Shreyas Kulkarni

The ice cream industry has a summer meltdown

For an industry that typically gets 40 per cent of its annual sales during the summer season, the ongoing national lockdown brings doom. Brands have now tied up with Swiggy, Dunzo and Zomato to salvage sales.

"About 40 per cent of the year's turnover comes in March, April, May and June; for all practical purposes, it's gone," says Anuvrat Pabrai, official spokesperson for the Indian Ice Cream Manufacturers’ Association (IICMA), and the founder of Kolkata-based Pabrai's ice cream brand.

The Coronavirus-induced national lockdown has hit India's ice cream industry, which is worth around Rs 10,000 crore, hard. Statista says that in 2019, the sales volume of ice cream and frozen desserts in the Indian packaged foods market was about 519 thousand metric tons (51.90 crore kg). This number will see a sharp fall in 2020.

May is near its end, then comes June before the monsoons take charge. So, 2020 doesn't bode well for this industry.

But, Shekhar Agarwal, head of marketing, Havmor Ice Cream, is optimistic. He says that the relaxation of lockdown norms and the introduction of Green zones have allowed businesses to restart, and it's a good sign. He, however, points out, "... Critical markets, like Gujarat, will be impacted more than most other states."

We asked Agarwal about the unsold inventory and its impact on the revenue. He responded, "... It is not such a critical challenge because it's a long shelf (life) product and consumption has remained strong."

In any company, 25-30 per cent of sales are B2B, so it is a huge loss. It's very unlikely that hotel and restaurant trade might take off, hotels maybe, restaurants not until the end of the year, or March 2021.
Anuvrat Pabrai, IICMA

On how he will tweak his marketing strategy now, and for the months to come, he said, "The consumers want ice creams to be delivered to the safety of their homes. We've started taking online orders on our website, and have also gone ahead and partnered with food delivery and grocery apps."

Havmor has now partnered with Dunzo to launch 'Havmor Ice-Cream Xpress' on the (Dunzo) app, and deliver its (Havmor's) range of ice creams to the consumers.

Talking about the impact on demand as more and more people adopt healthier lifestyles, Agarwal says, "Ice cream is seen as a delight category, and consumers have it for the experience. I don't see any change in consumer behaviour just because their health aspirations have changed during this period."

A Mother Dairy spokesperson responded to our queries over email. On the impact of the lockdown on the industry, the spokesperson said, "... We are confident that the category will see a turnaround with the ease in lockdown norms in the days to come... It is pertinent to note that ice cream, as a category, is relished across the year, so we are confident that the demand will surge as more and more selling points start operations across locations... During the lockdown, we were able to cater to the consumer demand from our dedicated network of outlets across Delhi NCR, which contributes around 25 per cent of (our) ice cream business. We did not witness any drop in demand."

IICMA's response to fake news about ice creams spreading Coronavirus
IICMA's response to fake news about ice creams spreading Coronavirus

Speaking about the impact of the virus on demand, and the 'fake news' that plagued the industry at the start of the year, the Mother Dairy spokesperson said, "... More than 25 per cent of the ice cream business comes from our own 'milk booths', and we are not seeing any drop in demand from these stores... With regards to the fake news of the virus spreading through ice cream, we would like to mention that this is mere sentiment. The industry association has already issued an advisory denying any such threat..."

Distribution is an issue that has plagued several industries. "... At Mother Dairy, we are committed to ensuring availability and safety for all, and hence, we have launched a home delivery system in key cities with a safe delivery mechanism to ensure easy product availability for the consumers... They just need to place an order on WhatsApp for free home delivery. We have ensured requisite inventories are maintained to serve the demand, while the production for some categories which are high in demand have been initiated. We are hopeful that we will be able to secure at least 80 per cent of our annual business, post lockdown..."

Commenting on the B2B sales, the Mother Dairy spokesperson said, "In the HORECA (hotels, restaurants and caterers) segment, the situation may take more time, though we are hopeful that it (the segment) will gradually start moving towards normal in 3-6 months."

In the recent past, we have seen Kwality Wall's come out with an ice cream ad called 'Happiness is essential'. It talks about the happiness and joy one gets out of eating ice cream. You can order Kwality Wall's ice cream from BigBasket and Swiggy.

Pabrai agrees that the demand for ice creams will remain strong. During a meeting with the ice cream manufacturers, he said, "There's a huge demand in the market, and people will buy. You just need to get your products at the retail level. I am expecting that the consumption of ice creams will go above and beyond the normal..."

According to Pabrai, the industry was impacted well before the lockdown because of the fake news that the Coronavirus was caused by ice cream and cold drinks.

"Everything was unfamiliar during the first lockdown (period), and sales were zero. With March, April and now May, too, gone, we might stand to get 15-20 per cent of sales in June," he says.

Speaking about the impact on small ice cream companies, Pabrai says, "Yes, there is going to be a very serious impact on the smaller ones, especially those in debt. I would classify the impact based on the debt of the company. If a small company has debt, it will get really bad for them. If it's small with no debt and sound finances, it might pull through. The big ones will survive based on their financials."

Being street smart

During our conversation, Pabrai shared an interesting piece of information regarding his stores. "During the second lockdown, the police allowed us to open ice cream stores from 10 a.m. to 5.30 p.m., but insisted that the shutters be downed, and only be opened for Swiggy and Zomato delivery personnel. We saw only 10-15 per cent of our regular sales."

"Lockdown three began and we were allowed to operate from 7 a.m. to 7 p.m. To ensure sales, we started selling milk and water, and classified ourselves as an essential goods supplier. And, we slyly kept the shop open till midnight for Swiggy and Zomato. It was a game changer, and sales jumped to about 80 per cent."

B2B, a lost cause?

We were also curious about B2B sales, and Pabrai said, "... That business is lost 100 per cent right now. In any company, 25-30 per cent of sales are B2B, so it is a huge loss. It's very unlikely that hotel and restaurant trade might take off, hotels maybe, restaurants not until the end of the year, or March 2021."

Speaking about the Creambell saga (a news report had erroneously said that it had shut down), he says, "... It sells to retailers where it can, but (its) institutional business is gone. It's able to do 10-15 per cent of its normal business... It does business in four states where it has its plants, out of the 29 possible ones. On average, there is 5-10 per cent of the business, where does it leave you?"

Government relief

The IICMA is disappointed with the government's response to the industry's plight. Pabrai reveals, "We expected the government to invoke the employee state insurance facilities, and pay the workers from it because employers can't pay their employees when revenue is zero. And the threat of arrest to employers for non-payment of wages was unwarranted. There has to be real-time cash percolating down the system."