It’s time to fill the gap. The ice cream Industry will see sunshine soon
To begin with, the pandemic has had a significant impact on the ice cream industry because ice cream is primarily a seasonal business for regional manufacturers who operate in one, two, or three states. Seasonality is much higher in smaller cities than in metropolises like Mumbai or Delhi.
If the ice cream business in a small city is 50 per cent during the season, the sales in a metropolis are more than 60 per cent. As a result, the seasonality factor is very extreme in smaller areas, as villages and small towns avoid eating ice creams in winter. During the off-season following the summers, most vendors and retailers close their doors, and manufacturers also close their doors.
The ice cream industry has been hit for the second time in a row by the pandemic’s second wave, and this time too during the same peak season as last year. According to my experience over the last 20 years, the ice cream season lasts from March 15th to June 15th, or 90 or 100 days. We lost almost the entire business in these 90 days in both years. Though we started well in the summer of 2021, with a good growth rate of 35% to 40%, an early lockdown in Chhattisgarh hit us badly, and the business nosedived.
Due to the lockdown, we have not completed even 10% of the total business because we rely entirely on the season. We have suffered a significant setback due to yearly expenses such as power bills, annual expansion plans, and yearly stock requirements of raw materials and packaging materials.
When it comes to raw materials and packing materials, we have much more stock than last year because we started outsourcing it at a higher price because we were picking up.
Another point to note is that raw material prices have risen drastically in the last two months, with plastic materials increasing by nearly 20 per cent to 25 per cent, and paper and paper product prices increasing by 30 per cent to 35 per cent. Despite the fact that prices have now dropped, we have already incurred losses as a result of beforehand purchasing of the raw materials at a higher price. We had already placed orders with many suppliers and they were supposed to be delivered to us by the end of April.
However, since the lockdown, it has been extremely difficult for us to cancel any orders. Some orders were held, some were cancelled, and some were reduced, for example, from 10 tons to 5 tons, this is because we had ordered it at a higher price and now the prices have come down.
Even the price of milk powder has dropped from Rs. 280 to Rs. 270 per kg to Rs. 225 to Rs. 230. That’s nearly Rs. 50 less, and we have plenty of milk powder on hand.
Moving on, while milk production is adequate, it is the manufacturers who are putting additional strain on the crisis. It has nothing to do with milk production; milk is always available in surplus, but the manufacturers keep all of the profits.
It is a very big debate, but the dairy industry keeps saying that the dairy industry is not profitable we are already facing losses so it is difficult to say about the facts because nobody is openly declaring the cost of the powder, fat, butter, they are all trying to capture the market and they are all trying to play with the market and as the demand starts increasing, they start increasing their prices.
Recently, demand has decreased, and companies have begun calling, attempting to fill as many orders as possible. It all depends on demand and price; if one rises, the other rises as well, and vice versa.
The ice cream industry is currently in shambles. I’m not sure how the industry will survive the rest of the year. Internal factors are important. Fixed expenses must be considered as overhead expenses continue to rise. The electricity is one factor, but if you have your own brand, you have a sales team and a production team, and because there is no production, you cannot simply fire your employees. We’ve lost all of our businesses; there are no weddings, functions, or parties. As a result, the bulk fat had to be destroyed and discarded.
Returning to business, we suffered many losses, including the closure of all ice cream parlours in malls. We had to close almost all of the parlours because there has been no business since March 2020.
The pandemic has nearly destroyed everything. Even if he is a millionaire, how can he live on his assets alone? Money is rotated in business. If the funds become stalled, all interconnected and subsidiary industries suffer.
However, this pandemic has taught us an important lesson. We’ve learned that it’s best to keep our liabilities as low as possible. New startup businesses that have been in this industry for the last 2-3 years are in a precarious position. It’s difficult for them to survive, and they’ve lost everything in this pandemic. This was the only business on which they relied. They have even mortgaged their homes to fund their business, and they are not in a position to repay their loans or EMI.
The fact is that we were unable to meet demand in March of this season, I wanted to expand my business, but everything was washed away.
Regarding our expansion plans, we had our expansion strategies ready but had to postpone them due to the crisis as it made no sense, it is more important to survive than to expand.
The Future of Ice cream industry
The industry’s future, in my opinion, looks very promising. When it comes to regional players, there are plenty of opportunities because many companies have ceased operations and closed their doors. This has now created a significant gap in the market. Now is the time to turn this chasm into an opportunity playground for newcomers to exploit.
For existing players, it’s essentially a case of survival of the fittest; whoever survives will take over the market. You must survive in any way possible; only by surviving will you be able to prove yourself as a market segment. To begin with, the ice cream industry expands at different levels than other industries; the ice cream industry is unique in that it has so many sections, such as ice cream manufacturing, candy manufacturing, cone manufacturing, and cold storage. We need to plan whether we will expand in phases or in sections; it is entirely up to us. Because this is a risky situation, a decision must be made at the right time. If some old machinery is nearing the end of its useful life, we can buy it at a discount and repurpose it instead of purchasing new machinery.
Some of them are working hard with a lot of automation, but due to the pandemic, they don’t want to continue and aren’t interested in the same business, so we can take over these machines.
With newer opportunities in mind, we have retained all of our employees and have been paying them salaries since last year, only in hope that we will recover with time, even if we have had a setback this season. So let’s see how it goes and how we can figure out what to do if the situation persists.