Natural- Origins

*1984- Fell out with brothers, opted out of Gokul's

*On his own, focus on traditionally made ice creams

*Completely natural, no artificial flavours or preservatives

*Industrial ice creams- 2 key players- Kwality & Vadilal

*Investment- Rs 3L (Settlement+ Own+ friends), Juhu outlet

*"Mumbai gives everyone a chance, so I was not scared to experiment here. I hired 3 people and
insisted my just married wife also join me in the business. I did not spend too much doing up the
interiors; I kept my outlet simple. I had faith that my products would speak for me."

Defining moments
Raghunandan Srinivas

Kamath

1960s- Failed Class VII, in

Mangalore, packed off to

Mumbai

1984- Fell out with

brothers, opted out of ice

cream business 'Gokul's'

.1994- Lost everything in

tax arrears to IT Dept,

lesson learnt led to

expansion

Indian Ice cream market

. Indian ice cream market Rs 2,000 crore @ 20%

. India PC ice-cream consumption 106 ml pa, US 22 liters, scope

. Organised players 45% share (Rs 900 crore)

. Gujarat 18% share- Rs 162 crore, Ahmedabad Rs70 crore

• Vanilla+strawberry+chocolate=70%; Butterscotch+dryfruits=20%

Catchment- After dinner, movies, malls; home delivery growing

. Unorganised sector- Kulfi, candy, ice fruit reign

Key Competitors
 Amul
 Kwality Walls
 Vadilal
 Mother Dairy
Manufacturing facility
Sole factory- Charkop, Kandivili- 4500 sqf

No equipment to make traditional ice cream or peel fruit

Developed equipment to enhance the process

"Sitafal was the biggest challenge as it has to be manually

deseeded. One person can deseed only 2 kgs in a day
manually. Eventually, we developed a machine to do it, and
now we deseed over 500 kg sitafal everyday."

"As we use lots of fresh fruits in our ice cream but do not use
any preservatives, distribution is a key challenge as fresh
stocks only have to available at our outlets."

Batch production to ensure freshness

Sourcing
• Dedicated suppliers for
milk and sugar
Exotic fruits from fruit
growers
Sitafal-Saswad, Mango
Ratnagiri
Regular fruits and dry
fruits from major
markets
• Local sourcing

Flavours
15 fruit flavours in 3 months
Combining traditional ice cream with fruit- super hit
Instant hit- Sitafal, first sunday after launch- 300 scoops
Extension- tender coconut, chikoo, jamun, musk-melon, papaya,
apricot, water melon, melon, pineapple, jack fruit

"We became popular purely by word of mouth"

 2009- 100 natural flavours, now combinations
NPL- raw mango flavour 'Pickle'- lapped up
Consistency in flavours- biggest challenge

4Ps
Product- Fresh and pure,
traditionally made ice cream

Price- VFM

Promotion- Word of Mouth

Place- Franchised outlets

PESTEL  Analysis
 Natural Ice Cream case study PESTEL analysis includes macro environment factors that
impact the overall business environment – Political, Economic, Social, Technological,
Environmental, and Legal factors.

Attaining the Next Orbit: Dilemmas of a Family Managed Business - Natural Ice Cream case
study (referred as “Cream Ice” for purpose of this article) is a Harvard Business School (HBR)
case study covering topics such as Innovation & Entrepreneurship and strategic
management. It is written by Pallavi Mody, Raveendra Chittoor and shed light on critical
areas in field of Innovation & Entrepreneurship, Innovation that the protagonist in the case
study is facing.

Managers at Cream Ice need to examine three inter-related environments in order to

come up with an effective strategy. The three inter-related environments are –
industry environment in which the company operates in, the geographic market or
country in which company operates, and wider socio economic / macro environment.
PESTEL analysis is mainly the assessment of macro environment factors.

Importance of PESTEL Analysis

Strategy planning process often requires five steps –

1. Choosing the vision, mission and the reason of existence for Cream Ice.
2. Analyze the Cream Ice external competitive environment to identify opportunities
and threats. PESTEL analysis is critical to understand the external threats &
opportunities arising because of the macro environment developments. Changes in
macro environment forces can impact the Porter Five Forces & industry
attractiveness. Thus significantly impacting the ability of Cream Ice to build
sustainable competitive advantage

3. Analyze Strengths and Weaknesses of Cream Ice.

4. Developing strategies that can capitalize on Cream Ice strengths and help mitigate
weaknesses and impact of threats of macro-environment.

5. Execution of the strategy and building a feedback loop, using which managers at
Cream Ice can fine tune processes and strategies going forward.

The Industrial Organization (I/O) approach advocates that for sustainable competitive
advantage external factors are as important as internal factors of the Cream Ice.
According to Michael Porter organizational performance is to large extend
determined by various industry forces.

