Rahil Gandhi, Director, Vadilal Dairy International Limited, speaks of his companies new marketing campaigns, withstanding the foreign competition and the growth of ice cream industry in India.
The ice cream industry in India appears to be going through a phase of churn with foreign brands giving a serious look-in to home-grown brands. What explains this sudden foreign interest in the Indian Ice cream industry and why are local brands looking to exit a business they have been associated with so long?
I don’t think there is any sudden interest of foreign brands in India. As you may be aware, Hindustan Unilever Limited (HUL) had acquired the Kwality brand ice cream way back in 1995. Also, Cadbury had brought the Dollop ice cream brand in 1990. There has always been an interest in ice cream or the dairy sector by foreign brands. Ice cream, overall, is always in demand and liked by many and there has never been a sudden foreign interest in the industry. Of course, there are always some local brands that are on the lookout for interesting buyout opportunities to come their way. By and large, local ice cream still continues to be patronized and liked by many people.
Why is it that many of the regional players, despite their years in the business, have not really been able to scale up as desired? Why is it that regional players have not been able to become national brands?
Regional players, despite being in the field for long, have not been able to scale up at the desired size because ice cream is a very tough business to bein. We need to have effective distribution, high-end logistic support and be able to match the taste and preferences of consumers. But regional players have been able to scale up in their own territories. They could not grow further in other territories due to the higher transportation and infrastructure costs. Setting up depots is very expensive and not very profitable if they are farther away from your production base. Selling ice cream products in other far way territories poses formidable logistics challenges.
Do you think foreign players will be able to scale the business heights that Indian players have failed to achieve?
As I said, most home-grown regional players have done well and have amazing success stories in their own respective regions though that success has not been replicated at the national level. I don’t believe it is that easy for foreign players to scale business beyond a point as the market is extremely competitive. Already, there are many big brands, multinationals, and major co-operatives in the market. They too have a tough time in catering to the territories where they are regionally weak. And good local players will always offer strong competition. Also, Indians are normally patriotic by nature and are loyal and patronizing of home-grown brands.
Is brand building a tough nut to crack in India’s ice cream market, which is massively fragmented, unorganized and crowded with small players?
Definitely. brand building in ice cream is a tough nut to crack. You only need to look, for instance, at a State like Maharashtra where there are one or two local players in every district. But they find it hard to scale up beyond a point individually. In some pockets of the State, it is very difficult to cut across the locally preferred and accepted brands. If you look at Aurangabad district alone, there are about 10 local brands in the region. Add to the fact that there are other brands available as well, which makes the existing cold chain market very competitive regionally.
As a leading player in the Indian ice cream market, what is Vadilal doing on the premiumisation and brand awareness fronts that can help enlarge its brand equity and footprint?
Vadilal is going to be very aggressive moving ahead as compared to the past years on innovation and brand building efforts. We have launched more than 30 SKUs in different forms like cups, candies, party packs as well as massive packing design changes for the summer season this year. We have gone in for a big overhaul of our product portfolio with the view to offer more choices, innovation in packaging and brand building. Our exercise in creating more awareness for our products and the strengthening of our availability programme has boosted both demand and supply. Going ahead, we have plans for more promotions – advertisements on boards, posters, POPs as well as advertising in newspapers and social media.
What is Vadilal doing to enhance the retail reach and increase the visibility and availability of its brands in terms of: –
a) Marketing campaigns – We plan to increase our outlets three-fold, keeping the rural and urban markets in mind and matching our quality and packaging to international standards. Currently, the company has approximately 15,000 outlets, which we plan to increase three-fold over the next five years. Of course, there is a plan to increase the capacity in terms of production and to adequately meet the demand by enhancing the infrastructure and facilities, thereby making Vadilal brand available in every kirana (retail) stores in the territories, and making it an easily accessible brand in every nook and corner. Our vision is to maintain the integrity of the brand with world-class quality and complete customer satisfaction. Vigorous marketing campaigns are underway through electronic and print media during the current financial year as well as for the years ahead.
b) Promotion via social media – Engage in active social media promotions and it is being done.
c) Ramping up the distribution system with freezers not only in supermarkets/ hypermarkets but also in small neighbourhood shops – For the first time in India, Vadilal launched different varieties of cones recently. In order to make these cones, machines had to be specially modified so that consumers could get different varieties of ice creams – anjeer, kaju draksh, cookies-n- cream, tutty-fruity – in cone varieties.
Earlier, these flavours were available in party packs and cups only. Distributors with cold room facilities are being offered higher margins and additional benefits as compared to the smaller distributors who operate deep freezer machines.
Deep freezers with nominal deposits and, in certain cases, on nil deposits are being offered to the retailers from where good returns of sales are expected. Select retailers are being offered special discounts to maintain the loyalty.
d) Opening more ice cream parlours; We have ice cream parlours of two different brands – ‘Pure Happiness’ and ‘Nothing But Goodness’. More such parlours are being opened for greater penetration of our products.
What have been your initiatives on introducing new ice cream concepts by way of new flavours and low-fat products for the calorie-conscious?
Innovation and introduction of new flavours and variants are a continuous process at Vadilal. FOM (Flavour of the month) is one such process through which a new flavour is added periodically.
How do you see the future for the local players?
With the changing times, tastes and preferences of consumers for natural and traditional flavoured ice creams are set to develop further. Indian brands will continue to play a major competitive role in Indian market despite foreign players entering the market. For sure, competition will always be there from Indian brands and International/foreign brands will not find the Indian market as easy to crack as they might have expected.