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    Wac Case 1 Amul Ice Cream

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    Khursheed Alam
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    of 12
    IBS Research Center MKS0136IRC. AMUL ICE CREAM: MARKETING STRATEGY INTRODUCTION ‘Amul brand of ice creams marketed by Gujarat Co-operative Milk Marketing Federation? (GCMMF), in fiscal 2003, recorded a huge sale of 27 million (mn) litres with revenue escalating 6.67% relative to the previous year to Rs. 160 crore. Amul, within 6 years of its launch not only defeated multinational brands of ice creams in Indian market but also dislodged the existing market leader Hindustan Lever Limited (HLL) promoted Kwality Walls from the numero uno position. The ice cream market was completely different two years ago with both Kwality Walls and Amul running almost neck-to-neck. The turnaround achieved by Amul made experts and analysts to speak highly about the Amul’s marketing strategy. Amul's success was attributed to the successful planning and implementation of its marketing mix’ tactics After wooing masses with its economy range, added premium range to its product Portfolio. To win the ice cream war, Amul emphasized more on non-traditional distribution network as its traditional distribution network was not suitable for it. It distributed ice creams through local kirana stores, chemists, bakeries, STD booths and supplied them with deep freezers. It also strengthens its distribution chain by increasing the number of pushcarts‘. The ‘Real’ ice cream of Amul promoted as “Swadeshi’, touched the heart of millions of Indians. Amul's success was attributed to the successful marketing mix, as it satisfied the consumers in the target markets. Thus, “Amul has achieved critical mass and emerged as a market leader"®. EVOLUTION OF INDIAN ICE CREAM INDUSTRY ‘The Indian ice cream industry, since its inception, was regulated and later reserved for the small-scale sector. Such feservations restricted the development of an organized sector in this industry. During the initial six years of Indian economic liberalization Process, which started in 1991, not many changes were initiated for the development of the industry. It remained a protected field for the small-scale players, who in turn did nothing for the growth of the industry. Lack of competitiveness in terms of | Amul is the mother brand of GCMMEF. The brand name ‘Amul, was derived from the Sanskrit word Amoolya, meaning priceless. It is the brand of Gujarat Co-operative Milk Marketing Federation (GCMMF), under which the Rs 2,400-crore dairy co-operative markets Buttor, Milk Powder, Ghee, ‘Cheese, Chocolates, Ico cream, Nutramul (health drink), Milk, and certain other food products. Amul products were in use in Indian homes since 1946. Gujarat-based GCMMF was the India’s largest food products marketing organization. It is a state level apex body of milk cooperatives in Gujarat. It has 14 affiliated dairy plants with total milk handling capacity of § million litres per day and milk drying capacity of 450 Mt per day. Ithas 12 milk Processing units located at different districts and has 2 million members, who belong to 10,000 yillage dairy cooperative socictios. _ Marketing Mix is a combination of Product, Place (distribution channels), Price and Promotion. {Mobile van selling ice creams. j,Gomment by R $ Sodhi, General Manager, GCMMF. Roy, Paulomi; “The ice-cream War Hots Up”, httpiin.rediff.com, March 20, 2004, This Case was written by Majumdar S and Roy T, IBS Research Center. Wie intended fo be used as he basis Tor cass lscussion rather than to illustrate either effective or inffective handling ‘of @ management situation, The case wes Compited from published sources. (©2009, 18S Research Centr. ‘No pat of this publication may be copied, stored, transmitted, reproduced or distibuted In any form or medium whatsoever without the permission ofthe copyright owner. License to se for IBS Campuses ony. Sem I, Class of 2016-18. Onl for rn, not for online circulation, MKS0136IRC manufacturing, product innovation and marketing, resulted in the emergence of small ice cream makers with local brands and fragmented market. Even the sole national brand, Kwality Ice Cream Company owned ‘Kwality’ brand, did not have substantial market share to be truly termed as national brand. Moreover, the shortage of reliable