Political Factors 
The political factors play a huge role in not only investment decision by transnational
corporations but also by companies such as – Cream Ice. Political environment and other
factors not only impact the cost of doing business but also long term sustainability. Some of
the political factors are – governance system, democracy & institutions, military coup
chances, probability of armed conflict, law and order in market etc.

Political Factors that Impact Attaining the Next Orbit:

Dilemmas of a Family Managed Business - Natural Ice
Cream
- Role Local Governments Play – Local governments are highly influential in the
policy making process and implementation as most of the policies and regulations
are implemented by the local government as enforcement agencies mostly report to
local government in their own states regarding various laws.
- Unrest within the Country & Chances of Civil Unrest – We don’t think that Cream
Ice business operations are facing any dangers from any kind of civil unrest or
internal militant operations in the country.

- Role of Non-Government Organization, Civil Society & Protest Groups – The

country has a vibrant civil society community and Cream Ice should build bridges
with them and seek out areas of co-operations. Civil society groups are influential
not only in policy making but also in building a society wide narrative.

- Likelihood of Entering into an Armed Conflict – From the information in the

Attaining the Next Orbit: Dilemmas of a Family Managed Business - Natural Ice
Cream case study, I don’t think there is a likelihood of country entering into an
armed conflict with a neighboring country.

- International Trade & Other Treaties – The country has a good record of adhering
to international treaties it has done with various global partners. The government of
each party has adhered to the treaties done by previous governments, so there is a
consistency in both rule of law and regulations.

- Segregation of Political Responsibilities between Different Government Agencies –

There are numerous government agencies which reduces the risk of overwhelming
pressure by one agency. But on the flip side it does increases both time and cost of
doing business and getting certifications and clearances.

- Government Regulations and Deregulations – The government is adhering to all the

rules and regulations under World Trade Organization norms. There is consistency in
both policy making and implementations of those policies.

- Size of Government Budgets – both Local Governments and National Government –

The government at both national level and local levels are running deficit budgets
which is boosting growth in the short term but may lead to increase in inflation over
medium term. The bond rating of national government is investment grade.

  Economic Factors 
Economic factors of a country and region have a direct impact on the potential attractiveness
of a given market. Some of the economic factors that Cream Ice should evaluate both in the
present market and one in which it wants to enter are – inflation rate, GDP growth rate,
disposable income level etc.
Economic Factors that Impact Attaining the Next Orbit:
Dilemmas of a Family Managed Business - Natural Ice
Cream
- Inflation Rate – The inflation rate can impact the demand of Cream Ice products.
Higher inflation may require Cream Ice to continuously increase prices in line of
inflation which could lead to lower levels brand loyalty and constant endeavors to
manage costs. Cost Based Pricing could be a bad strategy under such conditions.

- Level of Household Income and Savings Rate – Increasing consumption and

stagnant household income in United States had led to credit binge consumption. It
has decimated the culture of savings as people don’t have enough to save. Cream Ice
needs to be careful about building marketing strategy that is dependent on
“Purchase on Credit” consumer behavior.

- Fiscal and Monetary Policies – The Republican government tax break culture has
increased the deficit and it can lead to fiscal trouble for the economy in coming
years.

- Price Fluctuations in both Local and International Markets – Compare to the level of
quantitative easing in last decade the prices of Cream Ice products and prices of
overall products have remained sticky in the US market. Cream Ice should consider
the fact that at deficit levels of United States in an emerging economy can lead to
rampant inflation and serious risks of currency depreciation.

- Foreign Exchange Rate – Number of companies have incurred losses in past few
years because of forex risk in – Venezuela, Brazil, and Argentina. Cream Ice should be
careful about the history of forex risk before entering new market. Many US
companies have incurred losses in Mexico in regular forex crisis in that country.

- Government Spending – As mentioned in the political factors, government of the

country is running deficit budgets. The implication for Cream Ice is that it can boost
sales of its product in short run but also expose Cream Ice to medium term forex and
currency depreciation risks.

- Demand Shifts from Goods Economy to Service Economy – The share of services in
the economy is constantly increasing compare to the share of manufacturing, goods,
and agriculture sector.

Social Factors
Social factors such as demography trends, power structure in the society, women
participation in workforce etc have immense impact over not only the country's economy but
also on workforce talent availability and level of consumer demand.

Social Factors that Impact- Attaining the Next Orbit:

Dilemmas of a Family Managed Business - Natural Ice
Cream
- Immigration Policies and Level of Immigration – What are the immigration policies
of the country, what is the level of immigration, and in which sectors immigration is
encouraged. This will enable the Cream Ice to determine – if required can it hire
talent globally to work in that particular market.

