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Arun Ice Cream

Team 2: Bhavya KakkarAditi Garg Nikhil NairPuneet AggNitin Jaggi Shweta ShridharAshish Goel -

145 150 159 167 191 197 200

Ice Cream Man of India

Chairman Hatsun Agro Products Yearly Turnover Rs.2165 crores Product Range: 1) Arun Icecream 2) Ibaco Competitive Edge: First to Take the Parlour Route(the concept of exclusive franchise parlours in India) Reaching out to towns with a population of about 30,000 or even less Innovate varieties and new flavours have also helped maintain its brand image and recognition.

Early History
Chandramogan ,son of vegetable seller from Tamil Nadu left college and started Arun Icecream with Rs.15000 and raising a bank loan of Rs.21000. Prominent Location next to Uncles retail textile outlet attracted large walkin customers. USP-FRESH Ice Candies First Year Turnover Rs.150000 and profit of Rs.40,000

20 litres of daily icecream production.


3 fold expansion in next year with relocation in the outskirts as existing location couldnt be expanded.

Problem
1)Selling the hugely expanded capacity during offseason tough. Resumption of sales from the old outlet. 2) Higher capacity meant higher fixed costs and company came under losses. 3) Input costs soured and manufacturers decided to increase retail price fro 10 paise to 15 paise a piece Leading to revolt and boycott by ice-candy vendors 4) Stagnating volumes and low profitabiliy made the business outlook unattractive . Decided to move upwards into ice cream segment Increase volumes through bulk institutional sales like selling to hotel. 5) But required upgradation in quality and increase in product offerings. Required new equipments and qualified and experienced persons to oversee production 6) Arun icecreams break into hotel market but finances didnt improve and faced liquidity and profitability problems Because of bargaining power of hotels profitability was ver low .

Competitors
1) Kwality

2) Joy

3) Dasaprakash

Next two years ,the ice cream business was almost going to break even . But Chandramogan was searching for a winning formula for steering arun away from ordinary brands. Chandramogan also realised acute need for formal training in marketing and personal management . Got enrolled in Davars college for short duration management programme for working executives.

Market For Ice Cream In Chennai


ICECREAM

95%

5%

General provisional and departmental stores with deep freezers.


Hotels and restaurants. Social events

Educational Institutes
Ships at Madras port

Aruns Search For A Niche


When Arun trying to expand his firm then initially he looked at the 95% segment but failed to achieve. The general departmental stores like Dasaprakash, Joy and Kwality were supplied deep freezers and were acting as dedicated retail outlets for their brands. Those Ice cream which supplies to social events like weddings were extremely seasonal and this segment was highly brand conscious and also imposed heavy demand on Aruns logistics management. As Arun cant able to achieve in these segments, it went on to focus on the 5% segment of educational institutes and ships at the Madras port.

Cont..
College canteen and hostel mess segment was virtually ignored by the leading brand like Joy, Dasaprakash etc. Arun focused on the college canteen and hostel mess segment and after a several visit he was able to bag orders for supplies to large and prestigious institutes like IIT, Madras. Arun captured the ships segment and this segment was particular about delivery and quality and was not brand driven. Arun quickly captured most of this market and captured almost 95% of the college canteen and ship segment.

Cont..
Having firmly establishing itself in the city college campuses, then Arun went on to approach college canteens in the interior district of Tamil Nadu. Very soon the company had virtually 100% of the small but growing upcountry college market. The business was slowly entering into a phase of stagnation , so he began looking out for new markets in which he could grow.

BREAKING INTO THE UPCOUNTRY MARKET


As Chandramogan continued to stay clear of the top 3 segments in the Chennai market, it was evident that the business was entering a phase of stagnation. Began looking out for new markets for effective growth and competition.

PROBLEMS LEAD TO NEW IDEAS


Greatest growth potential seen in upcountry mofussil towns that were completely ignored by others. Problems: cost and logistics of servicing from a central factory in Madras Solution: Right marketing and distribution formulas!

