Arun Ice Cream 4x65y

Arun Ice Cream

Team 2: Bhavya KakkarAditi Garg Nikhil NairPuneet AggNitin Jaggi Shweta ShridharAshish Goel -

145 150 159 167 191 197 200

Ice Cream Man of India

Chairman Hatsun Agro Products Yearly Turnover –Rs.2165 crores Product Range: 1) Arun Icecream 2) Ibaco Competitive Edge: •First to Take the Parlour Route(the concept of exclusive franchise parlours in India) •Reaching out to towns with a population of about 30,000 or even less •Innovate varieties and new flavours have also helped maintain its brand image and recognition.

Early History •

Chandramogan ,son of vegetable seller from Tamil Nadu left college and started Arun Icecream with Rs.15000 and raising a bank loan of Rs.21000.

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Prominent Location next to Uncles retail textile outlet attracted large walkin customers.

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USP-”FRESH ” Ice Candies

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First Year Turnover Rs.150000 and profit of Rs.40,000

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20 litres of daily icecream production.

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3 fold expansion in next year with relocation in the outskirts as existing location couldn’t be expanded.

Problem 1)Selling the hugely expanded capacity during offseason tough. • Resumption of sales from the old outlet. 2) Higher capacity meant higher fixed costs and company came under losses. 3) Input costs soured and manufacturers decided to increase retail price fro 10 paise to 15 paise a piece • Leading to revolt and boycott by ice-candy vendors 4) Stagnating volumes and low profitabiliy made the business outlook unattractive . • Decided to move upwards into ice cream segment • Increase volumes through bulk institutional sales like selling to hotel. 5) But required upgradation in quality and increase in product offerings. • Required new equipments and qualified and experienced persons to oversee production 6) Arun icecreams break into hotel market but finances didn’t improve and faced liquidity and profitability problems • Because of bargaining power of hotels profitability was ver low .

Competitors 1) Kwality

2) Joy

3) Dasaprakash

• Next two years ,the ice cream business was almost going to break even . • But Chandramogan was searching for a winning formula for steering arun away from ordinary brands. • Chandramogan also realised acute need for formal training in marketing and personal management . • Got enrolled in Davars college for short duration management programme for working executives.

Market For Ice Cream In Chennai ICECREAM

95%

5%

•General provisional and departmental stores with deep freezers.

•Educational Institutes

•Hotels and restaurants.

•Ships at Madras port

•Social events

Arun’s Search For A Niche • When Arun trying to expand his firm then initially he looked at the 95% segment but failed to achieve. • The general departmental stores like Dasaprakash, Joy and Kwality were supplied deep freezers and were acting as dedicated retail outlets for their brands. • Those Ice cream which supplies to social events like weddings were extremely seasonal and this segment was highly brand conscious and also imposed heavy demand on Arun’s logistics management. • As Arun can‟t able to achieve in these segments, it went on to focus on the 5% segment of educational institutes and ships at the Madras port.

Cont.. • College canteen and hostel mess segment was virtually ignored by the leading brand like Joy, Dasaprakash etc. • Arun focused on the college canteen and hostel mess segment and after a several visit he was able to bag orders for supplies to large and prestigious institutes like IIT, Madras. • Arun captured the ships segment and this segment was particular about delivery and quality and was not brand driven. • Arun quickly captured most of this market and captured almost 95% of the college canteen and ship segment.

Cont.. • Having firmly establishing itself in the city college campuses, then Arun went on to approach college canteens in the interior district of Tamil Nadu. • Very soon the company had virtually 100% of the small but growing upcountry college market. • The business was slowly entering into a phase of stagnation , so he began looking out for new markets in which he could grow.

BREAKING INTO THE UPCOUNTRY MARKET • As Chandramogan continued to stay clear of the top 3 segments in the Chennai market, it was evident that the business was entering a phase of stagnation. • Began looking out for new markets for effective growth and competition.

PROBLEMS LEAD TO NEW IDEAS • Greatest growth potential seen in upcountry mofussil towns that were completely ignored by others. • Problems: cost and logistics of servicing from a central factory in Madras • Solution: Right marketing and distribution formulas!

