Natural Ice Cream * Early history and Strategy

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1 Natural Ice Cream * C a s e The ice cream parlour which began as a small initiative in 1984 stands in 2006 as an entity with profitability as high as `1.4 crore and with determination to double it in the subsequent financial year. One of Mumbai s best known ice cream brands the Natural Ice cream is the brainchild of Mr R. S. Kamath. Since its inception the company has managed to build its equity purely through word of mouth publicity. Natural ice cream has gained the reputation as being the most sought after ice cream parlour in Mumbai especially among the young people. It enjoys very substantial footfalls at its outlets, making evident the facility and service orientation applied by it. Natural ice cream as a company has been registering a consistent growth over the years. R. V. Mallya, General Manager, attributes this growth partially to the changing lifestyles, eating habits and the increasing per capita income and significantly to the quality of the products offered by the company thus enabling customers to be retained and also augmented through good word of mouth publicity. However, although the company has a strong position it does face challenges. One in terms of continually innovating and introducing new products coupled with consistency and the other through competition from not only local players but also foreign players like Gelato, Amore etc. The questions before the management was should Natural increase its advertising to reach out to a larger segment of the masses and should it expand beyond the borders of Maharashtra and Gujarat to enhance its market share? Early history and Strategy This success story began with two unfortunate incidents; one was Kamath s failure in the seventh grade, because of which his father stopped his education and brought him to Mumbai and the second was the split with his brother and of their business venture in Mumbai Gokul, a chain of restaurants serving ice creams, fast food and juices. The split with his brother happened in 1984 when he realised that if he had to prove himself he had to initiate a very novel idea to build an enterprise on it. What dawned on him was to introduce a business venture in which he had domain expertise as well as one which would be unique, and hence he decided upon making ice creams the traditional way and keeping it completely natural, devoid of artificial flavours and preservatives. At that moment the market was dominated by big players, like Vadilal and Kwality and it had a loyal crowd of customers. Moving away from the artificial was his unique selling proposition. After the initial introduction of traditional ice creams he added a small treat to it, by deciding to add bits of fresh fruits to the ice creams. *This case is based on the project work of Rohini Anupriya, Yogesh Deora, Shubhada Ankush Jadhav and Amit Vohra, students of MBA ( ) batch of SVK Ms NMIMS University.

2 2 Marketing Management Kamath had gained sufficient proficiency while working with his brother, but the idea of fruits came from the fact that his father was a dealer in fresh seasonal fruits, from whom he learnt the nuances of fruit trade. And hence the brand Natural was born. About Natural Ice Cream In 1984 with an initial investment of just `3 lacs, Kamath opened his first outlet in Juhu. This was the first business venture he embarked on all by himself, and he wanted to run it very cautiously. He then had only three staff members and his wife assisting him. He did not initially spend on the outlet ambience and instead let his products speak for itself. This also worked as an advantage for him as he was not under pressure to earn high returns immediately. So armed with the basic skill of making ice cream the traditional Indian way, he started his business. It struck him that whenever Indians wanted to embellish a seasonal fruit, they often poured milk on it. He thought of doing the reverse, by embellishing his traditional ice cream with fruit. Hence he added slivers of whichever fruit the customer asked for. Since he knew about fruits, it was easier for him to choose the best ones. A few months after the outlet opened he introduced 15 new fruit flavours, of which Sitafal was an instant hit. He recalls having sold 300 scoops or 12 kg of ice cream on the very first Sunday of February Once the idea of combining traditional ice creams with fruits proved successful, he decided not to settle on anything except the best seasonal fruits and hence traveled across the state to procure them. He travelled to Saswad, a small town near Pune for sitafals and to Ratnagiri for mangoes. Soon he was able to give a wide choice to his consumers. Although he had instant success through his specialised products, he priced them for a reasonable amount and much lower than the other established brands. He continually sought to learn from the customer and incorporated their suggestions effectively to profit from it. For instance, a customer informed him of how other businesses were getting innovative with fruits and ice creams in places like Africa and Singapore. These suggestions were seriously acted upon and improvements were accordingly made. He is even said to have introduced the jamun flavour on the feedback of a customer. After having started with a single outlet of 300 sq. ft. in Mumbai, it has grown to possess 46 such outlets in Mumbai, four in Pune and one each in Nasik and Ahmedabad. All the outlets get their ice cream from a factory in Charkop, Mumbai. The ice cream is dispatched in batches to ensure that only fresh produce is stocked at the outlets. As the process uses no preservatives and fresh fruits are added, the ice cream must be sold and consumed within a short time period of its manufacturing. It however does not have a distributor network in place and even to places like Pune, Nasik and Ahmedabad it delivers through its ice cream factory at Charkop. In 2006 it was voted as one of the top ice creams at the 2nd Consumer Reaction Award conducted by Bharati Vidyapeeth Institute of Management Studies and Research and a daily newspaper in Mumbai. The philosophy of Natural is to find the purest and the finest ingredients for producing ice cream. It is a way of doing business that is as much demanding as it is uncommon. This is the reason why Natural ice cream epitomises the finest ice creams of India.