STRATEGY FOLLOWED
A look at feasibility of supplying ice cream at weddings and other important social events in upcountry towns. Able to achieve some measure of success:
- Enhanced brand awareness - Additional sales

Drawbacks:
- no stable volumes and critical mass

STRATEGY REDEFINED
Towns identified: Pondicherry, Madurai, Kumbakonam, Sivakasi in Tamil Nadu Advertisement Strategy:
- banners and hoardings that ice cream from Chennai would be supplied on certain pre announced days(key selling point) - Also had mailers posted to potential upmarket customers( rare at that time)

Ice cream supplied through agents within 4-5 days of booking. Drawbacks:
Novelty factor began to wear off Customer response declined Fixed day selling left out a large number of potential customers(places contiguous + walk in)

BREAKTHROUGH
Realization of the fact that people see advertisements; but they seldom read it carefully Novel method of sit and eat parlor born in 1981. Investment of the agent + long term distribution arrangements = franchisee From 1981, on an average, 2 franchisee run parlors were opened every month Over 700 outlets in Tamil Nadu, Karnataka, Kerala, and Andhra Pradesh by early 1999

WHY FRANCHISEE WORKED


Personal profile and business background of potential candidates typically looked at People in mid or late twenties, who had preferably completed schooling with average family income and had probably failed in their early business endeavours were preferred. Friends and relatives of existing franchisees approaching with requests for franchisee rights made the task easier Exclusiveness, area protection, good ambience, prime location assured By 1985, Arun emerged as the largest ice cream manufacturer in Tamil Nadu in terms of volumes

Turnover increased from


1970 1981 1999 Rs. 1,50,000 Rs. 4,25,000 Rs. 28 million

STATISTICS

Inspite of the stats, no significant presence in Chennai for Arun Market share of 60% in Tamilnadu by 1999 and 36% in four south Indian states. One loyal person even added 32 agents. Franchisee family an extremely loyal lot and shared strong symbiotic relationship with the company. On the personal front, many enjoyed a warm relation with Chandramogan

CHALLENGES IN OPERATIONS
Procurement of milk in a cost efficient manner Seasonal demand-supply imbalance Short shelf life

PROCUREMENT
Procurement directly from dairy farmers. Setup of milk collection centres close to the ice cream plant. Guaranteed procurement of minimum quantity of milk. Offered to pay higher price in the peak ice cream season. Payment made once in 3 days. Sourced other ingredients such as fruits, sugar from leading wholesalers.

ARUN ICE CREAM SALES FIGURE


Percentage of annual sales
34 22

Months April-June July-September October-December

19

January-March

25

CONT..
For outward transportation took advantage of the train service of Indian railways to dispatch ice cream. Packed the ice cream cartons tightly in small wooden boxes with thermo Cole lining and filled with dry ice to prevent melting. In 1995 they purchased a refrigerated vehicle.

ARUNS RAPID EXPANSION


A new plant was set up in Salem which was close to madras, Kerala and Karnataka. It was located in the heart of Tamil Nadus milk belt. Chennai and Salem plants were designed for peak seasonal production. About 30-35 flavors were on offer at any given time. Chennai plant required upgradation.

ICE CREAM MANUFACTURING PROCESS


1

Selection of ingredients Making the mix Pasteurizing the mix


Homogenizing the mix Cooling & Ageing the mixaddition of flavours & colours Freezing the mixaddition of fruits & nuts Packaging the Ice cream Hardening and storage of Ice cream

NEED OF THE HOUR


Revamp the distribution logistics. Relieving factories of the responsibility of managing the direct distribution of ice cream to various destinations on a daily basis. In 1995 a new depot was set up in Madhurai with adequate cold storage facilities. The depot was responsible for sourcing from Arun factories, inventory and cold storage management, order taking and execution.

BRAND & PROMOTIONS STRATEGY


Quality ice cream, world-class facilities and a heritage of over 40 years in the business. The first Indian ice cream brand to be certified ISO 9000 More than 70 mouth-watering ice cream flavours and combinations Unparalleled service to customers through exclusive franchise parlours

Source : https://www.google.co.in/search?q=vadilal+ice+cream&ie=utf-8&oe=utf-8&rls=org.mozilla:enUS:official&client=firefox-a&gws_rd=cr

Fairly large sums of money for promotion and advertisement Colourful banners, posters and flyers. Media advertisement TV, newspapers and magazines Aruns advertisement spending higher than the Total Turn over of Dasaprakash .

