be divided into the branded market and the unbranded market. The branded market at present is 100 million liters per annum valued at Rs. 800 crores. In 2008-09, in the branded ice cream market, Amul held the number one spot,

with a market share or 38%, followed by Kwality Walls at 14%, Vadilal at 12% and Mother Diary at 8% The per capita consumption of ice cream in India is approximately 300 ml, as against the world average of 2.3 liters per annum Vanilla, Strawberry and Chocolate together constitute approximately 60% of the market. The per capita consumption of ice creams in India is just 300 ml per annum, compared to 22 liters in the US, 18 liters in Australia, 14 liters in Sweden. India is a way too far behind even in terms of the world average per capita ice cream consumption of 2.3 liters per annum. Pankaj Chaturvedi, Executive Director of Baskin Robins, explains Indian cuisine has a huge range of desserts in its mix. Ice cream always competes against these for attention. Besides desserts, ice cream also vies for attention with other like foods for example in summers with cold drinks, coffee, juice, etc. Another trend that is witnessing a change is the seasonal nature of the industry. Having said that, the peak season for ice cream still remains the summer months of April-June and dips in the months of November-February. According to the industry players, this trend especially holds true for the North and the Western parts of India. According to Pankaj Chaturvedi, The variation in sales for Baskin Robins can range from 15 30% from season to off season depending on geography and brand.

Ice cream parlor

Ice cream parlors are places that sell ice cream and frozen yogurt to consumers. Ice cream is normally sold in two varieties in these stores: soft-serve ice cream (normally with just chocolate, vanilla, and "twist", a mix of the two), and hardpacked, which has an assortment of flavors, as well as frozen yogurt, which is a low-fat alternative and tastes slightly different from ice cream. Ice cream and frozen yogurt are sold in ice cream cones, sundaes, and milkshakes. Some parlors may also sell gelato, ice cream cakes, and ice cream bars at these places. In addition to ice cream and frozen yogurt, ice cream parlors may even sell a variety of hot foods. While parlors remain open all year round in warmer weather locations, most parlors are open during warmer months, particularly from March to November, in colder weather locations, though some do stay open year round. Parlors vary from having an order-up window with outside seating to an entire indoor location.

Master franchising:
A master franchise is a person or entity that provides services to franchisees in a specified territory, typically a major market, geographical region or even one or more countries. Master franchising is a method that has been employed by most franchise systems. The operational efficiency of these systems, with their distinctly complex organizational form, benefits from increased growth rates.

In general, a franchise solves geographic concerns raised by companies and enables their product to be dispersed in more outlets, in more regions. In doing so, it allows the company to retain the economies of a large chain. Generally, a master franchisor will grant the master franchisee, or sub franchisor, the right to third-party operations within a defined territory. And then, with respect to regional issues, the sub franchisor will assume the role of the franchisor, but they typically will not own or operate the franchise. Other benefits include faster development, a more comprehensive financial base, specific expansion plans, capital and a regular cash flow, proximity to the customer, some independence, and the ability to address the demands of the customers as well as address the local competition. Although master franchising can beneficial and advantageous, there are also setbacks. Setbacks can include legal problems and overly long contracts. One specific setback of master franchises is that they raise agency costs. Franchise agreements are needed to codify the enforcement of behavior. But, because all aspects of the franchise cannot be predicted, this requirement raises the opportunity for franchise shirking while reducing the overall ability to monitor all aspects of the franchise. Thus, some scholar hypothesize that "new franchise systems which employ master franchising are more likely to fail than are other new franchise systems. Generally, master franchises are the organizational structure for domestic cleaners, fast food restaurants, computer equipment, real estate agencies, and convenience food stores.

Baskin-Robbins:
Baskin-Robbins is a global chain of ice cream parlors founded by Burt Baskin and Irv Robbins in 1945, from the merging of their respective ice cream parlors, in Glendale, California. It claims to be the world's largest ice cream franchise with more than 5,800 locations, 2,800 of which are located in the United States. Baskin-Robbins sells ice cream in over 30 countries, including Canada, Japan, Mexico, The Dominican Republic, Bahrain, The United Kingdom, the United Arab Emirates, Egypt, Saudi Arabia, Australia, the Philippines, Thailand, Indonesia, Malaysia, China, Bangladesh, South Korea, India, Sri Lanka, Pakistan, Panama and Taiwan. The Baskin-Robbins ice cream parlors started as separate ventures from Burt Baskin and Irv Robbins, owning Burt's Ice Cream Shop and Snowbird Ice Cream respectively. Snowbird Ice Cream featured 21 flavors, a novel concept for the time. When the separate companies merged in 1953, this concept grew to 31 flavors. Baskin-Robbins is known for its "31 flavors" slogan. The idea for having 31 flavors came from the Carson-Roberts advertising agency in 1953, along with the slogan "Count the Flavors. Where flavor counts." 31 was also more than the 28 flavors then famously offered at Howard Johnson's restaurants.