power supply in most parts of the country and the slow pace of development of cold chains? hindered the creation of a nationwide brand in this segment, The scenario started changing when the Indian Government de-reserved the ice cream industry in 1997’. The regulated industry structure did not provide ‘enough scope for scaling up. Besides, India had a very low per capita consumption (PCC) of ice cream, though Indian climatic condition favors ice cream consumption. Thus, the country had a large untapped potential. Multinationals companies (MNCs) like Swiss-based Movenpick, the Allied Domecq promoted Baskin Robbins, lowa-based Wells Dairy Inc. (owns Blue Bunny brand) and French-major Candia (owns Cream Bell brand), sensing the huge growth opportunity, made entry into the Indian market. However, til 2000, three years after the deregulation, the market was largely dominated ‘by the small Manufacturers. During this period, the organized sector accounted for only 25% market share in the Rs.1000 crore ice-cream industry. The MNCs, who ventured into India with great optimism, had to scale down their expectations. A MIC player pointed out that the price had been the main hindrance. The existing national brand, Kwality Walls, was wagering a war with another national brand, Anand-based Gujarat Co-operative Milk Marketing Federation's (GCMMF) brand, Amul. During 1997-2003, Kwality Walls’ volume sales and turnover declined by 65% and 39% respectively, while those of Amul catapulted by 575% and 484%, respectively (Refer Exhibit 1). After 2000, the market expanded at 20% per annum to become over Rs. 2000 crore industry in 2004. In the changed scenario, Amul consolidated its market leadership with 32% market share, while Kwality Walls stood at a distant second with dismal 8% market share (Refer Exhibit 2) MAJOR PLAYERS IN THE INDIAN ICE CREAM MARKET In the post-independence era®, the Indian ice cream industry witnessed a retarded growth in the regulated industry structure. The ice cream market was fragmented with smaller regional players catering to the market with their local brands. As the industry was reserved for the small-scale sector, the emergence of any national brand was retarded. This uncompetitive nature of the market adversely affected the promotion of ice cream consumption. Marketing, advertising and sales promotion were neglected. The PCC of ice cream in India was 250 ml per annum, whereas its average global consumption was 2 litres. Even countries like Sri Lanka and Pakistan, consumed much more than India. The pioneer of the ice-cream industry in Northern India was “Kwality’, promoted by Delhi” -based Kwality Ice Cream Company. In 1940, the company started selling flavored frozen ice in Delhi, After serving mouth-watering delights of ice creams to the Delhites"®, Kwality went for an all-India market. The trademark ‘Kwality’, written in a characteristic logo style, became synonymous with ‘Ice cream’ and ‘quality’ due to its extensive use all over India and its popularity and acceptance. Ice cream had come a ®° Cold chains are warehouses, in which ice-creams are stored bofore being distributed to the retailers, ° This sector was de-reserved in 1997, based on the recommendations of the Abid Hussain Committee report, on grounds of hygiene and technology. India got freedom from the British rule in August 15, 1947. ° Delhi is the capital of india. itis the India's second largest metropolitan city. "" Dethites means people residing at Delhi. LUpense to use for IBS Campuses only. Sem Il, Class of 2016-18. Only for rn, nat for online crulon MKSO0136IRC long way from the first scoop of fresh mounted ice served with honey and fruits in the 1 ‘A.D. to the ultra-indulgent flavors. In India, the pioneer of this technology was the Kwality Ice Cream Company, which in 1956, imported ice cream machinery for the production and marketing of ice cream on a commercial scale. Till 1989, tranquility prevailed in the Indian ice cream industry. In the first half of 1990s, Hindustan Lever Limited (HLL) entered the market and positioned itself in the frozen desserts market (which used edible oil fat instead of milk fat) as this section was not reserved for the small scale sector''. Within the next two years, in 1992, Cadbury, the first foreign player, entered the Indian market with its Dollops and Milkfood brands. Cadbury's Dollops brand failed to register any