SALES PROMOTION ACTIVITIES


Eat All You Can Ice Cream Mela.(Chennai)
Encouraging consumers to try out higher-end , expensive flavours 4200 people participated Cost Rs 270,000 Similar campaigns repeated in other cities like Hyderabad.

SLOW SPEED DRIVING COMPETITION


For Motorcycles & Scooters. Conducted in association with the local traffic police ( Chennai & Blore). 3400 people participated. Objective Again to encourage consumer trial of high end flavoursleading to greater flow of two wheeler traffic to Aruns Parlours

PHONE AND HAVE AN ICE CREAM CAMPAIGN


Dial a number campaign conducted in 20 towns 12000 callers costing Rs 1.60 Million. Such campaigns also launched at the time of entering new markets or introducing new flavours. Local initiatives Home- delivery scheme.

PRICING STRATEGY
Cost Plus Approach Franchisees were given at 20-25% of MRP depending on their location and the costs borne by them Single tier distribution strategy The overall distribution costs of Arun Ice Cream was about 3-4% of Sales, compared to 8-9% of competitors Such measures resulted in high profitability as compared to its competitors.

FRANCHISEE MANAGEMENT
Single tier distribution Direct order on phone from the franchisees Advance payment from franchisee located in small area Franchisees were required to display the price list issued by Arun Product sold in pre-packed factory packs with MRP marked Membership of 60-70 franchisees were canceled for violation of norms Franchises allotted only to Youth Average income individuals Those who have failed in business Franchises not allotted to highly educated and elderly

MANAGEMENT & ORGANIZATION


Recruited competent senior management Chandramogan had foreseen that Arun would need to strengthen the senior and middle management cadres One of his earliest recruitment was Shankar, an experienced ice cream technologist, for the production function Another key executive during Aruns growth phase was Adinarayan completed Salem project in record time.

EMERGING COMPETITIVE SCENARIO


Organized sector controlled by strong regional players like Kwality in the North & East, Kwality & Vadilal in the West and Dasaprakash Joy & Arun in the South. Small- time ice cream producers in the unorganized sector selling ice cream under local brands or private labels. Established brands confined to metropolitan cities and later expanded to service other principal towns in the region.

Source : https://www.google.co.in/search?q=vadilal+ice+cream&ie=utf-8&oe=utf-8&rls=org.mozilla:enUS:official&client=firefox-a&gws_rd=cr

EMERGING COMPETITIVE SCENARIO


In the late 1980s, Cadbury India, entered ice cream market with its

brand Dollops but failed. Unilever, through one of its Indian subsidiaries Brooke Bond India Limited(BBIL) entered processed food segment by acquiring the market leader Kissan from the UB group. BBIL also entered frozen foods segment by establishing a new state-of-art plant at Nasik, and launched the well known international brand of Unilever- Walls.

Having identified frozen desserts as growth area, BBIL acquired Dollops from Cadbury India and other leading brands of Kwality and Milkfood.

EMERGING COMPETITIVE SCENARIO


In February 1997, the Indian government announced de-reservation of ice cream manufacture. Companies like Hindustan lever could set up world class ice cream manufacturing facilities with Unilevers technological support and financial strenght. Even as Arun emerged at the top spot in the four southern states, Chandramogan had to contend with the new competitive dynamics and needed to re-work his own strategy.

OWNERSHIP STRUCTURE
Chandramogan started as Partnership firm styled Chandramohan & Co. in 1970. In March 1986 , HATSUN FOODS Pvt. Ltd. company was incorporated in Chennai and took over the business of Chandramogan & Co. on April 30, 1986 The brand name ARUN was later transferred to HFPL with a royalty charge of 1% on gross sales. In 1995 August , the companys name was changed to HATSUN MILK FOOD PRIVATE LIMITED (HMFPL) and it was converted to a public ltd. Company In JAN 1996, HMFL was taken public by an Initial Public offering of 1.80 million shares @ Rs.45 per issue and raised their paid-up capital from 0.5 million to 38.4 million and hence its net worth including share premium accounted to 84.0 million in a year. Due to reservation of ice-cream manufacture, HMFL was conceived to be a marketing company and sourced its ice-cream requirements from 2 SSI units ATLANTIC FOODS in Salem HATSUN FOOD company in Chennai.