STRATEGY FOLLOWED • A look at feasibility of supplying ice cream at weddings and other important social events in upcountry towns. • Able to achieve some measure of success: - Enhanced brand awareness - Additional sales

 Drawbacks: - no stable volumes and critical mass

STRATEGY REDEFINED • Towns identified: Pondicherry, Madurai, Kumbakonam, Sivakasi in Tamil Nadu • ment Strategy: - banners and hoardings that ice cream from Chennai would be supplied on certain pre announced days(key selling point) - Also had mailers posted to potential upmarket customers( rare at that time)

 Ice cream supplied through agents within 4-5 days of booking.  Drawbacks: -

Novelty factor began to wear off Customer response declined Fixed day selling left out a large number of potential customers(places contiguous + walk in)

BREAKTHROUGH • Realization of the fact that “ people see ments; but they seldom read it carefully” • Novel method of sit and eat parlor born in 1981. • Investment of the agent + long term distribution arrangements = franchisee • From 1981, on an average, 2 franchisee run parlors were opened every month • Over 700 outlets in Tamil Nadu, Karnataka, Kerala, and Andhra Pradesh by early 1999

WHY FRANCHISEE WORKED • Personal profile and business background of potential candidates typically looked at • People in mid or late twenties, who had preferably completed schooling with average family income and had probably failed in their early business endeavours were preferred. • Friends and relatives of existing franchisees approaching with requests for franchisee rights made the task easier • Exclusiveness, area protection, good ambience, prime location assured • By 1985, Arun emerged as the largest ice cream manufacturer in Tamil Nadu in of volumes

STATISTICS

• Turnover increased from 1970

Rs. 1,50,000

1981

Rs. 4,25,000

1999

Rs. 28 million

• Inspite of the stats, no significant presence in Chennai for Arun • Market share of 60% in Tamilnadu by 1999 and 36% in four south Indian states. • One loyal person even added 32 agents. • Franchisee family an extremely loyal lot and shared strong symbiotic relationship with the company. • On the personal front, many enjoyed a warm relation with Chandramogan

CHALLENGES IN OPERATIONS • Procurement of milk in a cost efficient manner • Seasonal demand-supply imbalance • Short shelf life

PROCUREMENT • Procurement directly from dairy farmers. • Setup of milk collection centres close to the ice cream plant. • Guaranteed procurement of minimum quantity of milk. • Offered to pay higher price in the peak ice cream season. • Payment made once in 3 days. • Sourced other ingredients such as fruits, sugar from leading wholesalers.

ARUN ICE CREAM SALES FIGURE

Months

Percentage of annual sales

April-June

34

July-September

22

October-December

19

January-March

25

CONT.. • For outward transportation took advantage of the train service of Indian railways to dispatch ice cream. • Packed the ice cream cartons tightly in small wooden boxes with thermo Cole lining and filled with dry ice to prevent melting. • In 1995 they purchased a refrigerated vehicle.

ARUN’S RAPID EXPANSION • A new plant was set up in Salem which was close to madras, Kerala and Karnataka. • It was located in the heart of Tamil Nadu’s milk belt. • Chennai and Salem plants were designed for peak seasonal production. • About 30-35 flavors were on offer at any given time. • Chennai plant required upgradation.

ICE CREAM MANUFACTURING PROCESS 1

• Selection of ingredients

2

• Making the mix

3

• Pasteurizing the mix

4

• Homogenizing the mix

5

• Cooling & Ageing the mixaddition of flavours & colours

6

• Freezing the mixaddition of fruits & nuts

7

• Packaging the Ice cream

8

• Hardening and storage of Ice cream

NEED OF THE HOUR • Revamp the distribution logistics. • Relieving factories of the responsibility of managing the direct distribution of ice cream to various destinations on a daily basis. • In 1995 a new depot was set up in Madhurai with adequate cold storage facilities. • The depot was responsible for sourcing from Arun factories, inventory and cold storage management, order taking and execution.

BRAND & PROMOTIONS STRATEGY • Quality ice cream, world-class facilities and a heritage of over 40 years in the business. • The first Indian ice cream brand to be certified ISO 9000 • More than 70 mouth-watering ice cream flavours and combinations • Unparalleled service to customers through exclusive franchise parlours

Source : https://www.google.co.in/search?q=vadilal+ice+cream&ie=utf-8&oe=utf-8&rls=org.mozilla:enUS:official&client=firefox-a&gws_rd=cr

• Fairly large sums of money for promotion and ment • Colourful banners, posters and flyers. • Media ment – TV, newspapers and magazines • Arun’s ment spending higher than the Total Turn over of “Dasaprakash” .