Criticism
Baskin-Robbins has been criticized for selling shakes with an extremely high calorie amount. For instance the Baskin-Robbins Large (32oz) Heath Bar Shake has
y y y

2,310 Calories 108 g Fat (64 g Saturated) 266 g Sugar

Administrative divisions of Baskin Robbins in India: States:

1. Andhra Pradesh 2. Arunachal Pradesh 3. Assam 4. Bihar 5. Chhattisgarh 6. Goa 7. Gujarat 8. Haryana 9. Himachal Pradesh 10. Jammu and Kashmir 11. Jharkhand 12. Karnataka 13. Kerala

15. Maharashtra 16. Manipur 17. Meghalaya 18. Mizoram 19. Nagaland 20. Orissa 21. West Bengal 22. Rajasthan 23. Sikkim 24. Tamil Nadu 25. Tripura 26. Uttar Pradesh 27. Uttarakhand
28. Punjab

Union Territories:
A. Andaman and Nicobar Islands B. Chandigarh C. Dadra and Nagar Haveli D. Daman and Diu E. Lakshadweep F. National Capital Territory of Delhi
G. Pondicherry

Baskin Robbins Store (Sector 17-C Chandigarh) Facts and Figure

Walk-in at store every day: 250-300 Estimated daily sales: 14000-15000 Average sales: 9000-11000 Highest sales (day wise):26000 Lowest sales(day wise):6000_7000 Number of stores in Chandigarh :4 stores Number of stores in Panchkula : 1stores Number of stores in Mohali:1 stores Number of stores in Mani Majra :1 stores Next week there will be Price Revision of ice cream. The last Price revision was done before 2 years. 31% off on every ice cream at the last day of each month.

Baskin Robbins Store (Sector 20 Panchkula) Facts and Figure:

Walking at store every day: 40-50 Estimated daily sales: 9000-10000 Average sales: 7000-8000 Highest sales (day wise):14000 Lowest sales(day wise):6000

Offer: Buy 2 get one free(half Liter scoop@ 210 only) WFL Cone price is Rs 10 each.

Current Market Share of Ice Cream Players:

COMPANY NAME Amul Kwality Wall's

MARKET SHARE 38% 14%

Vadilal Mother Dairy Cream Bell Arun others

12% 8% 6% 4% 18%

Number of Players (organized):

Kwality Wall's Mother Dairy Vadilal Amul Nirulas Baskin Robbins Cream Bell

The Ice Cream Business

The ice cream industry has traditionally grown at a healthy rate of 12% year-onyear. The growth in Ice cream industry has been primarily due to strengthening of distribution network and cold chain infrastructure. Channels such as Mobile Vending Units have been increasing year on year to reach out to a larger set of consumers. Besides, consumers also have the choice of trying out varied product offerings from different brands to keep them excited, What exactly is defined as ice cream under the guidelines? The Prevention of Food Adulteration (PFA) Rules, 1955 define ice cream as a frozen product that contains not less than 10% milk fat, 3.5% protein, 36.0% total solids, and 0.5% permitted stabilizer and emulsifier. Players who deviate from these norms tactfully call their product "frozen dessert.

Brands Include Within Ice Cream: Economy Brands

y y y y

Fat content, usually legal minimum, e.g., 10% Total solids, usually legal minimum, e.g., 36% Overrun, usually legal maximum, ~120% Cost, low

Standard Brands
y y y y

Fat content, 10-12% Total solids, 36-38% Overrun, 100-120% Cost, average

Premium Brands
y y y y

Fat content, 12-15% Total solids, 38-40% Overrun, 60-90% Cost, higher than average

Super-premium Brands
y y y

Fat content, 15-18% Total solids, >40% Overrun, 25-50%

Manufacturing Process:
The basic steps in the manufacturing of ice cream are generally first blending the ingredients, pasteurization, and homogenization, aging the mix, freezing, and hardening. Now, during the hardening process, the ice cream mixture is incorporated with air. This is done to make the product light and creamy . This is necessary as without air, ice cream would be like frozen ice. Now the ice cream can contain a considerable quantity of air, even up to half of its volume. This perhaps makes ice cream a business with high profit margin. Blending of the mix ingredients Pasteurization Homogenization Aging the mix Freezing Packaging

