Arun Ice cream

Group – 11, Section – B

Current Situation:

Mr. R G Chandramogan, Chairman and Managing Director of Hatsun Milk Food Limited
(HMFL), is faced with a task of devising a strategy for the market expansion of its brand Arun
ice cream beyond south India in the wake of increasing clout of Unilever group in the ice
cream/frozen desert market. Currently Arun ice cream is the market leader in four southern
states. But it is now facing stiff competition from HLL’s Kwality-Walls brand which by the virtue
of a strong product offering and financial strength has aquires about 50% of the national share.
HLL wants to be the market leader in every market and Arun ice cream did not want to sell out
to the MNC’s like the other entrepreneurs had.

Arun’s strategy till now was based on the following pillars:-

Low Capital Investment: Arun followed a franchisee model and hence avoided cash
crunch.
Good Relations with retailers and suppliers: Arun build up a very good relation with the
retailers. The company offered them exclusivity within a range and in turn they sold only
Arun Ice Cream. They also had contract with milk suppliers to ensure sufficient supplies
during lean periods.
Aggressive brand promotion: Arun promoted the brand aggressively with different
promotional schemes and huge sum set asid for advertising
Single tier distribution: Arun followed a single-tier distribution strategy which allowed it to
retain higher margins, both for the company and the retailers.

However there had been some major changes in the operating environment which would have a
bearing on the strategy to be followed going forward. Firstly, the government had announced
de-reservation of ice cream from the exclusivity of the SSI sector. Secondly, HFML had become
accountable to its shareholders after being taken public through initial public offering in 1996. In
the wake of these changes certain reactive measures need to be taken and the existing strategy
needs to be modified suitably.
Decision to Be Made:
The decision to be made is whether to expand the very successful franchisee model of Arun ice
cream elsewhere in the country or to diversify and look at the new product offerings it can offer
leveraging Arun’s strengths and competencies.

Recommended Strategy:
It is recommended that Hatsun first diversifies itself in the region of its strengths i.e the four
southern states. And then it can go for a phased expansion in different parts of the country.

For executing the recommended strategy Hatsun should do the following:-

 Hatsun should start offering diverse products like – yogurts, flavored milk, milk shakes,
butter, cheese etc.
 Hatsun should not diversify geographically – instead it should focus on the four states of
South India and build a better competitive position against the likes of HLL
 In line with its hugely popular sit and eat parlors, it should expand the capacity of the
existing ones and also open up new ones. In the sit and eat parlors it should have an
exclusive section of take-away counters with the new offerings on display. And this take
away counter should be placed before the ice cream parlor so that the customer is
forced to pass through it and atleast have a look at the new offerings.
 Promotion and advertising strategy should be focused on informing the public of its new
offerings, new store openings and engaging them with discounts.
 And then it should slowly expand into other parts of the country replicating the same
model of first starting out with the small towns and then gradually getting a foothold in
the metros.