significant presence in the country and subsequently was sold to HLL in 1993. Milkfood, after two years, met the same fate, as its marketing and distribution rights were acquired by HLL. However, the two brands were discontinued by HLL. In 1995, the global brand leader, Walls, entered the Indian market with its range of frozen desserts. HLL, predicting the increasing competition in the potential Indian market, formed a strategic alliance with the Indian ice cream brand leader, Kwality in 1995. The global brand leader - Walls, joined hands with the Indian brand leader, Kwality and formed the umbrella brand, "Kwality Walls" for the Indian market. Brands like Milkfood, acquired by HLL, were phased out to promote Kwality Walls. In 1996, GCMMF launched Amul ice-creams in 14 flavors in Gujarat? and Mumbai’. Amul ice cream was one of the few milk-based ice creams in the market and thus, Positioned as the ‘Real Ice cream’. It was priced 30% lower than the then market leader Kwality Walls and at a discount of 40-70% relative to other competitors. Amul leveraged on the price sensitivity of the Indian consumers and became an instant hit in the market. Within a year, Amul acquired 35% of the Gujarat ice cream market and 30% that of Mumbai. Moreover, its ice cream distribution network covered 34% of India. Within the calendar year 2001, the sales of Amul ice cream doubled, as it wooed the masses with its economy range. Kwality Walls’ share declined to 34.8% in February 2002 from 41.1% in 2001, whereas Amul's share increased from 31.7% to 37.6% during the same period In 2002, HLL decided to concentrate only on premium segment as its sales volume halved. HLL withdrew Kwality Walls from the smaller cities and mini metros and restricted it to only the six metros of Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad", By the end of 2002-03, Amul had overtaken Kwality Walls to emerge as the biggest player in the Indian ice-cream market. Mother Dairy, an ice-cream and milk brand of National Dairy Development Board (NDDB)"*, gave tough competition to Amul and Kwality Walls in the Delhi market. After NDDB introduced Mother Dairy as its own brand, the relation between GCMMF and NDDB got strained. Initially, Amul used Mother Dairy's facilities to cater to the markets of ™ According to the Prevention of Food Adulteration (PFA) Act a minimum 10 per cent daity fat is mandatory for an ice-cream, Gujarat is tho wostornmost state of India. ® Mumbai, formerly known as Bombay, is the capital of the Indian state of Maharashtra and the most populus city of India. itis the largest metro of india. Itis also known as the financial capital of In * Kolkata, formerly known as Calcutta, is the capital of the Indian state of West Bengal and capital of British India until 1912. It is the third largest urban agglomeration in India after Mumbal land Delhi. Chennai, formerly known as Madras, is the capital of the stato of Tamil Nadu and is India's fourth largest metropolitan city. Bangalore is the capital and the largest city of the Indian state of Karnataka. itis India's 5" largest metropolitan area. Hyderabad is the capital city of Andhra Pradesh; itis India's 7" largost metropolis. NDDB was formed to provide financial and technical support to the various dairy co-operatives of the country. Ucense to use fr IBS Campuses only, Sem, Cass of 206-18. Only for pint, not for online circulon. MKS0136IRC Faridabad, Gurgaon and Ghaziabad", but the rift between GCMMF and NDDB prompted Amul to supply the entire demand of the Delhi market and its adjoining regions from the Gandhinagar’” plant in Gujarat. Mother Dairy also stopped selling Amul’s products from its outlets, Another strong regional player in the market was Anmedabad"*-based Vadilal Industries Ltd (VIL), with a tumover of Rs. 96 crore. With its manufacturing units located in Gujarat and Uttar Pradesh, Vadilal had its presence in the states of Gujarat, Rajasthan, Uttar Pradesh and Madhya Pradesh Hatsun Agro Products Ltd. promoted Arun ice-cream was the first ISO 9001" certified Indian ice-cream brand, primarily dominated the South Indian market”. It had a market share as high as 56% in Tamil Nadu and a 33% share in South India. Arun ice cream was a Rs, 35 crore business. Hatsun had 1,100 exclusive ice-cream parlours, of which 60% were located in Tamil Nadu. In order to position “Arun” as a super premium brand, Hatsun Agro invested