An ice cream mix (consisting of milk, emulsifier, and sugar and so on) costs about Rs. 60-65 a liter. And in one liter you can add up to one liter of air. Therefore, per liter the mix would cost you approximately Rs 32. If you take a 150 ml cup, you can make 13 cups of ice cream from one liter of mixture. Calculating the per cup costing comes to about Rs 5. Now add to that Rs 5 worth of packaging cost, electricity, labor, transportation, advertisement cost etc. It comes to approximately Rs 10 per cup. Depending on the variety, the profit margin

therefore can go up to even 100%. While for bigger players, the distribution and advertising costs eats into the profit margins, for smaller players, it is the volumes that matter.

Mix Calculation of ice cream Milk solids-not-fat (SNF, or sometimes also called serum solids, S.S.), supplied by any of the following:
y y y y y

Skim powder (which also supplies water, about 3%) Condensed skim (which also supplies water) Condensed milk (which also supplies water and fat) Sweetened condensed (which also supplies water and sugar) Whey powder (which also supplies water)

In standardizing mixes, the composition of the various ingredients used must be known. In some cases the percentage of solids contained in a product is taken as constant, while in others the composition must be obtained by analysis. Information on the various ingredients is given below: (a) Skim milk - can be determined by analysis or assumed at 9 percent serum solids. Fat (0.01% - 0.10%) should be taken into account if significant.

(b) Dried products, e.g. skim milk powder, whey powder, WPC, milk powder blends, usually taken to be 97 percent solids as they retain some moisture. (c) Cream - Percent fat usually measured by an acceptable method. Percent MSNF found by formula as follows: (100 - percent fat) x .09 = % snf (assuming that the "skim milk" contains 9% total solids). (d) Milk - Percent fat measured by an acceptable method. (e) Condensed Milk Products - Composition of these products should be obtained by the supplier. (f) Sweeteners - Sucrose - Dry 100% solids Sucrose - Liquid 66% solids Dextrose - Dry 100% solids Corn Syrup Solids 100% solids Corn Syrup Liquid 80% solids Glucose 80% solids Honey 80% solids

(g) Egg Products - Fresh whole eggs: 10% fat, 25% solids Fresh egg yolk: 33% fat, 50% solids frozen egg yolk: 33% fat, 50% solids dried egg yolk: 60% fat, 100% solids

Growth Factor of Ice Cream Company:

The ice cream industry growth has been primarily due to strengthening of distribution network and cold chain infrastructure. Channels such as mobile vending units have been increasing year-on-year. Besides selling their products through kiosks, parlors and push carts, a significant part of the revenue comes from corporate sales. Says Pankaj Chaturvedi, About 55% of our business is contributed by exclusive ice cream parlors and kiosks while 30% is from corporate or food service sales. The rest comes in from retail and exports. The demand, he informs, goes up to 10 gallons during peak season.

Costing Of Plant Setting:

The cost for setting up a small scale ice cream plant could come to approximately Rs. 10 lakh, including the cost of an ice cream plant, labor (3-4), storage freezers, and so on. This price is not including the land cost. Of late, a number of players who have entered the segment are playing on innovative aspects, for example, natural flavors made from fruits. Some players like Mumbai-based Space Dots are also coming up with newer technology.

The Challenges
There are several challenges that affect the industry adversely. As mentioned earlier, the industry players not only face competition from their competitors, but also from other like foods. Though changing, consumers still consider ice cream as a dessert and a side item. Sharing his experience, we observed that consumers ordered ice creams as a side item or only when they were accompanied by children. We eventually decided not to move ahead with it. Moreover, of the ice cream consumption in India, nearly 60% is accounted to by three flavors of vanilla, strawberry and chocolate. And to be on the safer side, major players tend play around these flavors only. For big players, regional competition from smaller players is another major issue. Another major problem faced by the industry players, especially while expansion, is poor infrastructure such lack of cold storage and in case of rural penetration, even erratic power supply becomes an issue. This is especially true for big players Manish Vithalani says, Besides the presence of other players, another hurdle is the high rent charged for floor space, especially in malls. This also becomes a problem when we try to expand.

Market growth
The ice cream market growth picked up after de-reservation of the sector in 1997. Of the total size of Rs 15-16 billion, around 30-32% is in the hands of organized sector valued at Rs 4.9 billion, rest all is with the unorganized sector. Among the major players in this industry Hindustan Lever has a market share of around 50%, represented mainly by Kwality Walls brand. Amul with an estimated market share

of 35% is rapidly gaining market share and lastly. Vadilal is the player in the national market with 8-9% of the market share.

