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Ice cream consumption in north is 2nd-highest in country
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Tuesday, 01 April, 2014, 08 : 00 AM [IST]
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Rajesh Gandhi
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fiogf49gjkf0d India is the largest milk producer in the world, with an estimated annual production of more than 180 million tonne ice cream per year. Considering the Indian economy’s quantum growth in recent years, the ice cream market is also zooming in to new horizons.
The size of the Indian ice cream market is estimated to be worth Rs 3,000 crore, with the organised sector’s estimated to be approximately Rs 2,000 crore.
An ice cream treat makes life a little sweeter and refreshing. In fact, the Vadilal range of ice cream and frozen dessert products offer delights and pleasures to enhance everyday occasions as well as life’s special moments.
Increasing urbanisation, rising disposable incomes and increasing out-of-home food consumption, coupled with the ever-increasing food varieties available in the markets closer to home, are some of the reasons fuelling the ice cream segment.
New market base
The change in the consumer preference from traditional ice cream to premium brands has now created the market base for international companies to launch their premium ice cream brands.
The industry is seeing a growth of 35 per cent on a year-on-year basis, which makes it an attractive destination for international brands.
It is expected that this market would grow at a compound annual growth rate (CAGR) of 17 per cent between 2012 and 2017.
Although, the unorganised sector enjoys a bigger share in the Indian ice cream market and has deeper penetration in the rural and semi-rural areas in India.
For ice cream players, the North is one of the most important markets, as the region is of the highest-consuming regions in India.
Uttar Pradesh, Delhi and the National Capital Region (NCR), Uttarakhand, Punjab and Haryana are some of the best markets for ice cream.
The consumption of ice cream in the north is the second-highest in the country. According to a study conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), 35 per cent of the ice cream sold in the country is consumed in the western region, followed by 30 per cent in the north, 20 per cent in the south and 15 per cent in eastern and central India.
Vadilal in North India
In 1994, Vadilal entered Uttar Pradesh, starting with the Bareilly and Lucknow markets, anticipating tremendous scope. It gradually expanded to Kanpur, Agra, Ghaziabad and other major cities in the state.
In a bid to occupy a strong position in northern India, Vadilal acquired Bareilly Dairy Products Pvt Ltd (BDPL) in 1999. It became the company’s Bareilly plant. Through this plant, Vadilal was able to fulfill its plans of penetrating the North Indian market in a big way.
In less than a decade, Vadilal Ice Cream emerged the leader in the Uttar Pradesh market and has maintained this position. Today, it has over 100 distribution centres in the state alone.
The industry structure and ongoing transformation offers opportunities for organised players to invest and grow. Vadilal’s ice cream division has shown sustainable annual growth consistently.
Key drivers of demand in ice cream
Social shift: The key demand drivers for this sector are increasing income levels fuelled by the growth in the gross domestic product (GDP), leading to a rising middle class. India is expected to be the only country among the BRIC countries (namely Brazil, Russia, India and China) forecast to record GDP growth rates between five and six per cent consistently up to 2050.
India's growing middle class is further fuelling consumerism. In the past few years, there has been a huge increase in the number of nuclear families, along with a rise in the number of working couples, which has led to higher disposable incomes. This has resulted in the willingness to try new products and increased consumption and aided the affordability of impulse purchases, especially of ice cream.
International exposure of consumers
Several premium international brands have been attracted to the Indian market. These include Haagen-Dazs, Swensen's, Magnum and the US-based Mini Melts. With the entry of these brands in India, the overall consumer awareness and consequent size of the premium segment has witnessed robust growth. And taking a cue from international trends, the company has launched such variants in the premium segment as ice cream bars, ice-cream sandwiches, ice cream logs and ice cream pastries, and made them easily available to the Indian consumer.
Innovative products: Apart from health, consumers now look for flavours other than vanilla, strawberry or chocolate ice cream. Almost all the ice cream manufacturers identify and introduce different products that appeal to the customers with their flavours and tastes. In terms of scoops, Vadilal recently launched such flavours as Praline N Creme, Golden Ribbon, Silk Chocolate, Kiwi Queen, Chocolate Peanut, Pina Lemon and Mango Marvel to give Indian consumers a feel of the international ice cream eating experience. Golden Ribbon, Silk Chocolate and Praline N Creme are also available in the gourmet tub range. In the take-home category, Vadilal recently introduced two-litre party packs to cater to the bulk demand with regard to the home consumption category.
More options for consumers: Vadilal has the largest range of ice cream in the country, with 150-plus flavours. They are sold in over 250 packs and forms, including cones, candies, bars, ice lollies, small cups, big cups, family packs, and economy packs. It offers something for all tastes, preferences and budgets.
Infra development
The absence of consistent power supply has been a major hindrance to market penetration in several states, including Uttar Pradesh, Bihar and Delhi. As power generation capacities increase across India, it will become easier for agents and retailers to hold a larger quantity of products in a cost-effective manner, which would have a positive impact on sales.
Talking about the specifics, the cold storage capacity caters to milk and there is a lack of modern abattoirs for the meat processing sector. Ice cream storage requires a major step-up in infrastructure availability.
Limited controlled-atmosphere storage facilities in India, technologies, protocols and imported machinery increase the burden on ice cream manufacturers. We need to develop and upgrade manufacturing capabilities according to our specific requirements. These areas need support and new paradigms of the public-private partnership (PPP) model.
Government subsidy schemes, partnership with banks, creation of models for joint ventures (JV), special purpose vehicles (SPV) for implementation and dedicated infrastructure financing institutions are required to give this area the requisite push.
Vadilal has been working persistently working towards strengthening the manufacturing facilities by investments in upgradation as well as addition of new machines.
The company has India’s fastest cone-making machine. As against machines which make 6,000 cones per hour, it has put in place a machine which would make 18,000 cones per hour. It is the first and only ice cream producer in India to have a machine with such a huge capacity.
Power-cuts
The other big challenge for the ice cream industry is the availability of power across the country. The non-availability of continuous power hampers growth, because retailers and stockists may not maintain the inventory to avoid losses. Further, power fluctuations affect the product quality.
Power is an issue of national infrastructure, where the industry cannot do much. We have started providing specialized freezer which can hold the temperature for eight to ten hours to address the power fluctuation, but it is very costly, so it may not be a workable solution.
Last year was a great year for us. The company made steady progress in launching new products in the premium segment, and also successfully ventured into the gelato market, which is still left untapped.
Vadilal looks forward to penetrate deeper pan-India and expand the base in the North Indian markets.
(The author is MD, Vadilal Industries Ltd)
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