around Rs.6 crore to develop newer flavors and revamp the brand's logo and packaging. However, the foreign players were not able to make much of an impact in the Indian market, The US-based Allied Domecq International's Baskin Robbins started its operations in India with a 40:60 joint venture with Maharashtra Dairy Products Manufacturing Company Pvt. Ltd. But soon it was forced to close down over two dozens of its outlets in various cities across the country, due to very poor sales. Another foreign player, Swiss brand Movenpick also suffered in the Indian market due to its premium pricing and high operating costs. It was eventually taken over by Nestle in January 2003. French major Candia, which owned Cream Bell brand, took the joint venture route to enter India. The company planned to invest Rs 50 crore in the Indian market by 2005, in manufacturing, logistics and brand building. The company, taking lessons from the premium-priced brands debacles, did not position Cream Bell ice-creams in the premium-priced segment. It was expecting to achieve economies of scale by 2004, as it ‘would go national while keeping its Indian stint very low-profile. lowa-based Wells Dairy Inc. owned Blue Bunny ice cream was launched in early 2000 and distributed and marketed in India by Sno Shack Frozen Foods Pvt. Ltd. But the brand was pulled out of the Indian market due to high excise structure and low volumes. Thus, MNC brands, Who ventured into the India market, had to scale down their expectations, AMUL VS KWALITY WALLS Based on an improved marketing mix, Amul captured a significant market share of Kwality Walls, thereby becoming the market leader (Refer Exhibit 2). Amul brought about innovations in all the four elements of the marketing mix - its products, pricing strategy, distribution strategy and promotional strategy. ‘* Faridabad and Gurgaon are located in the Indian state of Haryana, while Ghaziabad is situated in the state of Utter Pradesh. All the three areas are included in the National Capital Region (NCR) of India, as they are adjoining to the India's capital Delhi. *" Gandhinager is the capital city of the Indian stato of Gujarat. It was named after the Mahatma Gandhi, who was born in the state. ahmedabad is a city of Gujarat. It was the capital of the state, before capital was shifted to Gandhinagar. 5180 900% cortieation is given for Qualty and World class manufacturing faites, ®* South Indian market is comprised of the following four states - Kerala, Karnataka, Tamil Nadu and Andhra Pradesh. LUcense to use for IBS Campuses ony. Sem I, Class of 2016-18. Only for print, not for onkne circulation. MKS0136IRC PRODUCT ‘Amul was considered good for family consumption, as it had always emphasized in its Promotional campaigns, that it used dairy fats in its products which were healthier than the vegetable fats used by others. Kwality Walls, its main competitor in the market, had Positioned itself as a premium brand. Kwality Walls ice-creams were preferred mostly by youngsters and the consumption of its premium products like Cometto and Feast, was considered a luxury in India, ‘A survey*" by Amul in 2002, revealed that in matured ice-cream markets like US, more than 70% of ice-cream consumption was from the take-home segment, which constituted only 40% of the Indian market. This was primarily due to the social framework prevalent in India, where ice-cream consumption was considered a luxury and not a part of the regular food habit. Lack of refrigeration facilities and premium pricing were also responsible for the same. The study also stated that even in the Indian metro cities, ice-cream was consumed at home on very few occasions only. The most Preferred flavors on such occasions were Vanilla, Chocolate and Butterscotch. This made the market limited to a very few flavors, where consumption was based on impulse buying decisions. The survey prompted Amul to introduce several new and uncommon flavors such as Anjir, Rajbhoj, Fresh Litchi, Kulfi etc. It also launched Kulfi and Softy mixes to cater to the take-home segment. Kuifi was launched in powder form, while Softy was made available in liquid, which the consumers could carry home very easily. By the end of 2003, Amul also launched its premium brand of ice-creams, including ‘Sundaes, Cheese & Almonds, Cappuccino, Dates & Honey Cake etc. Through this strategy, Amul directly took on Kwality Walls’ premium