Arun Ice Cream

Team 2:
Bhavya Kakkar- 145
Aditi Garg 150
Nikhil Nair- 159
Puneet Agg- 167
Nitin Jaggi - 191
Shweta Shridhar- 197
Ashish Goel - 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 couldn’t 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 didn’t 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 •Educational

departmental stores with Institutes
deep freezers.
•Ships at
•Hotels and restaurants. Madras port

•Social events
 Arun’s 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 Arun’s logistics management.

• As Arun can’t 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
 STATISTICS
• Turnover increased from
1970 Rs. 1,50,000
1981 Rs. 4,25,000
1999 Rs. 28 million
• 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
Months
sales

April-June 34

July-September 22

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.
 ARUN’S 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 Nadu’s 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

2
• Making the mix

3
• Pasteurizing the mix

4
• Homogenizing the mix

5
• Cooling & Ageing the mixaddition of flavours & colours

6
• Freezing the mixaddition of fruits & nuts

7
• Packaging the Ice cream

8
• 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:en-
US: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
• Arun’s 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 & B’lore).
• 3400 people participated.
• Objective – Again to encourage consumer trial
of high end flavours…leading to greater flow
of two wheeler traffic to Arun’s 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 Arun’s 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:en-
US: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 Unilever’s 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 company’s 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 dessert
market with acquisition of well-known regional brands(BBIL).

• 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 Arun’s growth plans.

• The decision whether to aggressively reinforce Arun’s

competitive profile and further expand its franchise
network in the face of HLL’s 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 Market in India 2009-15
 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 1000 Non-Branded 905
consumption in India with Ahmedabad and Delhi accounting 900 Branded 787
12%
for 30% of the total consumption 800 691 293
 Vanilla, Strawberry and Chocolate account for 50% of the total 700 610
548 281

US$ million
consumption in 2011 600 495
450 273
REASONS FOR GROWTH 500 265
 Rising disposable income 400 255
260
250
 Largest middle class population in the world 300
506
612

 One of the fastest growing economies in the world 200 346

418
240 288
 Acceptance of global trends such as going out for eating ice- 100 200
cream 0
KEY TRENDS 2009 2010 2011 2012 2013 2014 2015
 International brands such as Baskin Robbins and Cream Stone
have been increasing their outlets in Market Share (Branded), 2011
 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
Others Amul
health consciousness especially among young urban population, 35% 35%
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 Mother
Dairy Vadilal
Cream Bell 10%
10% 10%
Source: Business Standard, Indian Express and estimate
 Current Competition
Major Players Market share
• Fiercely competitive due to attractive
economics with profit margins ranging
between 30-50% 55%
Unorganized
• Organized sector comprises GCMMF’s
Amul, HUL’s Kwality Walls, Mother
Diary, Baskin Robbins and a number of
regional brands
• Amul is the market leader and is at the 45%
Organized

forefront of targeting the rural market

• For most national players viz. GCMMF, Vadilal

HUL and Mother Diary, revenue from GCMMF 15%

37%
ice cream accounts for a small portion of
their total revenues 14% Mother Diary
• Premium segment:
– Baskin Robbins is the single largest 16%
13%
premium ice cream brand 5% HUL
Others
– New entrants include Amul, Baskin Robbins

Movenpick, Haagen Dazs and

Snowberry
Source: Business Line “Bringing in the creamy layer”, August 2008; magindia.com “Amul to launch new ice cream range”, October 2008
 Swot Analysis
Strength Weakness

1.Good product range include various flavors, 1.Growing competition form international
party packs, sticks, cones etc. and other brands means limited market share

2.Good quality and packaging. 2.Limited international presence as

compared to leading global brands
3.Offers over 200 products across India

Opportunity Threats
1.High End ice-cream to tap the higher
1.Kulfi in rural markets
income group also
2. Local ice creams and sweet dishes
2. Tie-up with food chains, restaurants
3. Health conscious people refraining
3. Mobile vans for better visibility
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 MNC’s 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 company’s 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 Chandramogan’s 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 Ice-
cream effectively understood those needs and
formulated some strategies that were stable and
would help them in the long run to strengthen
the company’s position.
 tTHANKYPU

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