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 Asia-
Pacific 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 hard-
packed, 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

 2,310 Calories

 108 g Fat (64 g Saturated)

 266 g Sugar

Administrative divisions of Baskin Robbins in India:

States:

1. Andhra Pradesh 14.

22.
29.

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 MARKET SHARE

 Amul  38%

 Kwality Wall's  14%

 Vadilal  12%

 Mother Dairy  8%

 Cream Bell  6%

 Arun  4%

 others  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-on-
year. “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

 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

 Fat content, 10-12%

 Total solids, 36-38%

 Overrun, 100-120%

 Cost, average

Premium Brands

 Fat content, 12-15%

 Total solids, 38-40%

 Overrun, 60-90%

 Cost, higher than average

Super-premium Brands

 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:

 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 Weaknesses

 Strong brand name  Products innovation

 High quality products  Poor operate system

Opportunities Threats

 Positive outlook for the  Low-end products

Indian snack food market  Product innovation
 Growing natural ice cream  Rising raw material prices
market

 Increasing demand for

organic healthy food
products

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% yes
50% no
40%
30%
20%
10%
0%
yes no

Q2) Purchase Consideration for which brand?

Kwality Walls - 39% Vadilal – 12%

Amul – 29% Pastonji – 11%
 40%

35%

30%

25% walls
vadilal
20%
amul
15% pastonji
Royal
10%

5%

0%
walls vadilal amul pastonji Royal
Royal–
9%

Q3) How many times do you eat ice cream?

Daily – 4% every two days - 12%

Weekly - 27% Monthly – 37%
 40%
35%
30%
daily
25%
evy 2days
20% weekly
15% monthly
10% abv3mths

5%
0%
daily evy 2days weekly monthly abv 3mths
A
bove 3 months – 20%

Q4) which ice cream do you have?

Sundae – 27% Cornetto – 17% Kulfi – 10%

Feast – 20% Chocobar – 26%
 30%

25%

20% sundae
cornetto
15% kulfi
feast
10%
chocobar
5%

0%
sundae cor netto kulfi feast chco bar

Q5) which flavor do you prefer?

Chocolate – 41% Strawberry - 19%

Vanilla – 21% Butter Scotch – 19%
 45%
40%
35%
30%
chocolate
25% strawberry
20% vanilla
15% butter scotch
10%
5%
0%
chocolate strawberry vanilla butter scotch

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

Cup – 20% Bowl – 32%

Stick – 23% Cone – 25%

 35%

30%

25%
cup
20%
bowl
15% stick

10% cone

5%

0%
cup bowl stick cone

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

Yes – 60% No – 40%

 60%

50%

40%
yes
30% no
20%

10%

0%
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.