UNIVERSITY OF LUCKNOW

DEPARTMENT OF BUSINESS ADMINISTRATION

BUSINESS POLICY AND STRATEGIC ANALYSIS

TERM PAPER:

ICE CREAM INDUSTRY IN INDIA

SUBMITTED TO: SUBMITTED BY:

DR. JK SHARMA SRINATH VERMA’

INTRODUCTION OF ICE CREAM INDUSTRY

Ice-cream Industries occupies important place in India. It is one of the consumer goods industries in products is important popular diet .India is an agricultural based country because of the large number of cattle and large milk production most of the dairy and ice-cream industries has developed and India is well ranked in the world. Icecream industry has brought magnificent change in the rural economy. It provides employment to the marginal farmers. Today the competition in ice-cream like Amul, Kwality Walls, Vadilal, Gloria, Giani, Naturals etc. as ice-cream has been a regular edible item the consumption of in more. In 1983 when Indian Government issued a control in which the certain price level was fixed. It has an important role in employment generation and reducing the migration of villagers the town and cities for dinehood.

Ice-cream is one of the fastest growing food categories in India. However, per capita consumption of ice-cream in India is quite low.

OVERVIEW OF INDIAN ICE CREAM INDUSTRY

Ice-cream is typically regarded as a seasonal product, with demand peaking during the summer months. Winter witnesses a sharp decline in consumption and resultant dip in sales and profits. However, with the marketplace teeming with a host of innovative frozen variants, which consumers are enjoying even in the cold months, there is a surge in winter sales. India’s current ice-cream market is worth Rs 3,000 cr, including the unorganised sector. The branded market has a host of homegrown and international players, namely, Amul, Kwality Walls, Mother Dairy, Vadilal, Cream Bell, Baskin-Robbins, etc, amongst the the prominent ones. Whilst Häagen-Dazs, Baskin-Robbins, London Dairy and Hokey Pokey cater to the high-end market, the likes of Amul, Vadilal, Cream Bell and Mother Dairy are available at wide-ranging price points. Lately, the imported concepts such as frozen yogurt and gelatos are gaining popularity. The more recognisable brands are Cocoberry, Red Mango, and Yogurberry, while Amore, Gelato Vinto and Gelato Italiano are popular gelato brands, and primarily belong to the super premium to premium segments. Increasing urbanisation, rising incomes, consumer awareness, improved cold supply chain, growing deep freezer penetration, and growth of modern format retail facilities are giving a fillip to the country’s frozen desserts business, which is highly capital intensive.

In recent years, consumption of ice-cream and other frozen novelties in winters has been on the rise. A mix of factors is responsible for lessening the seasonal impact and contributing to the overall growth of the country’s ice-cream industry such as changing consumer perception, capturing regional variations, diverse consumer segments, favourable retail location, product range and innovation, festivities, and marketing and promotions. Currently growing at 12-15 percent annually, the future prospects of India’s ice-cream market seem promising for manufacturers, suppliers and retailers. A number of regional players have also started expanding. The entry of new players will further intensify the struggle to get a bigger market share.

TOP ICE-CREAM INDUSTRY IN INDIA

Top ‘N’ Town

Dinshaw’s

Amul

Kwality Wall’s

Mother Dairy

Vadilal

Gloria

Giani

Baskin Robbins

FUTURE STRATEGY OF ICE-CREAM INDUSTRY

Focusing on distribution & franchising new Happiness parlours all over India.

Vadilal has the largest fleet of Refrigerated Vehicles in India, strong Distribution Network comprising C&F Agents, distributors and retail dealers.

The Company's future strategy is continuously serving consumers with-innovative & value added products.

The overall vision of the company, to increase the consumption of ice cream on a national level, is fully supported by appropriate promotion and market communication

Competing with the foreign players and adopting new technology and techniques from them to provide better service to the consumers

SWOT ANALYSIS OF ICE CREAM INDUSTRY

STRENGTHS

They are available in reasonable prices.

Known for product quality.

