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Aug, 08 2012

TASTING THE CREAM OF SUCCESS

Starting one's own business is a dream for many. How about turning your childhood fantasy of ice-creams into an apt business opportunity with high returns? Explore the dynamics of the frozen dessert industry for lofty incomes.

I scream...you scream... we all scream for ice-cream...’ Our hearts must have ‘sung’ this line as a child at the sight of ice-creams. But as our experience suggests, years fail to take away from us the child-like passion for ice-creams. One seldom loses the opportunity to savour the taste of one. The tropical climate in India makes it a dream for ice-creams.

However, the heartening piece of information is that this Rs 2,500-crore industry in India has seen a growth rate of 15-20% yearly. Figures from the last five years are indicative of the fact that there is an upward trend in the consumption of ice-creams in India. What is more noticeable is that ice-creams are slowly becoming an all-season product and not merely a summer treat. Factors such as rapid urbanisation and globalisation, rising incomes and changing lifestyles have encouraged the growth of this industry.

Talking about the industry of frozen desserts, the market today is decked up with various ice-cream brands and other new concepts of frozen yogurts, frozen custards, frozen puddings, smoothies and gelato that are admirably nursing the sweet tooth of the people. With the concept of frozen yogurt increasingly becoming popular, many national and international brands are sprouting up to satisfy the cravings of all fro-yo fans. Cocoberry, Yogurberry, Berrylite, Yogoshack, Froyo and many others have already marked their presence in the Indian market serving a tasty sweet treat to health-conscious people with only a few calories and less fat. Unlike the traditional method when carts used to go door to door with high-pitched call of the ice-cream seller, now it has been replaced by big cafes and parlours. With myriad flavours and a variety of ice-creams, these parlours have become the most suitable low cost business concept.

Burgeoning market

Come summer and ice-cream manufacturers gear up for doing a roaring business. If market analysts are to be believed, the 2,500-crore industry has been on an expansion drive, eyeing a 15% growth this year despite increasing prices between 1 and 10 across product categories, since January. The branded ice-cream market with leading players such as Amul, Kwality Walls, Vadilal and Mother Dairy is banking on a variety of regional flavours, distribution network and expansion of retail outlets to strengthen their share in the market dominated by unorganised players. The industry also marks the presence of unbranded market for the frozen dessert which is currently valued at Rs 800 crore for 100 million liter per annum. According to the recent trends, the per capita consumption of ice-creams in India is 300 ml.

In the category of 100 % natural ice-cream, a premium brand of artisan ice-cream makers, Natural Ice Cream, has been engaged in satisfying its customers since 1984. “Currently, the industry of ice-cream and frozen desserts occupies a fair market size in India, which has increased by about 40 % in the recent past. The influx of foreign brands and new additions to the categories of frozen desserts are catering not only to the customers but are also creating great business opportunities for investors and franchisees,” says Kamath.

However, Kunal Pabrai, Founder, Pabrai's Ice creams, feels: “Frozen desserts and ice-creams are two sub-segments of the same product but 100% natural ice-creams are a separate and fast developing third segment. Our company is making 100% natural ice-creams of a style and quality unmatched in India. The market potential of this sub-category is huge.”

Robust prospects

The massive consumer market in India and the anticipated strong economic growth over the next few years augur well for the ice-cream industry. It is becoming more apparent that the future of the Indian ice-cream industry will be shaped by the organised retail sectors. If with the Centre's approval, the provision of FDI in the retail sector is implemented, it would give a boost to the Indian ice-cream market. The next few decades should witness the entry of global ice-cream majors into the Indian market, wanting to tap into its potential, and possibly some new domestic entrants as well. Moreover, improvements in electricity supply and better cold storage logistics will do a world of good to the prospects of this industry.

About the business prospects in this industry, Praneeth Chandra, Founder of Yogoshack, finds merits in a model that offers avenues for making profits at a low investment. He says: “We have one of the best franchise models designed for our business partners low investment and high returns. We have a wide range of best tasting 'no fat frozen yogurts and smoothies'.” He finds the brand's essence positive which adds to its business potential. “I do not doubt the potential of Yogoshack in the present and future market,” he adds.

While Marc Ng, CEO of Berrylite, a Singapore-based frozen yogurt brand, believes: “With premium quality products, frozen yogurt would be a consistent sector as a majority of customers are health-conscious. With a future target of opening 150 new franchise Berrylite outlets, we can grow more in the Indian market.”

Shedding light on the low cost business opportunities in the ice-cream industry, Kunal says: “We have tried to keep start-up costs very reasonable for our franchisees. There is a complete transparency in costs as franchisees are informed beforehand about financials involved in the opening of the outlet. A lower cost to franchisees means a lower break-even point and a quicker recovery of investment.”

“This does not mean, however, that we compromise on the equipment or furnishings. All essential operational requirements have to be met by the franchisee and cost cutting merely to keep costs low is not a prudent financial decision,” he adds.