3 Challenges Faced Natural Ice Cream 3 The journey to a strong market holding was not smooth sailing. The process of producing traditional Indian ice cream was not only slow but also laborious and had to be done manually, which meant maintaining the consistency in taste was a huge challenge. It also had to be made in batches to ensure that it is fresh. To resolve this issue Kamath began seeking equipments which would not only make the traditional ice cream but also enhance productivity and ensure quality. Hence he approached a dairy technologist who educated him on efficiency, bacterial quality, hygiene and consistency. Gradually he custom made, developed and adopted equipments like mechanical churners to improve efficiency. He also faced other challenges like de-seeding sitafal. As it was the most popular flavour it had to be done in huge quantities, however, a single person could deseed only two kilograms of it a day. Eventually he found a machine to do it. Even his educational background poised a problem to him at one point of time. He was unable to handle the taxation issues The Indian Ice Cream Market The ice cream market witnesses considerable action during summer as the companies in order to achieve maximum sales compete amongst themselves in the market by releasing hordes of promotional campaigns, advertisement and summer schemes. The market is broadly divided into the branded and the grey market, the latter consisting of small and cottage industry players. The total market is worth `2,000 crores of which the branded market is valued at `800 crore. The Indian ice cream market is characterised as a highly seasonal market, as in winter the sales fall sharply and in summer there is a steep increase in sales. The major brands include Kwality Walls, Amul and Mother Dairy. With a market share of 10 percent HLL is the second largest player in the branded ice cream segment after Amul which enjoys a whopping 37 percent market share. Amul : R. S. Sodhi, General Manager (Marketing), Gujarat Corporation Milk Marketing Federation (GCMMF), said, During summer on an average sales increase by percent. Our offers such as combo packs and 1+1 free etc. increase during summers. Amul recently launched a range of probiotic and sugar free ice creams targeting or rather catering to the health conscious and diabetic covering a new category of consumers who were unable to indulge in delightful ice creams. The sales turnover for the year was `52,554 million (1,325 USD). The organisation is a state level apex body of milk cooperatives in Gujarat which aims to provide remunerative returns to the farmers and has 13,141 village societies and 13 district cooperative milk producers union. Mother Dairy : Mother Dairy ice creams launched in the year 1995 have shown continuous growth over the years and today has approximately 62 percent market share in Delhi and NCR. It introduced new flavours like O blast, an orange based ice cream dessert and the Toffee Twist. Its brand Chillz targeting the entire family aired its TV commercial with the tagline, Goodness Inside. It has a range of ice creams particularly targeting children, like the Lic Lolleez, Cool buddies. It also targets the segment aggressively it arranges a media blitzkrieg in summers and plans to increase the number of carts outside schools, hold contests and promotions, offering goodies to them. Kwality Walls : Kwality Wall s was launched in 1995 as Hindustan Unilever Ltd s master brand for ice creams and Unilever claims to be the world s biggest ice cream manufacturer, with an annual turnover