Strong presence of parent company in India.

Wide variety of unique ice cream flavours

WEAKNESS

The durability of ice-creams is not really good ,it melts very soon

The industry has a complex supply chain management and the main issue is perish ability.

Domestic business as well as many international markets is thriving.

OPPORTUNITIES

They should focus more on their advertising and marketing strategies

The lifestyle of people is increasing as well as their income is also increasing.

India has 47 % youth population.

They can come up with new flavours

THREATS

The threat of new viable competitors

Foreign players entering the market

Consumers can easily switch to other substitutes with little cost or consequence

PESTEL ANALYSIS OF ICECREAM INDUSTRY

As ice creams Producer, Amul and Hagen Dazs both interact in an industry affected by several external factors that we need to analyze by using the PESTEL Analysis.

This is one of the best Tools to have a global overview of the pressures that impact on the dynamism of the ice cream sector.

We will only focus on the main variables (variables pivots), which likely influence the framework of the industry.

Special Tariff in different countries will influent our cost to enter into a new foreign market

Globalization in economy might reduce the tariff and make much easier to enter into a new country.

Life style will influent if they have the habit of eating ice cream or not.

The Dairy Science and Food Technology (DSFT) provides consultancy services to ice cream enhancing company competence.

POLITICAL ASPECTS

Basically related with degrees the government intervenes in the economy.

THE MIDDLE RATE : which is applied to the ice creams sold per unit (cones, cups, or Eskimos), will increase from 7% to 10%. This is bad news for the consumer who eats ice creams or sorbets outside home, as It will impact negatively on the sales of these products.

THE REDUCED RATE : applied to the packaged ice creams, mostly found in Hyper/ Supermarkets) will be lowered from 5.5% to 5%. This decrease of VAT may probably decrease the final consumer price of this product category and could be a factor that will increase the level of sales of ice creams in supermarkets/hypermarkets.

ECONOMIC ASPECTS

It is the macroeconomics factors that can impact on the way businesses operate in the food industry. Since the global crisis of 2008, india is strongly weakened on the economic aspects with

THE UNEMPLOYMENT RATE: equals to 38.5% (on the second quarter 2014) in India has considerably increased since 2008 (equals to 25.5%).

THE INFLATION: is also a factor to take into account because it strongly impacts on the final consumer prices and also, the level of sales of ice creams and sorbets. In this recessionary period, consumers are more and more cautions with their money and tend to buy less ice creams.

SOCIAL ASPECTS

Businesses that operate within the ice cream industry must complies with the social factors.

Here, we will focus on the main important factor the Food consumptions habits of the French people.

the taste is still the criteria the most important for food purchases, the rate of 3 meals a day is respected and cooking is still a national leisure.

Therefore quality of products is still essential for French consumers.

Two main trends appearing in the French food industry must be considered for companies in the food industry (such as ice-cream companies) to sell successfully food products in the French market

LEGISLATIVE

Environmental protection laws will affect the ingredients we use for ice cream in local market.

Labor Law in different countries will influence the cost and revenue of a company.

TECHNOLOGICAL INNOVATIONS

The ice cream industry is impacted by the innovation of powerful kitchen appliances, which enable people to create at home their own delicious ice creams.

Today, 1 millions of French people state to have an ice cream maker (one that has to be placed inside the freezer at home). However, this kind of machine needs to be placed into the freezer at least 12 hours before the creation of the ice cream.

The emergence of new machines with their own built-in-freezing system enables consumers to prepare ice creams at the last moment: only in 30 minutes! Contrary to the previous type of ice-cream maker, this powerful one can threaten companies

ECOLOGICAL

Global Warming will last the summer time and change the eating habits. It will also makes people become eco-friendly

Water pollution and pollution control will affect the quality and health of ice cream products.

PORTER’S 5 FORCES ANALYSIS

POTENTIAL ENTRANTS

The technology and materials are easily to acquire, so it’s easy to have your own small ice cream shop. But if you want to expand it to become a large company, then the space of storage and transportation cost are really high. Also, you might be lack of adequate distribution channels.