SALES PROMOTION ACTIVITIES • “Eat All You Can” Ice Cream Mela.(Chennai)  Encouraging consumers to try out ‘higher-end’ , expensive flavours  4200 people participated  Cost – Rs 270,000  Similar campaigns repeated in other cities like Hyderabad.

SLOW SPEED DRIVING COMPETITION • For Motorcycles & Scooters. • Conducted in association with the local traffic police ( Chennai & B’lore). • 3400 people participated. • Objective – Again to encourage consumer trial of high end flavours…leading to greater flow of two wheeler traffic to Arun’s Parlours

“PHONE AND HAVE AN ICE CREAM” CAMPAIGN • ‘Dial a number’ campaign conducted in 20 towns • 12000 callers costing Rs 1.60 Million. • Such campaigns also launched at the time of entering new markets or introducing new flavours. • Local initiatives – “Home- delivery scheme”.

PRICING STRATEGY • Cost Plus Approach • Franchisees were given at 20-25% of MRP depending on their location and the costs borne by them • Single tier distribution strategy • The overall distribution costs of Arun Ice Cream was about 3-4% of Sales, compared to 8-9% of competitors • Such measures resulted in high profitability as compared to its competitors.

FRANCHISEE MANAGEMENT • • • •

Single tier distribution Direct order on phone from the franchisees Advance payment from franchisee located in small area Franchisees were required to display the price list issued by Arun • Product sold in pre-packed factory packs with MRP marked • hip of 60-70 franchisees were canceled for violation of norms • Franchises allotted only to • Youth • Average income individuals • Those who have failed in business Franchises not allotted to highly educated and elderly

MANAGEMENT & ORGANIZATION • Recruited competent senior management • Chandramogan had foreseen that Arun would need to strengthen the senior and middle management cadres • One of his earliest recruitment was Shankar, an experienced ice cream technologist, for the production function • Another key executive during Arun’s growth phase was Adinarayan – completed Salem project in record time.

EMERGING COMPETITIVE SCENARIO • Organized sector controlled by strong regional players like Kwality in the North & East, Kwality & Vadilal in the West and Dasaprakash Joy & Arun in the South. • Small- time ice cream producers in the unorganized sector selling ice cream under local brands or private labels. • Established brands confined to metropolitan cities and later expanded to service other principal towns in the region.

Source : https://www.google.co.in/search?q=vadilal+ice+cream&ie=utf-8&oe=utf-8&rls=org.mozilla:enUS:official&client=firefox-a&gws_rd=cr

EMERGING COMPETITIVE SCENARIO • In the late 1980s, Cadbury India, entered ice cream market with its

brand “Dollops” but failed. • Unilever, through one of its Indian subsidiaries Brooke Bond India Limited(BBIL) entered processed food segment by acquiring the market leader Kissan from the UB group. • BBIL also entered frozen foods segment by establishing a new state-of-art plant at Nasik, and launched the well known international brand of Unilever- Walls.

• Having identified frozen desserts as growth area, BBIL acquired Dollops from Cadbury India and other leading brands of Kwality and Milkfood.

EMERGING COMPETITIVE SCENARIO • In February 1997, the Indian government announced de-reservation of ice cream manufacture. • Companies like Hindustan lever could set up world class ice cream manufacturing facilities with Unilever‟s technological and financial strenght. • Even as Arun emerged at the top spot in the four southern states, Chandramogan had to contend with the new competitive dynamics and needed to re-work his own strategy.

OWNERSHIP STRUCTURE • • • • •

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Chandramogan started as Partnership firm styled Chandramohan & Co. in 1970. In March 1986 , HATSUN FOODS Pvt. Ltd. company was incorporated in Chennai and took over the business of Chandramogan & Co. on April 30, 1986 The brand name ARUN was later transferred to HFPL with a royalty charge of 1% on gross sales. In 1995 August , the company’s name was changed to HATSUN MILK FOOD PRIVATE LIMITED (HMFPL) and it was converted to a public ltd. Company In JAN 1996, HMFL was taken public by an Initial Public offering of 1.80 million shares @ Rs.45 per issue and raised their paid-up capital from 0.5 million to 38.4 million and hence its net worth including share ed to 84.0 million in a year. Due to reservation of ice-cream manufacture, HMFL was conceived to be a marketing company and sourced its ice-cream requirements from 2 SSI units ATLANTIC FOODS in Salem HATSUN FOOD company in Chennai.