segment products like Cornetto and Feast, whose prices were much higher than that of Amul. Thus, Amul's product Portfolio consisted of a large number of low-priced products for mass consumption, which offered value for money and a small set of premium products, catering to the upper end of the market. Such two-pronged strategy was generally adopted by the market leaders in a market with high growth potential. Both Amul and Kwality Walls focused extensively on attracting children. Amul launched ‘Twister’ series of ice-creams in several flavors for kids and followed it up with Santra Mantra (an orange flavoured ice-cream) and Bouncer (an ice-cream containing nut, essential proteins, vitamins and minerals for the growing children). In order to counter Amul's move, Kwality Walls re-launched its kids' portfolio of ice creams with four added flavors, In line with its innovative products, Amul launched Isabgol*-enriched ice-cream and Promoted it as a “health-cum-fun' ice-cream. Amul was already marketing Slim Scoop, a range of fat-free ice creams for the health conscious customers. It was launched in June 2002 and claimed to have just 0.2% fat content, which was the lowest among all other existing ice-cream products. Amul was also working to develop sugar free ice-creams for the diabetic patients. 2 The survey named “Ice-cream Mood” was conducted by FCB Ulka on behalf of Amul. ** Isabgol is known as Psyllium in English. Psyllium husk is derived from the seed of the Plantago ovata plant, native to Asia, the Mediterranean region, and North Africa. Its husk is considered to be a natural laxative apart from having other medicinal values. LGcense to se for IBS Campuses ony, Sem Il, lass of 2016-18. Only for rn, not for online culation MKS0136IRC PLACE Amul's distribution was through retail outlets, spread across 1000 cities and towns in India. It also started distributing the ice-creams through unconventional vendors, like STD booths, chemist shops, baker shops, stationery store etc, who stocked the ice- creams in their deep freezes. It was a strategy of Amul to market its products through small local outlets, which were in no way associated with selling ice-creams. Since 2002, Amul started deploying Deep Freezers in the retail outlets in Delhi, under the ‘Hamara Apna Deep Freezer’ (HADF) scheme. Under this scheme, retailers were encouraged to buy their own deep freezers for vending ice creams, with Amul Negotiating a discounted price with the refrigeration companies, like Blue Star, Voltas and Carrier. It was estimated that due to such negotiations, the retailers were able to save around Rs 5,000-8,000 per freezer depending on the capacity and make of the freezer. According to this scheme, the retailers also got a five-year guarantee on the freezers from the manufacturers. Before Amul started this initiative, other ice-cream companies used to supply freezers, on which the retailers had to provide a refundable security deposit, but they never become the owner of the freezers. Within the first 15 days of the launch of the scheme, Amul deployed more than 1000 deep freezers in the outlets across Delhi and had plans to tie up with 20,000 retailers in Delhi alone. In 2002, Amul launched six exclusive “Amul Shoppes" in Ahmedabad in collaboration with the Urban Development Authority. This concept was extended to Delhi, where Negotiated a deal with Delhi Metro Rail Organization, so as to set up Amul's outlets in its premises, ‘Amul became the second company in India, to market its ice-creams through its official website”. Under this scheme, any customer could visit the website of Amul and select the flavor of his choice from the list and then mention the delivery address. In 2002, Amul bought an ice-cream factory in Nagpur. This factory, which was lying idle for over a year, was previously a packaging unit of Kwality Walls. Amul decided to serve the markets of West Bengal, Orissa, North Maharashtra and Andhra Pradesh from this plant, as it was nearer to these markets than the rest of Amul's manufacturing facilities. This arrangement was estimated to save over 1,000 kms of transportation cost for the company. The company also planned to double the existing capacity of the plant to 20,000 litres in the near future. Bringing about a dramatic change in its earlier strategy, Kwality Walls started concentrating primarily on the four metros™ and the cities of