ICE-CREAM MARKET INDIA

December 2008

Executive Summary

– Drivers: Opportunity to capitalize on low consumption levels; growing institutional sales

– Challenges: Competition with the unorganised sector on price and quality, and lack of well-developed cold chain facilities

Market

Drivers & Challenges

Trends

Competition

– Large investments in advertising – Diversification of product portfolio targeting specific consumer segments– Partnerships and franchises pursued to boost distribution– Falling costs of raw materials offsetting rising milk and sugar prices

– GCMMF’s Amul brand is the market leader– Mother Diary and Hindustan Unilever’s Kwality brand are other strong players– The premium segment is dominated by Baskin Robbins

– Estimated worth USD 209 mn in 2008, expected to grow to USD 240 mn in 2009– North and west account for 70% of total sales– High profit margins ranging between 30-50%

• Market Overview• Advertising Trends• Competition• Factors – External & Internal• Key Developments

The industry is growing steadily with the northern and western regions accounting for the largest consumption

• Size and Growth– Worth USD 209 mn in 2008 – Growing at 12% p.a. in 2005-2008 – Forecast to increase by 15% to reach

USD 240 mn in 2009• Characteristics

– Northern and western regions together account for 70% of total market consumption

– Profit margins range from 30% to 50% depending on the product segment

– 60% of ice cream sales occur during the summer months of April-June

– 80% of sales is through street vendors– Vanilla is the highest selling flavour and

together with strawberry and chocolate it accounts for 70% of the market

Overview Size and Growth

240209

182155148

0

50

100

150

200

250

2005

USD mn

2006 2007 2008 e 2009 f

+12%

40%West

30%

North

10%East

20%

South

Source: The Economic Times “Showers upset regional sales targets of marketers”, May 2007; IBEF “FMCG companies target consumers in summer”, March 2008; India Environment Portal “Is our ice cream natural or synthetic?, August 2007; The Financial Express “Fire & Ice”, June 2008; 51Rainbow company website

Geographic Distribution

• Market Overview• Advertising Trends• Competition• Factors – External & Internal• Key Developments

Ice Cream Industry

Key Competitors in Ice Cream Category

• Mother Dairy– Key Strengths

• Popular ( Delhi)• Ideal in milk ice creams • Popular for variety of product offerings : Milk, Curd, Butter • Trust and reputation

Offerings in Ice Formats• Lic Lollies• Priced @ 5• Targeted to kids• Flavors Lemon, Orange, Mango and

raspberry and cola. • New Launched are shararat and

chulbuli• Benefit Enriched with Vit C

Key Competitors

• Kwality Walls– Key Strengths

• Premium Imagery

• Popular • TV ads• Trust and reputation • Varieties in chocolate ice

creams• Attractive packaging

– Offerings in Ice Formats• Black grape jelly : In

black current • Twister Zing :

Raspberry and Mango• Benefit Beat the heat• Others in milk base

are : Litchi Zap and Mango Zap priced @ 25

Key Competitors

• Vadilal– Key Strengths

• Low pricing• Easy availability

Offerings in Ice Formats• Juice Candies • Flavors Kachi kerri, Black

Current , Mango, Orange, Kala khatta, Jaljeera and Tiranga ice candy

• Price @ 10• Benefit Quenches thirst and

offers refreshment

Key Competitors

• Amul– Key Strengths

• Popular • TV ads• Trust and reputation • Varieties in milk ice

creams

Offerings in Ice Formats

• Stamina Candies

• Flavors : Orange , Lemon and Mango

• Priced @ 8

• Positioned as India’s first fitness candy

Key Competitors

• Creambell– Key Strengths

• For masses • Availability• Economical

Offerings in Ice Formats• Joosticks • Flavors : Nimboo Paani, pineapple

and strawberry• Priced @ 10• Benefit Real frozen juice on stick

Key Trends

Large scale advertising Product diversification to target specific segments

Benefits derived from falling costs

Franchises and strategic partnerships to enhance

distribution

Trends

Large-scale advertising geared towards brand building and sales promotion

• Grew by 15% rise in 2008 compared to 2007• Average number of ads per day increased by 45% • The top 3 ice cream brands advertised

– Kwality Walls Almond Praline– Kwality Walls Paddle Pop– Arun Ice Cream

• Grew by 58% rise since 2005• Gujarat accounted for 25% of the total advertising • Maximum advertising in non-metros in the

newspaper medium indicates organized sector’s targeting of rural areas and unorganized sector

