Corporate: Competition - The branded ice-cream tango begins

COMPETITION
The Branded Ice-Cream Tango Begins

With HLL and GCMMF battling for the top slot, this is one cold war that's hotting up.

By Nita Jatar Kulkarni

In the blue corner is the country's largest consumer products company, Hindustan Lever Ltd (HLL). In the red, the country's largest co-operative, the Gujarat Co-operative Milk Marketing Federation (GCMMF), a low-profile entity recognised more through its flagship brand Amul. At stake is the market for branded ice-creams valued at Rs 325 crore, and expected to grow at the rate of 20 per cent a year. That's the context for one of the most intense marketing battles in recent times.

Is it worth it? Let the numbers speak: the total market for ice-creams in India (and this includes the local unbranded variety) is valued at Rs 2,000 crore; and the annual per capita consumption of ice cream in India is a mere 106 ml, against 22 litres in the US. Clearly, it's the future thaw in the market that keeps competitors like HLL (a market share of 55 per cent) and GCMMF (a marketshare of 35 per cent) going, although they couldn't go about it in more diverse ways.

For, Lever's Kwality-Wall's, despite its presence at price points as low as Rs 2 and Re 1, has always seen itself as a brand that competes on the basis of quality, not price. Only in May, 2000, did the company soften its stand a trifle to slice the prices of a few of its offerings like Cornetto, priced at Rs 24, which was being offered at a discount of Rs 4 in select cities and the Rs 70 one-litre pack, which offered 25 per cent extra ice-cream. In contrast, GCMMF, which has stormed the market with its Amul brand of ice-creams in the last four years (the brand is available nationally, except in eastern India, where it is proposed to be launched by October, 2000), sees price as the single biggest weapon in its armoury. Avers R.S. Sodhi, 40, General Manager (Marketing) GCMMF: ''We want to convert ice-cream into a mass product.''

Thus, GCMMF has unleashed a flurry of price-based promotions since April, 2000: Rs 5 off on the Rs 15 Tricone; Rs 3 on the Rs 15 Frostik and Rs 2 on the Rs 10 Chocobar as well as a 1.25-litre brick for the price of a one-litre pack (Rs 60). Lever has reluctantly followed suit: its new launches like three variants of the Feast (at Rs 14, Rs 5 less than the basic Feast Chocolate), and Biki Max, priced at Rs 5. Admits J.H. Mehta, 47, Executive Director, HLL: ''Price has played a part in Biki Max becoming a rage among Indian kids.''

Can price work in the long-term? Says Rajesh Iyer, 34, Associate Director, Business Consulting, Arthur Andersen: ''Price may make for a great entry tactic but it does not make for a long-term strategy.'' Both companies are quick to point out that they have other differentiators. ''Real milk, real ice-cream, real value for money,'' intones Sodhi in an obvious reference to the time when the manufacture of ice-cream from milk fat was restricted to the small-scale sector forcing Lever to opt for vegetable fat-based frozen desserts. That, though, has changed. Today, several of the Kwality-Wall's offerings are made from milk fat. Lever, for its part, claims its Max range is made from real glucose, milk, and fortified with vitamin A-positioning it on the health platform.

Talking marketshare

With such intense competition, claims abound: Sodhi of GCMMF believes that it was Amul's entry that caused Lever's ice-cream volumes to stagnate over the last two years. In an earlier interview to BT, HLL's Chairman M.S. Banga admitted that the company's ice-ream business hadn't performed well primarily because of teething troubles the company had faced in getting a cold chain in place (See Lever's new adventure, BT, June 7, 2000).

A Lever spokesperson dismisses Sodhi's claims, pointing out that they are based on volumes and that Kwality-Wall's business rose from Rs 155.41 crore in 1998-99 to Rs 171.26 crore in 1999-2000. ''In value-terms, Amul's share of the organised market is a mere 13 per cent,'' he concludes. In turn, GCMMF claims that the Kwality-Wall's marketshare dipped from 50 per cent last year, to 45-48 per cent this year.

Claims and counter-claims about the relative marketshares are only to be expected in a marketing war. But Lever is unlikely to be able to challenge GCMMF on the price front. The latter has the backing of 180 co-operative dairy networks located across the country, and an efficient supply-chain in place for the procurement of high-quality milk-an essential input for ice-creams. For some time, it looked as if Lever would shun the low-end and opt for the value segment. In the middle of 1999, the company started importing the international Wall's range and selling them through select outlets in a few cities with minimal promotional support.

Focus on the low-end

Focus on the high-end would have meant lower volumes but higher margins. However, Lever seems to have put its plans for the high-end on back-burner. Today, its focus is primarily at the low-end, where it competes head-to-head with GCMMF. Some analysts say Lever's emphasis on the popular segment stems from its anxiety to avoid another Nirma-like debacle. That would be disastrous for a company that hopes to be number one in every product category. What will it be? Lever's marketing savvy or GCMMF's supply-chain strengths? Amul's price or the Kwality-Wall's lineage? With an aggressive GCMMF confident about attaining the number one slot in 2001, this is one cold war that is far from over.

Issue Contents Write to us Subscriptions Syndication