STRATEGIC CHALLANGES
The aggressive entry of UNILEVER group in ice-cream and frozen market with acquisition of well-known regional brands(BBIL). dessert

They were the giants into the market with wide variety of product portfolio and financial resources and can sustain into the market for a long time even without making profits. HLL announced strategies and were aggressively penetrating in the market to be the market leader.

Development of a Competitive strategy as soon as possible.

PROBLEM IDENTIFICATION
The dramatic developments in the marketplace could seriously undermine Aruns growth plans. The decision whether to aggressively reinforce Aruns competitive profile and further expand its franchise network in the face of HLLs competitive onslaught or pursue alternative business opportunities.

RECCOMENDATIONS
Extensive consumer research into the development and application of relevant technologies innovatively in new product formulation and refrigerated product handing can be done. New standards can be set in terms of Quality. It can increase the network of franchisees geographically by easing norms of MRP guidelines and payment terms. Advertising can be done to increase customer base

CONT..
Promotional offers like BUY ONE GET ONE FREE, DISCOUNT ON NEXT VISIT and FREE HOME DELIVERY can be introduced.

It should compete with global brand in terms of pricing and varieties of flavors. Healthy variant of the ice-cream (LOW SUGAR, LOW CALORIE) can be introduced in order to convert the health conscious non buyers into possible prospects.

ICE-CREAM MARKET IN INDIA


MARKET OUTLOOK Ice-cream consumption in India is expected to increase from US$ 450 million in 2009 to US$ 905 million in 2015 at a CAGR of 12% North and West India accounts for 70% of total ice-cream consumption in India with Ahmedabad and Delhi accounting for 30% of the total consumption Vanilla, Strawberry and Chocolate account for 50% of the total consumption in 2011 REASONS FOR GROWTH Rising disposable income Largest middle class population in the world One of the fastest growing economies in the world Acceptance of global trends such as going out for eating icecream KEY TRENDS International brands such as Baskin Robbins and Cream Stone have been increasing their outlets in Availability of large number of options from traditional Kulfis to new gelatos and flavored yogurts Growing trend of going out to eat ice-cream with increasing health consciousness especially among young urban population, higher focus on fat free, low sugar and pro-biotic variants Reducing impact of seasonality with people preferring to go out and consume ice cream in winter season as well

Ice Cream Market in India 2009-15


1000 900 800 700 600 500 400 300 200 100 0 Non-Branded Branded
905

12%
691 610 548
273 265 260

787
293 281

US$ million

450

495

250

255

200

240

288

346

418

506

612

2009 2010 2011 2012 2013 2014 2015

Market Share (Branded), 2011

Others 35%

Amul 35% Mother Dairy 10%

Cream Bell 10%


Source: Business Standard, Indian Express and estimate

Vadilal 10%

Current Competition
Major Players
Fiercely competitive due to attractive economics with profit margins ranging between 30-50% Organized sector comprises GCMMFs Amul, HULs Kwality Walls, Mother Diary, Baskin Robbins and a number of regional brands Amul is the market leader and is at the forefront of targeting the rural market For most national players viz. GCMMF, HUL and Mother Diary, revenue from ice cream accounts for a small portion of their total revenues Premium segment: Baskin Robbins is the single largest premium ice cream brand New entrants include Amul, Movenpick, Haagen Dazs and Snowberry

Market share

55%

Unorganized

45%

Organized

Vadilal GCMMF 37% 14% Mother Diary 13% 5% HUL Baskin Robbins 15%

16% Others

Source: Business Line Bringing in the creamy layer, August 2008; magindia.com Amul to launch new ice cream range, October 2008