STRATEGIC CHALLANGES • The aggressive entry of UNILEVER group in ice-cream and frozen market with acquisition of well-known regional brands(BBIL).

dessert

• They were the giants into the market with wide variety of product portfolio and financial resources and can sustain into the market for a long time even without making profits. • HLL announced strategies and were aggressively penetrating in the market to be the market leader.

• Development of a Competitive strategy as soon as possible.

PROBLEM IDENTIFICATION • The dramatic developments in the marketplace could seriously undermine Arun’s growth plans. • The decision whether to aggressively reinforce Arun’s competitive profile and further expand its franchise network in the face of HLL’s competitive onslaught or pursue alternative business opportunities.

RECCOMENDATIONS • Extensive consumer research into the development and application of relevant technologies innovatively in new product formulation and refrigerated product handing can be done. • New standards can be set in of Quality. • It can increase the network of franchisees geographically by easing norms of MRP guidelines and payment . • Advertising can be done to increase customer base

CONT.. • Promotional offers like BUY ONE GET ONE FREE, DISCOUNT ON NEXT VISIT and FREE HOME DELIVERY can be introduced.

• It should compete with global brand in of pricing and varieties of flavors. • Healthy variant of the ice-cream (LOW SUGAR, LOW CALORIE) can be introduced in order to convert the health conscious non buyers into possible prospects.

ICE-CREAM MARKET IN INDIA Ice Cream Market in India 2009-15 1000 900 800 700 600 500 400 300 200 100 0

US$ million

MARKET OUTLOOK  Ice-cream consumption in India is expected to increase from US$ 450 million in 2009 to US$ 905 million in 2015 at a CAGR of 12%  North and West India s for 70% of total ice-cream consumption in India with Ahmedabad and Delhi ing for 30% of the total consumption  Vanilla, Strawberry and Chocolate for 50% of the total consumption in 2011 REASONS FOR GROWTH  Rising disposable income  Largest middle class population in the world  One of the fastest growing economies in the world  Acceptance of global trends such as going out for eating icecream KEY TRENDS  International brands such as Baskin Robbins and Cream Stone have been increasing their outlets in  Availability of large number of options – from traditional ‘Kulfis’ to new ‘gelatos’ and ‘flavored yogurts’  Growing trend of going out to eat ice-cream with increasing health consciousness especially among young urban population, higher focus on fat free, low sugar and pro-biotic variants  Reducing impact of seasonality with people preferring to go out and consume ice –cream in winter season as well

Non-Branded Branded

787

12% 691

293

610 450

495

281

548 273 265

250

200

255

240

260

288

346

418

506

612

2009 2010 2011 2012 2013 2014 2015

Market Share (Branded), 2011

Others 35%

Cream Bell 10% Source: Business Standard, Indian Express and estimate

905

Amul 35% Mother Dairy 10%

Vadilal 10%

Current Competition Major Players •

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Fiercely competitive due to attractive economics with profit margins ranging between 30-50% Organized sector comprises GCMMF‟s Amul, HUL‟s Kwality Walls, Mother Diary, Baskin Robbins and a number of regional brands Amul is the market leader and is at the forefront of targeting the rural market For most national players viz. GCMMF, HUL and Mother Diary, revenue from ice cream s for a small portion of their total revenues segment: – Baskin Robbins is the single largest ice cream brand – New entrants include Amul, Movenpick, Haagen Dazs and Snowberry

Market share

55%

Unorganized

Organized

45%

Vadilal GCMMF

15% 37% 14% Mother Diary

16% Others

13% 5%

HUL Baskin Robbins

Source: Business Line “Bringing in the creamy layer”, August 2008; magindia.com “Amul to launch new ice cream range”, October 2008

Swot Analysis Strength

Weakness

1.Good product range include various flavors, party packs, sticks, cones etc.