Troubleshooting market issues

There are certain factors that pose a challenge to the growth of this industry. These factors include the lack of cold storage chains, irregular supply of electricity and poor infrastructure for storage and transportation. It is a matter of concern for the industry that the Indian cold storage logistics chain is very poor. This obstacle hits the industry hard since an ice-cream is a highly perishable product. To overcome this hurdle and maintain the quality of their premium products, most of the ice-cream and frozen yogurt manufacturers seek assistance of special vehicles with deep freezers for transportation. “We have developed a unique logistic network which is able to prolong the shelf-life of the product,” says Marc of Berrylite.

On the other hand, the manufactures of Hokey Pokey and Natural Ice Creams believe in supplying the freshly made products as per the demands at their company-owned and franchise outlets.

Another issue that bothers the manufacturers is the prevalence of a large number of unorganised players in this industry who offer very low quality products at cheaper rates. The rising prices of milk and allied products are also not making life easier for the manufacturers, as they need to constantly raise the prices of their products, which have ramifications for the demand of their products in the market. Erratic and poor electricity supply in most regions of India is also irksome for the industry.

The way to finding solutions to most of these issues is for an aspiring entrepreneur to first do a thorough research on the frozen dessert industry and analyse the demands and line of working at several locations. It is important to find out what makes an ice-cream or frozen yogurt parlour popular in a particular area. Changes should be brought in the menu from time to time and the service as well as the ambience should be enhanced to attract more customers. Bringing in more product mix and matching flavours of homemade desserts may prove very significant. Founder of Hokey Pokey Ice creams, Rohan Mirchandani says: “Though our brand is new in the Indian Market, we offer premium quality products to our customers with the liberty of personalising them according to one's tastes and preferences. This would soon help the brand mark its presence pan-India. Along with that, the brand would also give business opportunities to franchisees and budding entrepreneurs.”

Growing together

Knowing the value of quality consistency across outlets, the ice-cream and frozen dessert brands provide adequate training and professional support for their franchisees. “We train the staff completely in all aspects like knowledge about the menu items, recipes, machines, billing, customer service, cash management, customer retention, etc. Our support to the franchisee will be in all the ways like supply chain management, marketing, overhead cost control, etc. (let me say 100% support and training). We have a very strong team for marketing. I have worked for different MNCs in Dubai and the US in the marketing teams. That experience is helping me guide my marketing team and their activities better than expected,” says Praneeth.

Pabrai's ice cream follows two levels of training one for the franchisee and the other for the store staff providing a complete training pertaining to the product, systems and controls, both pre-opening and post-opening, with detailed checklists on how to run the operations. Knowledge about audit methodologies, daily operation procedures and controls, etc., is imparted to the franchisees, along with the staff. Moreover, the franchisees are also assisted by a strong marketing team with advertisement support being provided by the master franchisee.

Investment requisites

Being the most sought after leisure time destination for people, seeking the franchise of an ice-cream brand is considered a fruitful experience for business aspirants.

With many brands of frozen desserts coming up in various forms of the franchise model, one can seek a business opportunity in this industry with a minimum investment of Rs 5000 which may go up to a maximum amount of Rs 50 lakh.

Berrylite, for instance, requires an investment of Rs 3-4.5 lakh and an area of 300 sq ft from franchisees.

For an aspiring Natural Ice Creams' franchisee, investment starts from Rs 20 lakh onwards, along with an area of 800-2000 sq ft while Hokey Pokey Ice Creams has different investment categories including kiosks with an investment of Rs 8 lakh and an area of 80-100 sq ft; for parlours investment of Rs 11 lakh in 250-400 sq ft area; for cafes, Rs 14 lakh as investment along with an area between 500 sq ft and 650 sq ft.

Pabrai's Ice cream has two formats of franchise models-- kiosk and standalone store. While a kiosk requires Rs 5-7 lakh investment and an area of 64 sq ft, standalone stores need an investment of Rs 8-13 lakh and an area of 150-400 sq.ft. The brand is seeking expansion in tier I, II and III cities of North and West India.

However, to attain the franchise of the frozen yogurt brand, Yogoshack, the franchisee will have to invest Rs 10-20 lakh, along with an area of 200-1000 sq.ft, according to the kiosk and traditional store format. Yogoshack is specially targeting the metropolitan cities for future roll out.

Good tidings for future

The frozen yogurt brand, Yogoshack, is also planning to open more than 20 stores by the end of the financial year 2012-13, for they aim to be present in every mall and high street in all metropolitans and cosmopolitans in India. Berrylite, Natural Ice Cream and Hokey Pokey are also seeking rapid pan-India expansion through the franchise model.

BOX_1

Name of the brand Investment Area Preferred locations

Berrylite Rs 3-4.5 lakh 300 sq.ft Mumbai, New Delhi and Bangalore

Hokey Pokey Ice Creams Rs 8-14 lakh 80-650 sq.ft Chandigarh, Lucknow, Pune, Indore,

Bangalore, Delhi, Chennai, Aurangabad

Pabrai's India Rs 5-13 lakh 64-400 sq.ft Tier I, II and III cities of north and west

Yogoshack Rs 10-20 lakh 200-1000 sq.ft Metropolitan cities

Natural Ice Creams onwards Rs 20 lakh 800-2000 sq.ft Metropolitan cities

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