4 4 Marketing Management of 5 billion. Its products are termed as Pleasure Food, and enjoy great popularity. Some of them are Cornetto, Feast, Paddle Pop. By introducing a new product, Moo, a calcium enriched ice cream, the company lured kids and their mothers with its nutritional offering. HLL is also planning to extend its retail brand Kwality Walls Swirls parlours in tune with the growing number of shopping malls across the country. At present there are 30 such parlours across India. However, the organised players have not been able to extend their distribution chain to small villages/towns due to the size of the market being small there and the non-availability of cold chain. The Indian ice cream market is hence still dominated by a large number of small local manufacturers and regional players. For instance, players like Pastonji and Dinshaw s in Maharshtra, Vadilal in Gujarat, Arun Ice-creams in south India enjoy a dominant position in their respective regional markets. Pastonji, Baskin Robbins and Natural s ice cream are some significant players in Mumbai as they have a wide and strong distribution network. While Pastonji has franchisee operations at Pune, Nashik, Jaipur and Mehsana, Natural s operations are restricted to Maharashtra and Gujarat at present. Pastonji has already launched new items in special shape and well decorated containers like magic swirl, sundae tubs, mini sandwich, mini sundae/swirl etc. In the last two years, Mumbai has been fortunate to experience the Gelato, an Italian ice cream. A number of gelato serving parlours have mushroomed in the city. These parlours are also ready to make competition fierce with their unique and innovative flavours which are launched during summer. Amore, started just a year ago has successfully established itself considering quality and innovation. Natural Ice Cream s Positioning Strategy Natural has been manufacturing 100 percent vegetarian ice creams and this has given it an edge in the Indian market. Considering the religious sentiments within the country, the consumers would not hesitate to consume a scoop of Natural ice cream on any day of the year. (a) Product range: To quote Mr. Kamath, In the food industry, one must have something different, the serving style, the item or the taste. You must give your customer something unique, only then you can survive. In line with his principle Natural ice cream constantly introduces new fruit flavours. It also introduced the raw mango flavour and called it Pickle, and it aroused a great response. It follows a model of Product Innovation and with it has created a niche for itself hence distinguishing it from its competitors. The flavours available at Naturals are generally fruit based, besides dry fruit and chocolate based. However it is observed that customers at Naturals often prefer the fruit based to the other flavours. Unlike the machine made ice cream, Natural s hand churned ice cream is not whipped, so it is denser, creamier and richer. That makes consumers who have tasted it never want to settle for artificially flavoured mass produced ice cream again. Hand churned ice cream is structurally different from industrially made ice cream since hand churned ice cream does not contain emulsifiers; it tastes best within a day or two of making it. Also, hand churned ice cream contains no preservatives and often contains fruit, so it must be eaten fresh. Natural also converts their ice creams to milkshakes which are reasonably priced. (b) Price: Rupees 28 a scoop is perhaps the lowest price among branded ice creams. One cannot classify its emphasis on the price factor but can on the taste factor. Creamy ice creams which combine Indian kulfi with natural flavours and fruit pieces in them is an innovation, which the Indian consumer had never experienced.

5 Natural Ice Cream 5 Some ice creams are available around the year. Like the chocolate almond, choco cream, coffee walnut, mango, badam, kesar pista and anjeer. Some like the chickoo, sitaphal, papaya pineapple, tender coconut and water melon are seasonal. But they all are priced at the same amount. The Natural outlets also offer a waffle cone for just an additional `5 against its competitors like Baskin Robbins who charge `11 for it. (c) Place : Each Natural parlour is opened after a demographic and demand analysis of the region is done. The potential franchisees usually do the analysis and give the report to the company. Recently counters in malls like the Mega Mall in Mumbai have commenced. This is done to increase their visibility and serve the customers whose shopping habits are shifting from shops to malls. (d) Processes (Service Quality Offered): Along with being served at the parlours, customers also are offered free home delivery. If informed a day earlier, Natural even arranges to provide ice creams in thermocol boxes to be carried on a long journey or on a picnic. A rigid quality control programme is followed by the company at its Mumbai plant. As the product is fruit based and quickly perishable it ensures that the delivered quantity is consumed within ten days. Based on the customer response and the fact that complaints of stale or poor quality ice cream at Natural is not yet heard of, speaks for itself. (e) Physical Evidence : Its outlets provide good ambience, with seating facility that gives a warm experience to the customers. Network Suppliers: The main raw materials for ice cream manufacturing are milk, sugar and fruits. They have dedicated suppliers for each product who are also responsible for timely delivery. Fruits are bought from Metro and the APMC market situated in Vashi, Mumbai. APMC caters to the seasonal fruit requirement and the Metro market supplies off season fruits to the company s factory located in Kandivali, Mumbai. All the suppliers are local to reduce the cost of transportation. Franchise: The potential franchisee studies the area in terms of its capacity, competitors and demand factor. The franchisees have to pay a deposit of `10 lakh to the company before if begins operations. Distributors: As it is a premium product the company does not believe in selling to the customers through the local shops. Distribution is centralised from the Mumbai factory. For distributing the product from the factory to the outlet in Mumbai, Nasik and Pune, the company has dedicated vans and trucks. However for the outlets at Ahmedabad the company uses thermocol packing which has sustainability for 24 hours and uses the railway services to deliver. Success and the Future Natural ice cream has achieved its success sans advertising and also seems confident that it is a household name as it has a stream of loyal customers. It has created a niche which keeps at bay the threats posed by any new entrant. Now with the increasing opportunities and the expanding market through India s liberalisation Kamath sees the need to expand. It is continuing to innovate and experiment to provide new and unique flavours to its consumers. It already has around 100 natural flavours, Lately ice cream market has witnessed innovations. Amul has launched probiotic ice cream for diabetics as also for health conscious segment. It has also launched new flavours including kulfi. Likewise Kwality walls, and several other local players have introduced new flavours like paan ice cream, roasted ice cream with or without hot chocolate sauce. The competitive edge of naturals was getting blunted. What could naturals do to retain it. How can naturals expand its market?