1.Growing competition form international and other brands means limited market share

2.Good quality and packaging.

2.Limited international presence compared to leading global brands

3.Offers over 200 products across India

Opportunity

Threats

1.High End ice-cream to tap the higher income group also

1.Kulfi in rural markets

2. Tie-up with food chains, restaurants 3. Mobile vans for better visibility

2. Local ice creams and sweet dishes 3. Health conscious people refraining from sweets

as

Porter five forces analysis • Barriers to entry – The two favorable factors are the opportunity for product differentiation within the super segment and the importance of corporate experience in all phases of the operation (production, distribution, and marketing). The most important down side factor is that consumer switching cost is nil. • Power of buyers – With ice cream there are virtually no important end consumers. However if one focuses on the consumer as retailer then the importance of the few powerful and growing grocery chains represents a significant hurdle. This is offset by the almost complete lack of potential for backward integration and the relative insignificance of ice cream to this customer group. • Power of suppliers – The most important factor here is the importance of quality. The agribusiness in India is still very much in the developmental stage and there is little concern, at present, over the dairy producers moving into ice cream production.

Porter five forces analysis •

Availability of substitutes – The concept of comfort foods in India is still very much in the incubation stage; as such the primary role of ice cream is that of a sweet desert with little or no emotional value. Accordingly, there is a wide variety of alternative products. The most notable alternatives are kulfi and faludeh. Kulfi is the traditional desert of India.

• Government actions – While there is no threat that the government will enter the industry the primary concerns are focused on the growing economic tensions between states and between states and the national government. The need to generate additional government revenues could prove to be the motive to reinstate industry restrictions or otherwise alter the basic economics of the industry. • Rivalry – By almost every indicator the rivalry is intense and will continue to grow. There are just a few large firms, the industry is expected to grow rapidly, and the strategic stakes are large not only for the MNC‟s attempting to enter the market but for domestic firms as well.

After 1998 …. •

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Huge competition from HLL and consolidation of ice-cream sector, growth opportunities were limited. Therefore the company expanded there business network across south India with more than 1050 sit and eat parlor. The company focused on innovation and experimentation .Therefore launched 70 new flavors with Color Magic, an ice cream that changes colors.

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Arun ice-cream crossed the Indian border and became international with establishing plants in three nations • Seychelles(70 per cent share of ice cream market in Seychelles) • Fiji • Brunei

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In 2012 the company came up with its segment icecream range ibaco which has opened its stores in three metros namely : • Chennai, • Bengaluru • Delhi

Cont… •

• • • • • • •

Icecream business is seasonal in nature with huge demand in summers with average demand in winters. Therefore the company faced the problem of huge unutilized milk procured from the farmers. Arun ice-cream came up in diary business with launch of „AROKYA MILK‟ This strategy was the game changer for Mr.Chandramogan as company‟s revenue increased exponentially . Company followed it with various diary products like butter, cheese ,paneer,ghee and curd. Hatsun Agro Products Ltd. came up with Gomatha Milk. Arun icecream focused on marketing and had huge television marketing ads all the years which helped to build the brand . In 2013 Hatsun Agro India Ltd. Crossed Rs.2100 crore revenue. „The Hindu‟ coined him as “THE ICECREAM MAN OF INDIA”

Learnings •

For an efficient business running capability one must know the nuances of it and this is why Chandramogan felt the need to an MBA course

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Supply chain Management is an important aspect to be kept in mind as the success of the business hugely depends upon it and Chandramogan‟s business flourished due to his efficient supply chain strategies.

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Finding a niche in the already competitive market is difficult and time taking but proper pricing strategies and dedicated team work can make it possible. This is what Chandramogan did when he first captured the college and ship market for ice-cream in the south and later became quite well known in several other sectors.

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Being cost efficient increases profits for the companies. Chandramogan did not employ an elaborated 3 tier supply chain system and hence saved huge costs instead his vehicles delivered directly to the retail outlets from the manufacturing units.

CONCLUSION The essence of marketing a marketing strategy is to understand the changing needs and preferences of the consumer and to cease the opportunity to shape and fulfill them. Arun Icecream effectively understood those needs and formulated some strategies that were stable and would help them in the long run to strengthen the company’s position.

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