- Education Level in Society – Education level of the society impacts both the quality
of jobs and level of income. High level of education often results in better jobs,
higher income and higher spending on complex and aspirational products.

- Attitude towards Health & Safety – The attitude towards health and safety is often
reflected in the quality of the products and cost structures of manufacturing
processes. Cream Ice has stringent norms for health and safety norms so in emerging
economies it may have to compete with players who don’t have high cost structures
that of Cream Ice.

- Birth Rate – Birth rate is also a good indicator of future demand. USA has avoided
the European Union style stagnant economy on the back of slightly higher birth rate
and higher level of immigration.

- Demographic Trend – The demographic trend is one of the key factors in demand
forecasting of an economy. For example as the population of USA and EU is growing
old the demand for products mostly catering to this segment will grow. Cream Ice
should consider demographic trends before new product developments and
integrate features that cater to this segment. As population is ageing it will require
less tech intensive products.

- Gender Composition in Labor Market Cream Ice can use gender composition of
labor market to understand the level of liberal nature of the society, women rights,
and women’s say in matter of societal issues and consumption decisions. The gender
composition of labor market is a good indicator of disposal income of household,
priorities of the households, and related needs.
- Level of Social Concerns & Awareness in Society – Higher level of social concerns in
the society often result higher consumer activism and pressure from non-
governmental organizations, & pressure groups.

- Societal Norms and Hierarchy – What sort of hierarchy and norms are acceptable in
society also influence the types and level of consumption in a society. In highly
hierarchical societies the power of decision making often reside at the top

Environmental Factors
Environmental factors are fast gaining traction not only among consumers but also among
regulators and policy makers. Climate change and changing ecosystem is leading to the
extinction of more than 20% of species on the planet by the turn of this century.

Environmental Factors that Impact Attaining the Next

Orbit: Dilemmas of a Family Managed Business - Natural
Ice Cream
- Corporate Social Responsibilities Culture – Are Cream Ice present CSR efforts
applicable in the new market or does it needs to have new initiative to cater to the
prospective market.

- Level of Consumer Activism Regarding Environmental Concerns – Cream Ice needs

to know the level of consumer activism regarding environmental concerns is. It will
help Cream Ice in both developing environmentally friendly products and thwarting
PR stumble blocks.

- Environmental Regulation Impacting Absolute Cost Advantage Dynamics in the

Industry.

- Influence of Climate Change – How climate change will impact Cream Ice business
model and supply chain. For example if the supply chain is not flexible it can lead to
bottlenecks if shipments from one part of the world are delayed because of sudden
climate shift.

- Per Capita and National Carbon Emission – What is the per capita carbon emission
of the country and what is the overall level of carbon emissions of the country. This
will help in better predicting the environment policy of the country.
- Recycle Policies – What are the recycle policies in prospective market and how
Cream Ice can adhere to those policies.

- Influence and Effectiveness of Environmental Agencies – The role of environment

standards enforcement agencies is critical in safeguarding norms. But often in
emerging countries these agencies delay the process as a tactic to extract bribes.
Cream Ice should be aware of presence of such practices in a country.

Legal Factors
Legal factors often govern – conditions to enter the market, laws to operate in the market,
and procedure to resolve any dispute with other stakeholders. If the legal system is not
strong then Cream Ice can face numerous challenges – from consumer petitions to
shakedowns from authorities

Legal Factors that Impact Attaining the Next Orbit:

Dilemmas of a Family Managed Business - Natural Ice
Cream
- Employment Laws – What are the employment laws in the country and are they
consistent with the business model of Cream Ice. For example Uber employment
system is not consistent with French laws and it is facing challenges in the country.

- Consumer Protection Laws – Cream Ice needs to know what are the consumer laws,
what is the rate of enforcement, what is the attitude of authorities towards consumer
protection laws, and what is the role activist groups in enforcement of consumer
protection laws.

- Data Protection Laws – Cream Ice needs to assess what are the data laws in the
country and what it needs to do to comply with them. For example most of EU
countries now want the EU citizen data to be saved in EU countries only.

- Securities Law – What are the securities law in the country and what are the
conditions to list the company on national or regional stock exchange.

- Time Taken for Court Proceedings – Even if the country has best of the laws, it
doesn’t mean much if they can’t be enforced in a timely manner. Cream Ice should
do a primary research regarding how much time it often takes to conclude a court
case in the country given the sort of legal challenges Cream Ice can face.
- Laws regarding Monopoly and Restrictive Trade Practices – As a new player Cream
Ice shouldn’t be worried about the monopoly and restrictive trade practices law.

- Intellectual Property Rights Protection – Cream Ice should assess the level of
protection that intellectual property rights get under the legal system of the country.