Though India has a low per capita ice cream consumption of 300 ml per annum, the trend is slowly

changing due
to a number of reasons. DARE explores the dynamics of the business.

Indian summers are synonymous with ice creams. Come summers, and you will see a number of colorful

pushcarts selling the choicest of ice creams in numerous flavors from the traditional vanilla and chocolate to
unusual varieties like Mother Diary’s Shahi Nazrana. If that doesn’t baffle you then the ice cream range definitely
would, for example the ice cream range for the children would be entirely different from that for the teenagers or
for that matter adults. Or, for those who like to have ice cream in peace, there are a number of ice cream parlors
that are opening shop.

But did you know that a 100 ml scoop of your favorite ice cream that you ordered may contain upto 50% air! This
makes the business a highly profitable venture to get into – sometimes, the profits can go upto 100%! However,
there are several challenges to this business as well. In this story,
DARE attempts to find out the dynamics of the business.

The Ice Cream Industry: An Overview

Looking at some industry facts first. In 2007, the global market of
ice creams was pegged at $61.6 billion in terms of retail value or
15 billion liters in terms of volume. Of this, the Asia-Pacific ice
cream market was worth $13 billion in terms of retail value and
5,128 million liters in terms of volume. Coming to India, the Indian
ice cream industry is currently estimated to be worth Rs. 2,000
crores, growing at a rate of approximately 12%. RS Sodhi, Chief
General Manager of Gujarat Co-operative Milk Marketing
(GCMMF), the makers of ‘Amul,’ explains, “The ice cream market in India can be divided into: the branded
market and the grey market. The branded market at present is 100 million liters per annum valued at Rs. 800
crores. The grey market consists of small local players and cottage industry players.” In 2008-09, in the branded
ice cream market, Amul held the number one spot, with a market share or 38%, followed by Kwality Walls at
14%, Vadilal at 12% and Mother Diary at 8%.

Despite a decent growth rate, the ice cream industry faces the challenge of low per capita consumption.

Industry at a glance
The ice cream industry in India is worth Rs. 2,000 crores

The industry can be divided into the branded market and the unbranded market. The branded market at present is 100 million
liters per annum valued at Rs. 800 crores

In 2008-09, in the branded ice cream market, Amul held the number one spot, with a market share or 38%, followed by
Kwality Walls at 14%, Vadilal at 12% and Mother Diary at 8%
The per capita consumption of ice cream in India is approximately 300 ml, as against the world average of 2.3 liters per
annum
Vanilla, Strawberry and Chocolate together constitute approximately 60% of the market.

The per capita consumption of ice creams in India is just 300 ml per annum, compared to 22 liters in the US, 18
liters in Australia, 14 liters in Sweden. India is a way too far behind even in terms of the world average per capita
ice cream consumption of 2.3 liters per annum. This when India is a country with hot climate with a young
population. Pankaj Chaturvedi, Executive Director of Baskin Robins, explains “Indian cuisine has a huge range of
desserts in its mix. Ice cream always competes against these for attention.” Besides desserts, ice cream also
vies for attention with other like foods for example in summers with cold drinks, coffee, juice, etc.

Another trend that is witnessing a change is the seasonal nature of the industry. Having said that, the peak
season for ice cream still remains the summer months of April-June and dips in the months of November-
February. According to the industry players, this trend especially holds true for the North and the Western parts
of India. According to Pankaj Chaturvedi, “The variation in sales for Baskin Robins can range from 15–30% from
season to off season depending on geography and brand.

The Ice Cream Business

The ice cream industry has traditionally grown at a healthy rate of 12% year-on-year. “The growth in Ice cream
industry has been primarily due to strengthening of distribution network and cold chain infrastructure. Channels
such as Mobile Vending Units have been increasing year on year to reach out to a larger set of consumers.
Besides, consumers also have the choice of trying out varied product offerings from different brands to keep
them excited,” Paul Thachil, CEO – Dairy & Foods, Mother Dairy Fruit & Vegetable.