Production area:
In rural areas, kulfis / ice creams made by small / cottage industry are popular. The market for organized sector is restricted to large metropolitan cities. In small towns and villages, there are thousands of small players who produce ice- creams / kulfis in their home backyard and cater to the local market. Almost 40% of the ice creams sold in the country are consumed in the western region with Mumbai being the main market, followed by 30% in the north and 20% in the south.

Growth promotional activities:

The Indian government adopted the policy of liberalization regarding the ice cream industry also and it is since then that this sector has shown an annual growth ranging from 15- 20% per annum for last 1- 2 year. Presently in 1999- 00 it is estimated at worth of Rs15- 16bn. This growth rate is expected to continue for another next 2- 3 years because of lower base.

Types or Flavors:
Indian Ice Cream market can be segmented in three different ways, namely on the basis of flavors; on the basis of stock keeping units / packaging and on the basis of consumer segments. On the basis of flavors the market today has a number of flavors like vanilla, strawberry, chocolate, mango, butterscotch a number of fruit flavors; dry fruit flavors traditional flavors like Kesar- Pista, Kaju- Draksh etc. The

market is totally dominated by Vanilla, Strawberry and chocolate, which together account for more than 70% of the market followed by butterscotch and other fruit flavors.

Opportunity:
Ice cream market in India is estimated to be around INR 2,000 crores, of which over 40% belongs to the organized sector growing at about 15% Year by Year. Amul leads the pack with about 36-38% market share (5% of its total revenues), followed by Kwality Walls & Vadilal with about 12-14% share each. These players not only have to fight the small local and cottage industry players, but also the fact that the Indian cuisine itself offers a large variety of desserts which are still preferred by most Indians. Due to this reason, the per capita consumption of ice creams in India is about 300ml per annum, 1.4% of that in US, and 13% of the world average, which can be seen as a huge opportunity in this sector in India attracting new regional and national entrants. However, an issue is the seasonal nature of this industry in India, especially true for the northern parts of the country. Bulk of the sales happen during the summer months of April- July, while the sales witness a significant dip during winter months of November-February. Additionally, the seasonality of events like marriages affects sales in a big way, although institutional sales provide some cushion. But what makes the situation worse is low supply of electricity, especially during the high demand summer months that affects the ice cream stocks. Once the ice cream melts, it is non-saleable, and drives retailers not to carry enough stocks not an optimal situation given the not so favorable situation of cold chain in India.

Where Amul is trying to increase its reach by adding retail outlets to the tune of 15 k to its base of 70 k outlets, on the other hand HUL is focusing on new product launches and television campaigns for consumer activation. Half the market is driven by impulse purchase, and rest by family consumption at home and in-parlous sales. There are niche players in the parlous business, with Nirula s being an established player in the north and Naturals in the west; and then there are premium players like Baskin Robbins. Brands are coming out with pro-biotic and low fat ice creams targeting the health conscious consumers, and also new manufacturing processes which reduce air content in ice creams giving more value for money to the consumers; but the acceptance for such products is still to be put to a proper test in the market.

Over all SWOT Analysis:

Strengths y Strong brand name y High quality products Opportunities y Positive outlook for the Indian snack food market y Growing natural ice cream market y Increasing demand for organic products healthy food Weaknesses y Products innovation y Poor operate system Threats y Low-end products y Product innovation y Rising raw material prices

Strengths:
Have an already established good reputation Established efficient manufacturing and distribution premises Good relationship with established customers Good management and staff Resources availability They are available in reasonable prices. Known for product quality. Strong presence of parent company in India.

The Brands almost generic to their product category Wide variety of unique ice cream flavors.

Weakness:
Deals in limited market The durability of ice-creams is not really good It melts very soon The industry has a complex supply chain management

Opportunities:
Development of further varieties They should focus more on their advertising and marketing strategies They should come up with offers for purchase of ice-cream in whole market

Threats:
Poor demand in the economy Competition from foreign companies and Indian companies. Consumer buying power also represents a key threat in the industry Consumers can easily switch to other substitutes with little cost or consequence

Ice Cream Marketing Strategy:

Ice cream shops use a variety of marketing methods to help sell their products, including print advertisements in local publications, email marketing and direct mail. A marketing strategy explains how you are going to promote your products and services. For an ice cream shop, this means your marketing strategy helps you determine how you will bring more customers into your shop, and ultimately increase your profits. 1. Definition of Objective: The marketing strategy for your ice cream business should start with a clear statement of your marketing goals. Write the goals so they are specific, measurable and realistic.

