Ice Creams: Yet to ‘unfreeze’ - Views on News from Equitymaster

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Ice Creams: Yet to ‘unfreeze’

Sep 19, 2000

The Indian ice cream market is very small (estimated market value: Rs 3-4 bn). This is surprising considering that India is a warm country and as such the market for ice creams should have been huge. The government’s policy of reserving it for small-scale industry (which neither had the ability to offer quality products, nor the finance to develop the infrastructure to distribute the same) seems to be one of the main reasons for this. Another reason for this small size is that ice cream being a impulse purchase product, is not yet accepted as snack food, or part of a frequent consumption habit. Also, though awareness is high, but penetration is low even in urban areas as ice cream is costly (a scoop costs Rs. 8-10). Also, Indians traditionally prefer eating milk based sweets during festivities and hence, consumption of ice cream suffers. Lack of adequate cold storage facilities across India also hinders ice cream consumption.

As a result, per capita consumption is languishing at 0.11 litre (equivalent to one scoop!). This is almost 1/3rd of the per capita consumption of neighbouring Pakistan.

However, there is hope yet for this segment. The market, which was deregulated in FY96, is highly fragmented with a host of regional and local products. Retail sales comprise 70% of the total market, while western India is the largest market (40%). With deregulation in place, the market is expected to grow at 10-12% over the next decade.

Hindustan Lever Limited (HLL) controls over 50% of this market (Kwality Walls). It dominates across India except in the western region (i.e. Maharashtra, Gujarat). Vadilal, which controls 15% of the total ice-cream market, dominates the west with 30% share. Amul has already garnered a 7% share and is emerging as a strong contender because of competitive pricing of its products.

In a bid to increase market penetration HLL has earmarked Rs 2 bn for investing in cold storage chains across India. This is likely to spur growth in the segment. But how the rural consumers take to this remains to be seen. Also, ice creams will still have to contest with milk based sweets and chocolates for a place on the Indian consumers dessert menu.

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