ICE-CREAM MARKET INDIA

December 2008

Executive Summary
Market
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%

Drivers & Challenges

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

Trends

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

Competition

GCMMFs Amul brand is the market leader Mother Diary and Hindustan Unilevers Kwality brand are other strong players The premium segment is dominated by Baskin Robbins

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
Overview
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

Size and Growth

USD mn
250 200 150 100 50 0
+12%

240 182 209

148

155

2005

2006

2007

2008 e

2009 f

Geographic Distribution
North 30%

West 40% 10% 20% East

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

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 Indias 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

Trend s Franchises and strategic partnerships to enhance distribution

Benefits derived from falling costs

Large-scale advertising geared towards brand building and sales promotion

Advertising on Television: Jan-Apr 2008
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

Share of TV advertising

Kwality Walls 78% (HUL)

Hatsun Agro 9% 2% 4% Metro Daily Ltd Karnataka Milk 7% Federation Others

Advertising in Print: Jan-Apr 2008

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 sectors targeting of rural areas and unorganized sector Non-metros: 57% Metros: 26% Mini metros: 16%

Share of Print advertising

GCMMF
14% Vadilal 52% Havmor 9% 3% Dinshaws 22% Others

Advertising is the primary method to increase consumption and penetration levels

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

Product diversification to target specific segments Producers have launched flavoured kulfi the traditional Indian dessert ice cream which is the favoured dessert in the nonmetros

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
Company Hindustan Unilever (HUL) Product

Capitalizing on demand from a niche markets

Health Benefits High calcium content, low calorie and fat Increases immunity, help in digestion, prevents diarrhoea and growth of colon cancer Low sugar and fat content

Moo
Probiotic range Amul Prolife Diet

GCMMF Mother Dairy

Source:

Financial Express Ice cream war begins as HUL, Amul oil plans, February 2008

Enhancing network through franchises and strategic partnerships

Strengthens marketing, sales and distribution. Company HUL Franchising GCMMF Hatsun Agro Milkway Express Baskin Robbins Company Partnerships HUL GCMMF Kiosks - Swirls Increase 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 Premium ice cream outlet Arun Ice Cream Unlimited 1000 outlets in southern and central India by 2009, counters at corporate campuses Outlets in malls and multiplexes Affiliation Indian Oil Corporation (IOC) Oxicash Bharat Petroleum Corporation Ltd (BPCL) Purpose Retail stores at petrol stations Marketing via scratch and win contests Mobile kiosks at petrol stations Exclusive retailing Targeting the southern market Re-launch brand in Mumbai, Delhi, Bangalore, Hyderabad, Kolkata and Chennai Projects

Baskin Robbins
Milkway Express Movenpick

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

Spencer Retail Ltd and Foodworld Rhapsody Foods & Beverages

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
Major Players
Fiercely competitive due to attractive economics with profit margins ranging between 30-50% Organized sector comprises GCMMFs Amul, HULs 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

Market share

55%

Unorganized

45%

Organized

Vadilal GCMMF 37% 14% Mother Diary 13% 15%

16% Others

5%

HUL Baskin Robbins

A well established unorganized sector creates a fiercely competitive environment for the larger players
Source: Business Line Bringing in the creamy layer, August 2008; magindia.com Amul to launch new ice cream range, October 2008

Market Overview Advertising Trends Competition Factors External & Internal Key Developments

Drivers & Challenges

Challenges Low quality products and competitive pricing from unorganized sector Lack of cold chain facilities

Drivers Low consumption levels Developing institutional channel

External Factors
ECONOMIC FACTOR - Low consumption levels
ml

Per capita consumption levels are very low at 200250 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

300 200

250 106

250

100 0

2000

2004

2008

Source: Economic Times Vanilla prices shoot up on short supply, October 2008; Business Today The Branded Ice-Cream Tango Begins, July 2000; Rediff The icecream 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 Factors
TECHNOLOGICAL 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