Swot Analysis
Strength
1.Good product range include various flavors, party packs, sticks, cones etc. 2.Good quality and packaging. Weakness 1.Growing competition form international and other brands means limited market share 2.Limited international presence compared to leading global brands as

3.Offers over 200 products across India

Opportunity
1.High End ice-cream to tap the higher income group also 2. Tie-up with food chains, restaurants 3. Mobile vans for better visibility

Threats
1.Kulfi in rural markets 2. Local ice creams and sweet dishes 3. Health conscious people refraining from sweets

Porter five forces analysis


Barriers to entry The two favorable factors are the opportunity for product differentiation within the super premium segment and the importance of corporate experience in all phases of the operation (production, distribution, and marketing). The most important down side factor is that consumer switching cost is nil. Power of buyers With ice cream there are virtually no important end consumers. However if one focuses on the consumer as retailer then the importance of the few powerful and growing grocery chains represents a significant hurdle. This is offset by the almost complete lack of potential for backward integration and the relative insignificance of ice cream to this customer group. Power of suppliers The most important factor here is the importance of quality. The agribusiness in India is still very much in the developmental stage and there is little concern, at present, over the dairy producers moving into ice cream production.

Porter five forces analysis

Availability of substitutes The concept of comfort foods in India is still very much in the incubation stage; as such the primary role of ice cream is that of a sweet desert with little or no emotional value. Accordingly, there is a wide variety of alternative products. The most notable alternatives are kulfi and faludeh. Kulfi is the traditional desert of India.

Government actions While there is no threat that the government will enter the industry the primary concerns are focused on the growing economic tensions between states and between states and the national government. The need to generate additional government revenues could prove to be the motive to reinstate industry restrictions or otherwise alter the basic economics of the industry. Rivalry By almost every indicator the rivalry is intense and will continue to grow. There are just a few large firms, the industry is expected to grow rapidly, and the strategic stakes are large not only for the MNCs attempting to enter the market but for domestic firms as well.

After 1998 .

Huge competition from HLL and consolidation of ice-cream sector, growth opportunities were limited. Therefore the company expanded there business network across south India with more than 1050 sit and eat parlor. The company focused on innovation and experimentation .Therefore launched 70 new flavors with Color Magic, an ice cream that changes colors. Arun ice-cream crossed the Indian border and became international with establishing plants in three nations Seychelles(70 per cent share of ice cream market in Seychelles) Fiji Brunei In 2012 the company came up with its premium segment icecream range ibaco which has opened its stores in three metros namely : Chennai, Bengaluru Delhi

Cont

Icecream business is seasonal in nature with huge demand in summers with average demand in winters. Therefore the company faced the problem of huge unutilized milk procured from the farmers. Arun ice-cream came up in diary business with launch of AROKYA MILK This strategy was the game changer for Mr.Chandramogan as companys revenue increased exponentially . Company followed it with various diary products like butter, cheese ,paneer,ghee and curd. Hatsun Agro Products Ltd. came up with Gomatha Milk. Arun icecream focused on marketing and had huge television marketing ads all the years which helped to build the brand . In 2013 Hatsun Agro India Ltd. Crossed Rs.2100 crore revenue. The Hindu coined him as THE ICECREAM MAN OF INDIA

Learnings
For an efficient business running capability one must know the nuances of it and this is why Chandramogan felt the need to join an MBA course Supply chain Management is an important aspect to be kept in mind as the success of the business hugely depends upon it and Chandramogans business flourished due to his efficient supply chain strategies. Finding a niche in the already competitive market is difficult and time taking but proper pricing strategies and dedicated team work can make it possible. This is what Chandramogan did when he first captured the college and ship market for ice-cream in the south and later became quite well known in several other sectors. Being cost efficient increases profits for the companies. Chandramogan did not employ an elaborated 3 tier supply chain system and hence saved huge costs instead his vehicles delivered directly to the retail outlets from the manufacturing units.

CONCLUSION
The essence of marketing a marketing strategy is to understand the changing needs and preferences of the consumer and to cease the opportunity to shape and fulfill them. Arun Icecream effectively understood those needs and formulated some strategies that were stable and would help them in the long run to strengthen the companys position.

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