The Hindu Business Line : Ice-cream, hot battles

The onset of summer, and it's time for the annual slugfest between ice-cream majors. This season, however, could see unprecedented action, predictable winners, and some huge upsets.

IT'S a Cold War out there. And this summer, it promises to be the fiercest ever the domestic ice-cream industry has seen.

Both Hindustan Lever Ltd (HLL) and Gujarat Cooperative Milk Marketing Federation (GMCCF) have already locked horns over their respective brands, Kwality Wall's and Amul, claiming to be market leaders in the Rs 1,000-crore domestic ice-cream business, of which the organised sector accounts for Rs 650 crore.

The third contender in the Big Fight, National Dairy Development Board's (NDDB's) Mother Dairy, is engaged in a pitched battle with erstwhile associate GCMMF. NDDB's Mother Dairy milk booths are not selling competing Amul's products any more. Also, NDDB has decided to float a subsidiary marketing company, Mother Dairy Foods Ltd, to partner with State dairy co-operative federations in the form of joint ventures. NDDB is further strengthening its marketing and finance divisions, has been in expansion mode on the product front for Mother Dairy ice-creams, and has undertaken a large-scale exercise to revamp its ice-cream push-carts.

HLL, which is expected to turn around its Rs 210-crore ice-cream business in 2003, recently announced its decision to focus on six cities - the four metros and Bangalore and Hyderabad. While analysts view this as a cautious move on the company's part, J. H. Mehta, Executive Director (Ice-cream Division), HLL, explains, "Two-thirds of our ice-cream turnover comes from these six cities."

Attributing the expected turnaround next year to a `radically new strategy', Mehta observes, "Our strategy in 2002 focused on one of our power brands, Kwality Wall's, supported by appropriate communication and activation, launch of differentiated innovations, focus on six citadels and aligning of our cost structure to the new strategy."

HLL managed to halve its losses in ice-creams last year, which the company attributes predominantly to the decision to shift its business from commodity to product model and working on supply chain efficiencies. HLL's ice-cream business losses were reduced to Rs 6 crore in the April-December 2002 period, from the Rs 20-crore figure the previous year.

Meanwhile, Kwality Wall's' Rs 80-crore Max sub-brand - which accounts for one-fifth of the company's ice-cream business turnover - was recently relaunched.

GCMMF - or Amul - has projected that it will end the April-March 2002-03 period with ice-cream sales of 24.5 million litres, valued at around Rs 150 crore, against 18 million litres (Rs 115 crore) the previous year. While GCMMF says it has become the country's leading ice-cream seller in both value and volume terms, HLL disputes this by quoting A.C. Nielsen data, according to which Kwality Wall's had an overall market share of 38.3 per cent by value in 2002, against Amul's 16.7 per cent. Says an HLL spokesperson, "In individual cities, our share was 36.9 per cent in Mumbai (against 35 per cent for Amul), 36.3 per cent in Delhi (9.7 per cent), 30.5 per cent in Bangalore (15.2 per cent) and 54.1 per cent in Hyderabad (13.2 per cent). Amul's claim is, therefore, absolutely incorrect."

GCMMF, however, contests A.C Nielsen's data on the grounds that it is limited to seven cities. Besides, ice-cream, unlike soaps or biscuits, is sold through exclusive deep freezer outlets (DFOs) and a retailer who sells one brand, say, Kwality Wall's, will not stock rival brands. As Prasanna Shah, head of GCMMF's ice-cream division, explains, "Market surveys are based on sales reported by the same sample of outlets year after year. A.C. Nielsen's panel has not been updated for the last four years and during this period we have been adding around 10,000 DFOs annually, the sales from which are not captured in the survey data. Further, during this period, HLL has withdrawn its ice-cream from virtually every market, barring six cities from where A.C. Nielsen's sample is drawn."

And while HLL's spokesperson points to Amul's turnover figure of Rs 150 crore being calculated on the basis of end consumer prices (ECP), GCMMF's Shah emphasises that the Rs 150-crore figure represents net turnover.

Market share apart, each of the Big Three are busy generating consumer pull necessary for both out-of-home and in-home consumption, by broadbasing their products across various price points.

GCMMF is now gearing to introduce super-premium ice-creams at `value-for-money' prices, some of which are already in the market. Analysts expect that Amul's move will give the HLL ice-cream management more sleepless nights.

Regional-level players, meanwhile, aren't giving way easily.

Take the Rs 96-crore, Ahmedabad-based Vadilal Industries Ltd (VIL), which has earmarked an investment of about Rs 7 crore for the current fiscal to consolidate and expand operations, in addition to strengthening its cold chain network. Says Rajesh Gandhi, Managing Director, VIL, "We will also infuse investments in our sales generating assets, plant and machinery." The investments are being accrued internally, stresses Gandhi, even as he scotches speculation that the company is in talks with Nestle India or other multinationals for a possible buy-out or strategic investment. Vadilal currently has three manufacturing bases - two in Gujarat and one in Uttar Pradesh.

Vadilal's other summer plans include setting up an additional five, franchisee-operated ice-cream parlours (branded Happinezz) within this calendar year in Delhi alone. Vadilal's Happinezz parlours currently exist in Gujarat, Rajasthan, Uttar Pradesh and Madhya Pradesh.

That's not all. Expect a spate of new fruit-flavoured ice-cream flavours from Vadilal this summer, and aggressive marketing promotions. Vadilal is now eyeing a turnover of Rs 125 crore from its ice-cream business in fiscal 2003-04, says Gandhi.

Southern stalwart Hatsun Agro Products Ltd, which markets Arun ice-cream, intends to reposition Arun as a super premium brand and a revamp of the brand's logo and packaging has already been undertaken. Another recent decision has been to hike investments in the ice-cream business with the objective of further consolidating its position as market leader in the South. Hatsun Agro claims a 34 per cent market share in the Southern region, and in Tamil Nadu alone, it claims a 56 per cent share. Hatsun currently has 1,100 exclusive ice-cream parlours, 60 per cent of which are in Tamil Nadu. The company's cold storages exist in Chennai, Vijayawada, Anantapur, Bangalore and Salem. Hatsun now plans to invest over Rs 6 crore in a fully automated extruded candy line for ice-creams.

However, Hatsun has no plans to go national for now. Explains C. Sathyan, the company's Executive Director (Operations), "Our plant being in Chennai, logistics don't suit us going national." Hatsun Agro has projected a turnover of Rs 330 crore during the current year, with the ice-cream business accounting for 11.5 per cent.

On the other hand, players in the premium category haven't been able to make much headway. The US-based Allied Domecq International's Baskin Robbins, operating in India through a joint venture with Maharashtra Dairy Products Manufacturing Company Pvt Ltd, has had to close down over two dozen outlets in select cities, even as it is adding new ones in others. The company has had to rework its location and pricing strategy for the domestic market more than once.

Then there's Swiss ice-cream player Movenpick, which was acquired by Nestle SA in January this year. Movenpick had parted ways with its local franchisee, Ravi Jaipuria, in mid-2002. It's well known that steep operating costs of Movenpick's ice-cream boutiques, coupled with steep prices, were the roadblocks facing Movenpick's success in the Indian market.

Meanwhile, there's no word from Nestle India yet on its India-specific plans for ice-creams, though industry analysts expect some development on this front sooner than later.

With India's per capita consumption of ice-cream - at 200 ml - being among the lowest in the world, opportunity for ice-cream marketers is abundant.

A harsh summer, a keenly contested battle, and a pampered consumer. It can't get hotter than that for the ice cream industry.

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