What exactly is defined as ‘ice cream’ under the guidelines? The Prevention of Food
Adulteration (PFA) Rules, 1955 define ice cream as “a frozen product that contains
not less than 10% milk fat, 3.5% protein, 36.0% total solids, and 0.5% permitted
stabilizer and emulsifier.” Players who deviate from these norms tactfully call their
product "frozen dessert.” However, it is illegal to sell “ice cream” which have
contents below these specified standards.

The basic steps in the manufacturing of ice cream are generally first blending the
ingredients, pasteurization, homogenization, aging the mix, freezing, and hardening.
Now, during the hardening process, the ice cream mixture is incorporated with air.
This is done to make the product ‘light’ and ‘creamy’. This is necessary as without
air, ice cream would be like frozen ice. Now the ice cream can contain a considerable quantity of air, even up to
half of its volume. This perhaps makes ice cream a business with high profit margin.

Manish Vithalani of Space Dotz informs, “A ice cream mix (consisting of milk, emulsifier, sugar and so on) costs
about Rs. 60-65 a liter. And in one liter you can add up to one litre of air. Therefore, per liter the mix would cost
you approximately Rs 32. If you take an 150 ml cup, you can make 13 cups of ice cream from one liter of mixture.
Calculating on that basis, the per cup costing comes to about Rs 5. Now add to that Rs 5 worth of packaging
cost, electricity, labor, transportation, advertisement cost etc. It comes to approximately Rs 10 per cup.”
Depending on the variety, the profit margin therefore can go up to even 100%. While for bigger players, the
distribution and advertising costs eats into the profit margins, for smaller players, it is the volumes that matter.

The ice cream industry growth has been primarily

due to strengthening of distribution network and
cold chain infrastructure. Channels such as
mobile vending units have been increasing year-
on-year
Paul Thachil
CEO – Dairy & Foods, Mother Dairy Fruit &
Vegetable

Besides selling their products through kiosks, parlors and push carts, a significant part of the revenue comes
from corporate sales. Says Pankaj Chaturvedi, “About 55% of our business is contributed by exclusive ice cream
parlors and kiosks while 30% is from corporate or food service (as we categorize it) sales. The rest comes in
from retail and exports.” A chef at a prominent five star Delhi hotel tells us their banquet section itself buys 6
gallons of ice cream from manufacturers on a daily basis. The demand, he informs, goes up to 10 gallons during
peak season.

What is the cost of setting up a small scale ice cream manufacturing unit? Manish Vithalani says, “The cost for
setting up a small scale ice cream plant could come to approximately Rs. 10 lakh, including the cost of a ice
cream plant, labor (3-4), storage freezers, and so on. This price is not including the land cost.” Of late, a number
of players who have entered the segment are playing on innovative aspects, for example, natural flavors made
from fruits. Some players like Mumbai-based Space Dotz are also coming up with newer technology. According
to Dilip Jagad of Space Dotz, “Unlike the normal ice cream, our product comes in the form of balls. Besides, the
product has no air content and uses cryogenic technology, used in rocket science.” Another noteworthy
innovation was the pro-biotic and low fat ice cream bought into the market by Amul.

The Challenges
There are several challenges that affect the industry adversely. As mentioned earlier, the industry players not
only face competition from their competitors, but also from other like foods. Though changing, consumers still
consider ice cream as a dessert and a side item. Sharing his experience, Sidharth Jaiswal of Joos, a juice bar
chain, says, “We had introduced ice creams on an experimental basis in our juice outlets in Ahmadabad. We
observed that consumers ordered ice creams as a side item or only when they were accompanied by children.
We eventually decided not to move ahead with it.” Moreover, of the ice cream consumption in India, nearly 60%
is accounted to by three flavors of vanilla, strawberry and chocolate. And to be on the safer side, major players
tend play around these flavors only. For big players, regional competition from smaller players is another major
issue.

Another major problem faced by the industry players, especially while expansion, is poor infrastructure such lack
of cold storage and in case of rural penetration, even erratic power supply becomes an issue. This is especially
true for big players. Manish Vithalani says, “Besides the presence of other players, another hurdle is the the high
rent charged for floor space, especially in malls. This also becomes a problem when we try to expand.”