As regional labels such as Arun, Cream Bell, Vadilal Dairy International and Heritagetake on the might of Kwality Walls, Amul and such others, the Rs 9,000-crore ice cream market is in for a refurbish. In fact the local ice cream industry expects to grow at close to 10 per cent for the next few years and the brand map for the sector to change forever.
Mintel research shows that the global ice cream market will touch sales of 13 billion litres in 2016 and India and Vietnam are among the world’s fastest growing markets. Also in 2017 India’s volumes are expected to overtake that of UK.
The 2017 annual Nielsen Global Brand-Origin survey indicates that in the midst of an increasing preference for global brands, the only categories with a strong swing in favour of local brands were dairy and fresh foods. Thus the regional brands are under pressure from growing competition from smaller, emerging homegrown players in their own territories. And at the same time, there is a growing preference for homegrown labels in food and dairy.
Regional brands are taking steps into the new opportunity. Instead of expanding into multiple markets and launching an advertising blitzkrieg, they are using their knowledge of local palates and supply infrastructure to take one market at a time.
Arun ice creams from the Chennai-based Hatsun Agro Products Ltd entered the Mumbai market in November 2017. Before making it to the maximum city, it set its base up in Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Orissa, Maharashtra and Goa. Also the first stores in Mumbai are away from the popular hotspots, but well-populated with consumers familiar with the brand.
Hatsun has grown beyond a cottage industry operation to a national brand with a 4.5 per cent share of the market. At the same time it has also become the country’s largest private dairy. The company is able to save 4 per cent margin on milk-based raw material and these benefits are then ploughed back into the business, on advertising and entering new markets.
Gujarat’s Havmor had spread itself thin. Margin pressures had started acting on them. The promoters were looking at selling the ice cream business and hence having a national presence was crucial to enhance the brand value. South Korea’s Lotte Group acquired Havmor for Rs 1,020 crore in November.
In contrast, RJ Corp-owned Devyani Food Industries that makes Cream Bell ice creams has pretty much expanded across India and has broken into the list of top five ice cream brands in record time. Nitin Arora, chief executive officer, Devyani Food Industries said that Kerala is one of the few markets where it is not present yet. This year it started operations in Tamil Nadu, it is present in Karnataka and Andhra since the last five years. The revenue share is around 55 per cent from North India (its home market) and 45 per cent from the rest of India.
Cream Bell has almost doubled its production capacity in five years. Arora says the FY18 capex plan is to invest Rs 250 crore (Rs 210 crore already invested). All of this has inspired another player Vadilal Dairy International (promoted by a wing of the family that has the rights to the brand in the southern markets while Vadilal Industries holds the rights for North and West) to double its outlets in the next two years.
Vadilal Dairy International is investing in freezers and working on brand building and visibility. Besides consolidating its base, it is working on expanding its reach, but the transformation is expensive.