Technology & Materials are easy to acquire

The space of storage and transportation cost are high

Lack of Adequate distribution channels

COMPETITORS

The competition in this industry is really high because there are lots of competitors in different sizes (market share figure)and big brands has their own retail stores supported by mother companies. Also, customers can switch brands easily means every brand could attract or lose their customers at any time and this makes the competition more intense.

High number competitors (in different sizes)

Big brands have own retail stores (supported by mother company)

Customers can switch brands easily

BUYERS/CUSTOMERS

The buyers can switch the brands easily and can decide when or whether they want to buy or not, but most people have a tendency to buy ice cream in low volume. Therefore, the bargaining power is not so high.

No consequence to switch brand

Tendency to buy Low Volume

Discretion in whether or when to buy

SUBSTITUTES

Maybe other kinds of frozen desserts will be. But basically, big brands produce almost every kinds of frozen desserts.

So in other perspective, some people will think cookies candies or cakes as a substitute for ice cream.

SUPPLIERS

The material suppliers have strong bargaining power to small ice cream shops because they form a alliance.

But less power to big brands because they have lots of market shares.

MARKET SHARE

Market Share

Local Regional Company private LabelUnilever, Nestle, Blue Bell

KEY DRIVING FORCES

The raise of health awareness.

Research indicates that in the future, flavors of health improvement will increase the consumption, thus resulting in an increase in demand. Impact:“Delicious” is no longer the only pursuit of ice cream in flavors, it added healthy, green, cultural and other new requirements. Focus of ice cream is from a product which is such a high-calorie, high fat into a low-calorie, low fat, healthy foods. I will be a new trend of development. Also, some people can’t eat ice-cream with lactose because they may suffer diabetes or have an unhealthy body. Therefore, it will make them unable to eat ice cream.

Increasing temperature because of global warming!

The global temperature is increasing every year which means the demand in ice cream is also increasing. People are more willing to buy ice cream especially when the summer gets longer and weather becomes hotter. Company has to be aware that should it start to promote or strengthen their advertisement especially in summer time in the following years. They can seize the opportunity to promote on some holidays in summer time or also cooperate with some amusement park because the children will go especially in summer vacation.

EFFECT OF GLOBALISATION

Ice cream brands now are much easier to get into international markets in different countries because of the international treaty or reduction of tariff between countries.

Also, the numbers of big retail stores are much easier to increase or set up in foreign countries because of globalization. It means the options of channels for selling ice cream will also increase.

However, in the meanwhile, it means there will be more competitors to enter into global ice cream markets.

The industry also has a franchise component. Many well-known brands have start-up opportunities that give owners the needed help and support.

Ice cream shop owners with the required capital can get substantial profits from the market. Such business arrangements often benefit both parties and are one of the main ways the ice cream industry uses to keep building new customer bases. It will be influenced by globalization trend if company wants to do franchising in other countries.

INNOVATION AND TRENDS IN THE INDUSTRY

Focus on Ingredients / Healthy Ice Cream Trends are towards natural ingredients (no additive/preservative claims). Also, ice-cream with lactose are refused because of more and more people suffering diabetes. Moreover, healthy eating continuing to be one of the dominant consumer trends in the food and drink market, the impetus to develop healthier ice cream versions remains. Therefore, more growth in diet-specific ice creams can be expected

Flavors grow upTraditional flavors such as chocolate, strawberry and vanilla are used in everyone ice cream stores (60%) and are not seen as unique anymore. Recently, the research shows that 7 out of 10 people said they are willing to try new flavors from a brand they typically buy, which shows an important future trend. Also, coffee is an on-trend flavor such as espresso, mocha and cappuccino. It means that there is more adult approach to ice cream.

Ice cream as a snack

People see ice cream not only as ice cream anymore. Instead, they are a snack with something. For example, people eat them with bread, cookies, and other accessories. Japanese starts to cream a kind of food called “Pastry Cream”.