2. Identify Your Target Market: The marketing strategy for your ice cream business should also help you better understands your target customers. Research your target market by observing customers who come into your shop. Think about the customers who frequent your ice cream shop the most, and identify several market segments for your business. This means you should identify several "subtypes" of customers, and describe demographic characteristics like age, gender and ice cream preferences.

3. Analyze your competitors:

Another part of the marketing strategy for your ice cream business is a competitive analysis. Describe each of your main ice cream competitors in detail. Include all information you know about their business model, competitive strengths and weaknesses and market share. Scour your local newspapers and other publications, and collect advertisements and other marketing materials your competitors use. 4. Choose Appropriate Marketing Tactics: In your ice cream marketing strategy, you should organize and select several tactics to promote your ice cream products. For example, create a direct mail campaign in which you send ice cream coupons and offers to your target market. Place an advertisement in a local newspaper, and communicate the business hours and most popular flavors for your ice cream shop. Sponsor ice cream eating contests and other events in the hot summer months to draw parents and kids to your shop. Develop a search engine marketing campaign so customers can find you when they search for local ice cream shops online. Create a website, and offer printable coupons for your ice cream business.

The Marketing Mix:

Product

The product that should be made and launched ice cream; the branding that the product would have is the company brand name, as it is already an established and trusted name.
Price

The price to be charged for the Ice Cream that would be cost effective and reasonable .As the product closest to product that is already in the market, the price should be satisfactory.
Place

the main places that should stock the product should be all the supermarkets. The local licensed shops should also be considered, as this was a popular place of purchase for the ice cream. According to the results of the questionnaires there would also be a market for this product within restaurants or near by the restaurants.
Promotion

The promotion and advertising should be conducted at the same time as the launch of the product. This should include advertising on television and radio, within magazines and newspapers. Television advertising

Newspaper advertising Magazine advertising Radio advertising

Market Survey:

Q1) Do you ever have ice cream? YES - 93% NO - 7%

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% yes no

yes no

Q2) Purchase Consideration for which brand? Kwality Walls - 39% Amul 29% Royal 9%
40% 35% 30% 25% 20% 15% 10% 5% 0% walls vadilal amul pastonji Royal
walls vadilal amul pastonji Royal

Vadilal 12% Pastonji 11%

Q3) How many times do you eat ice cream? Daily 4% Weekly - 27% Above 3 months 20%
40% 35% 30% 25% 20% 15% 10% 5% 0% daily evy weekly monthly abv 2days 3mths

every two days - 12% Monthly 37%

daily evy 2days weekly monthly abv3mths

Q4) which ice cream do you have? Sundae 27% Feast 20%
30% 25% 20% 15% 10% 5% 0% sundae cor netto kulfi feast chco bar
sundae cornetto kulfi feast chocobar

Cornetto 17% Chocobar 26%

Kulfi 10%

Q5) which flavor do you prefer? Chocolate 41% Vanilla 21%

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% chocolatestrawberry vanilla butter scotch

Strawberry - 19% Butter Scotch 19%

chocolate strawberry vanilla butter scotch

Q6) Do you like to have it in cup, bowl, stick or cone?

Cup 20% Stick 23%

35% 30% 25% 20% 15% 10% 5% 0% cup bowl

Bowl 32% Cone 25%

cup bowl stick cone

stick

cone

Q7) Does the packing of the ice cream influence you to buy it?

Yes 60%
70% 60% 50% 40% 30% 20% 10% 0% yes no

No 40%

yes no

Porter Five Model For Ice Cream Industry:

Barriers to entry The two favorable factors are the opportunity for product differentiation within the super premium segment and the importance of corporate experience in all phases of the operation (production, distribution, and marketing). The most important down side factor is that consumer switching cost is nil. Power of buyers With ice cream there are virtually no important end consumers. However if one focuses on the consumer as retailer then the importance of the few powerful and growing grocery chains represents a significant hurdle. Power of suppliers The most important factor here is the importance of quality. Availability of substitutes The concept of comfort foods in India is still very much in the incubation stage; as such the primary role of ice cream is that of a sweet desert with little or no emotional value. Accordingly, there is a wide variety of alternative products. The most notable alternatives are kulfi and faludeh. Kalfi is the traditional desert of India. Faludeh, an Iranian sweet and is quite popular because of its rice noodle content and generally low price. Government actions While there is no threat that the government will enter the industry the primary concerns are focused on the growing economic tensions between states and between states and the national government.

Rivalry By almost every indicator the rivalry is intense and will continue to grow.