Richard Pennington

Edge Hill University

Strategy for export development within the ice cream market

utilising a micro-franchise model.
Companies who have developed their brand on high quality in an industry worth $49.4bn in
2013 shows a true originality that is needed to brake the dominance of the big corporations. As a
quality product with a need to achieve a price premium it would be sensible to focus on the middleclass audience as the preferred target market.
The EU is suffering from stagnant GDP growth and high youth unemployment, one factor that
has been cited for this lack of growth is the saturation levels of the markets. Any move to try and
secure a market share would most likely require a large capital investment to compete with the
established corporations in the mass market.
The burgeoning middle classes from the emerging markets are the driving force in the
majority of world GDP growth. In Asia alone there are 525 million people classed as middle class
(earning between $10-100p/d), that is more than the entire EU population. Over the next two decades
the estimated worldwide middle class will expand by another three billion, almost exclusively from the
emerging markets. Some estimates show the future global share of the middle class in the EU will
remain broadly constant in population size but percentage wise the share will decrease from 36% in
2009 to 14% in 2030. The asia-pacific region is estimated to grow rapidly from 525 million middle
class in 2009 to 3,228 million in 2030. This will increase their share of the global middle class from
28% to 66%.
From these estimates a move to establish a presence in these emerging markets would be
advised for a company looking for future long term growth. The Chinese market has in recent years
shown a huge appetite for foreign goods and brands, The UK is seen as a luxury exporter and so
companies should look to reinforce their UK heritage into their brand in order to give greater appeal in
markets that share this view.
China, India and Brazil are the markets I would concentrate on due to their projected middle
class growth of approximately 1 billion, 475 million in China and Brazil respectively by 2030. Brazil is
expected to have over 9.4 million people with disposable incomes over $50,000 by 2020. They are
also members of the BRICs nations which gives a more politically stable view over the long term.
Brazil is currently going through a period of uncertainty over their current suspension of President
Dilma Rousseff, following the resolution of this situation the economic future should continue broadly
constant.
A route to market that could prove very cost effective and allow rapid expansion is the
relatively new Micro-Franchising business model. The Micro-Franchising or inclusive business
models have been used in emerging markets as a way of reducing poverty while being viable profit
making arms of some large corporations such as Unilever.
It could be seen that several companies operating a micro-franchise system like Fan Milk in
Ghana would be successful. Franchises would contribute 20-25% of the start-up costs. This would be
to purchase a bike with freezer attached like Fan Milk have and initial stock. The remaining funds
could come from either a Micro equity/Micro Venture Capital arm of the business or from NGOs that
specialise in emerging market development. By using this method the presence of hundreds or even
thousands of vendors could be seen at popular high footfall events such as football matches, tourist
hotspots and festivals. The companies would become household recognised brands and associated
with the joy of the event attended by the customer and also the quality of the product. This brand
awareness will then follow on to the efforts of stocking products in supermarkets, restaurants and
other retailers, customers will want to replicate the luxury experience they had at events while at
home.
A similar system is a huge commercial success for the company previously mentioned Fan
Milk in Ghana. They have supplied ice cream and ice lollies through retailers in stores, supermarkets
and hotels since 1962. They developed their own Micro-Franchise model which now has over 7000
bicycle vendors. The vendors can even become agents if they have premises with freezers, their own
bicycles and a network of vendors to resell to. This system has proven to give rapid expansion for Fan
Milk and they have found a model that overcomes one of the biggest problems for franchisors,
franchisee rotation, with their vendors staying for an average of 8 years.
This system is a proven concept and could be fully utilised by many if the company is willing
to be patient for potential large future growth. The concept can also boost their domestic brand as the
micro-franchise model can be used to identify their brand with a corporate responsibility ethos and
gain pubic attention thorough the media for their ethical business model.

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Richard Pennington

Edge Hill University

I would suggest that more businesses look to develop an export presence to these emerging
markets but not at the expense of naturally developing there EU exports. Striking a balance would be
necessary to combine short/medium term growth with the longer term growth stated in this piece.

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