With prices of raw materials like milk powder and sugar remaining stable, ice cream makers are eyeing higher revenues through volume growth instead of hiking prices this summer.
The four-month period of summer, starting March, accounts for around 40-50 per cent of annual sales of ice-cream makers. "We sell ice creams of around Rs 400 crore annually, and around 40-50 per cent of that comes during the summer months," said Rajesh Gandhi, managing director, Vadilal Industries, which enjoys nearly 14 per cent market share nationally. The company enjoys a 35 per cent market share in Gujarat, which is considered to be among one of the key markets for ice creams.
Gujarat is a large ice cream market, with amongst the highest per capita consumption (PCC) in the country. Against a national urban PCC of around 0.5 litres, Ahmedabad city would be as high as 2.2 litres.
Milk costs comprise around 18 per cent of the manufacturing cost of ice creams, while sugar constitutes around 2-3 per cent, dairy fat around 18 per cent and the rest being other ingredients like dry fruits, chocolates etc.
Talking about profitability, Vadilal's Gandhi said, while prices of milk powder and sugar are under control now owing to huge stocks, at the same time, the company also has not taken any price increase for the last one year. It last raised prices in last February, 2012. "Fixed costs are going up all the time, therefore, while material costs are under check, margins would not increase by huge proportions. It will more or less remain at 2012 levels only," he added. The company, however, is expecting around 30 per cent growth in volumes on a year-on-year basis. It currently has a production capacity of around 375,000 litres per day.
Another major ice cream player, Baskin-Robbins too said, it is looking at volumes growing by around 8-10 per cent during summers. "We have launched seven new flavours for the summers, and we are expecting volumes to grow by around 8-10 per cent," said Sanjay Coutinho, chief executive officer at Graviss Foods Pvt. Ltd. (master licensee of Baskin Robbins Ice creams). It had last raised prices in May 2012, and expects stable prices to boost volumes.
RS Sodhi, managing director, Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and markets Amul brand of milk and milk products said that the margins in the ice cream business are around 5-6 per cent. "While milk and sugar prices are under control, price of nuts and chocolates have not come down. Therefore, there would not be any major impact on profitability. Volumes, however, are expected to pick up by around 20 per cent." Amul enjoys a 40 per cent market share of the all India ice cream market, which is pegged at around Rs 1600-1800 crore.