– Non-metros: 57% – Metros: 26% – Mini –metros: 16%

Advertising on Television: Jan-Apr 2008 Share of TV advertising

Advertising in Print: Jan-Apr 2008 Share of Print advertising

7%

9%

78%Kwality Walls

(HUL) 2% Karnataka Milk

FederationOthers

Hatsun Agro

4% Metro Daily Ltd

14%

9%Havmor

3%

22%

GCMMF

Others

52% Dinshaws Vadilal

Source: exchange4media.com “Snapshot of advertising by Ice Cream category in Print during Jan-Apr’ 08”; Indiatelevision.com “Snapshot of advertising by Ice Cream category in January-April 2008”, June 2008

Advertising is the primary method to increase consumption and penetration levelsAdvertising is the primary method to increase consumption and penetration levels

Source: Financial Express “Ice cream war begins as HUL, Amul oil plans”, February 2008

• Producers have launched flavoured “kulfi” – the traditional Indian dessert – ice cream which is the favoured dessert in the non-metros

• Naturally flavoured ice cream i.e. without any artificial or synthetic flavour has been introduced for the premium segment

• Players are capitalizing on the market which has become extremely health conscious

Product diversification to target specific segments

Capitalizing on demand from a niche markets

Company Product Health Benefits

Hindustan Unilever (HUL) Moo

High calcium content, low calorie and fat

GCMMFProbiotic range –

Amul Prolife

Increases immunity, help in digestion, prevents diarrhoea and growth of colon cancer

Mother DairyDiet Low sugar and fat content

Enhancing network through franchises and strategic partnerships

Company Projects

HUL Kiosks - Swirls

GCMMFIncrease Amul Parlours from 1,800 to 3,000 in 2008 and 10,000 by 2009, Cyber stores in 100 cities, Cyber clubs in 125 cities

Hatsun Agro Premium ice cream outlet – Arun Ice Cream Unlimited

Milkway Express

1000 outlets in southern and central India by 2009, counters at corporate campuses

Baskin Robbins Outlets in malls and multiplexes

Company Affiliation Purpose

HULIndian Oil Corporation (IOC) Retail stores at petrol stations

Oxicash Marketing via scratch and win contests

GCMMF Bharat Petroleum Corporation Ltd (BPCL) Mobile kiosks at petrol stations

Baskin Robbins

Lifestyle, Coca-Cola, ICICI credit cards and Cox & Kings

Exclusive retailing

Milkway Express

Spencer Retail Ltd and Foodworld Targeting the southern market

Movenpick Rhapsody Foods & BeveragesRe-launch brand in Mumbai, Delhi, Bangalore, Hyderabad, Kolkata and Chennai

Par

tner

ship

sF

ran

chis

ing

Strengthens marketing, sales and distribution.Strengthens marketing, sales and distribution.

Source: FnBnews “Coops, the mainstay of India's dairy model”, October 2008; Business Standard “Ice-cream makers add healthy flavours”, April 2008; FoodIndustryIndia “Gelato ice creams is a hit at AAHAR”, March 2008

• Market Overview• Advertising Trends• Competition• Factors – External & Internal • Key Developments

Market

• Fiercely competitive due to attractive economics with profit margins ranging between 30-50%

• 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 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

Major Players Market share

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

A well established unorganized sector creates a fiercely competitive environment for the larger players

A well established unorganized sector creates a fiercely competitive environment for the larger players

GCMMF37%

Vadilal

15%

Mother Diary 14%

HUL

13%

Baskin Robbins

5%Others

16%

55%Unorganized

45%Organized

• Market Overview• Advertising Trends• Competition• Factors – External & Internal • Key Developments

Drivers & Challenges

Drivers

Low consumption levels

Developing institutional channel

Challenges

Low quality products and competitive pricing from unorganized sector

Lack of cold chain facilities

External Factors

ECONOMIC FACTOR - Low consumption levels

• Per capita consumption levels are very low at 200-250 ml while penetration rate is estimated at 15%

• Significant scope for market growth by increasing either consumption levels or market penetration, or both

• National players are focusing on increasing per capita consumption or penetration to grow the market

250250

106

0

100

200

300

2000 2004 2008

ml

Source: Economic Times “Vanilla prices shoot up on short supply”, October 2008; Business Today “The Branded Ice-Cream Tango Begins”, July 2000; Rediff “The ice-cream war hots up”, March 2004; Vadilal Annual Reports; Hindu “The Ice-cream Punch”, June 2004

External Factors

SOCIETAL FACTOR - Low quality products and competitive pricing in the unorganized sector

• The market faces a threat from low-quality products

• Price difference between large and small players

• Large players are at a competitive disadvantage compared to the unorganized players due to the low quality and pricing of the unorganized sector

External FactorsTECHNOLOGICAL FACTOR - Lack of cold chain facilities

• The lack of good cold chain facilities for transportation and storage is an impediment towards increasing market access and penetration

• Cold chain also constitutes the most to the total cost

• Developing cold chain infrastructure is extremely crucial to increase market penetration and the challenge is shared by many other industries in the food & beverage sector

Internal Factors - SWOT