Hyderabad and Bangalore, with its high-end produets. In these cities, Kwality Walls already had a network of about 200 softy machines and was planning to invest Rs.50 crore to set up another 1000 vending machines. Kwality Walls focused on these cities as they accounted for almost two-thirds of their ice cream market and withdrew from almost all the B and C class cities and even from mini-metros such as Ahmedabad and Nagpur. HLL distributed its products through a variety of channels, such as retail cabinets, push carts and restaurants. The company had plans to open exclusive parlours for its products in the near future. HLL decentralized and revamped its manufacturing facilities at Delhi, Uttar Pradesh, Maharashtra, West Bengal, Tamil Nadu and Andhra Pradesh, to reduce supply chain costs. ® Baskin Robbins was the first company who has the e-selling initiative in India. The four metro cities are Delhi, Mumbai, Kolkata and Chennai * Cities are categorized on the basis of population LUcense to use for IBS Campuses ony. Som I, Cass of 2016-18, Only for print, not for online etulaon. MKS0136IRC PRICE The entry of GCMMF and NDDB into the ice-cream market with their own brands of Amul and Mother Dairy, had broken the myth that ice-cream was an up-market and costly item. Since its launch, Amul had positioned itself in the market as a brand which ‘scored over its competitors because of the low price of its products. Although Amul used dairy fat (which had a market price of Rs 140 a kg) as compared to the vegetable fat used by Kwality Walls (which had a market price of Rs 25-Rs 30), its ice-creams were 30-40% less expensive than that of Kwality Walls. In spite of such high cost of ingredients, Amul was able to keep its prices low, as it was the brand of GCMMF. GCMMF was the largest dairy co-operative in India, which was free from the clutches of middlemen at every stage of raw-materials procurement. This helped the co-operative in keeping the end prices of its products lower than that of its competitors, a benefit which Amul subsequently passed on to the consumers (Refer Exhibit 3) PROMOTION In May 2002, Amul launched its ‘Flavour of the Month’ campaign, in order to make the consumers aware of the availability of certain varieties of ice cream. Amul promoted all its products, including the ice-cream, under its umbrella tagline of “Utterly Butterly Delicious’®. This campaign was first launched in 1967 and since then, it had become synonymous with Amul ‘Amul positioned its ice-cream on the health platform and all its punch-lines read ‘Real milk Real ice-cream’. Through this ad-campaign, Amul tried to differentiate its ‘Real ice- cream’ products from that of Kwality Walls’ frozen desserts and highlighted the fact that Amul's products were made from dairy fat and not from the cheaper fats. Through these advertisement campaigns, Amul also promoted the fact that its ice- creams were totally Swadeshi”, yet fully in sync with modern consumers’ preferences. The aim of its commercials was to portray patriotism by taking pride in its products. Through the advertisement campaigns, Amul wanted to bring home the fact that its products were of low cost as compared to that of its competitors’. HLL, on the other hand, adopted a three-pronged strategy of communication, innovation and activation. HLL introduced a new punch-line ~ ‘Ho Jaaye Dil ka Connection’, which was expected to counter Amul's ‘teal milk real ice-cream’ campaign. Through this new campaign, Kwality Walls wanted to focus on the fun and sharing aspect of the brand. To push Kwality Walls products, HLL decided to focus on selected outlets and launched Rs.16 crore promotional campaigns in six Delhi, Mumbai, Kolkata, Chennai, Hyderabad and Bangalore CURRENT SCENARIO Industry sources were of the opinion that the ice-cream market in India was quite sluggish with a maximum growth rate of 7-8% per year. By the first quarter of 2004, it had developed into a 2,000 crore market, in which the organized sector had just a 40% market share. The organized sector comprised of 10 ice-cream manufacturers, offering more than 12S flavors to the consumers. Lots of new players had entered the market, especially, post 1997, but this had resulted mainly in the shifting of market share from one player to the other, without any actual growth of the market. The Government had “

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