“Evaluation of Entry into Ice cream Business for Unilever Bangladesh Limited” Submitted to Sharmin Shabnam Rahman Lecturer BRAC Business School BRAC University Submitted by Md. Robin Miah Id# 06204032 BRAC University Date: 02-09-2010

 

  

September 2, 2010

SHARMIN SHABNAM RAHMAN

Lecture

BRAC Business School

BRAC University

Subject: Submission of Internship Report

Dear Madam,

This is to inform you that I am submitting the internship project report titled “Evaluation of Entry into Ice cream Business for Unilever Bangladesh Limited” upon completion of my formal internship attachment period from May 06, 2010 to July 06, 2010 with Unilever Bangladesh Limited.

I would like to thank you and show my gratitude for your support and guidance that you provided me during the preparation of this report. Without your help it would have been impossible for me to prepare this report. I would like also show my gratitude to my Company supervisor MD. Risalat Siddique, Brand Manager, UBL for his support during my internship period.

I have tried to discuss all the relevant points of a feasibility study while keeping consistency with Unilever Bangladesh Limited’s information confidentiality policy.

I would be glad to clarify any discrepancy that may arise or any clarification that you may require regarding my project and report.

Sincerely,

________________________

MD. ROBIN MIAH

ID#06204032

BRAC University

ACKNOWLEDGEMENT I would like to show my sincere gratitude to Sharmin Shabnam Rahman, lecturer, BRAC University, and my Academic Internship Supervisor; for her constant supervision and guidance have been of extreme help to me. I am also thankful for all the times I consulted her and she answered with the utmost patience and perseverance. I am thankful to Mr. Tanzeen Ferdous, Senior Brand Manager, Brands & Development, Unilever Bangladesh Limited, for entrusting me with such an important project and allowing me scope to work independently, providing all required supports. I am also grateful to Mr. Muhammad Risalat Siddique, Brand Manager, Unilever Bangladesh Limited and my Company Internship Supervisor, for his relentless support during each stage of research and work. He supervised and corrected me during the entire research process. Last but no the least, I would like to thank Mr. Hamdan Kabeer, Brand Manager for Lipton, Unilever Bangladesh Limited for helping me in developing the construct of this report and providing me detail regarding Operating Methods for Foods of Unilever PLC.

Evaluation of Entry into Ice cream Business for Bangladesh Limited I

Executive Summary

Unilever Bangladesh Limited (UBL) is a household name virtually for every Bangladeshi national. Being a multi-national, no other company has achieved this level of success. It is regarded as one of the most reputed multi-cultural companies of the world. With its history of over 70 years globally, UBL, an operating and Brand building company of Unilever Group has predominantly served the Bangladeshi market with mainly Home and Personal Care (HPC) FMCG products for last 47 years with limited presence in the food business with Lipton tea. With dominant brands in HPC like Lux, Lifebuoy, Wheel and Pond’s, growing brands like Sunsilk, Clear and rising stars like Rexona and Dove’, the company now wants to check its possibilities in the foods category which globally is the largest business of Unilever (54% of total portfolio). With this intention in mind, the authorities of UBL in Brands & Development Department assigned the project “Evaluation of Entry into Ice cream Business for Unilever Bangladesh Limited”. This research was designated to be mainly qualitative in nature and to build on earlier researches done by UBL. To assess the feasibility of entering into ice cream business, I combined primary sources like consumer and trade visits, and secondary sources like earlier research reports to understand market construct, market characteristics, and target consumer groups of the ice cream industry. Based on the collected data, and then assessed the entry prospect for UBL in this industry. Ice cream industry of Bangladesh is estimated to have a size of BDT 220 Crore where BDT 131 Crore belongs to branded segment (BDT 121 Crore Common Format Ice cream that is distributed through retail and BDT 9.8 Crore in the boutique segment) and BDT 79 Crore is in the unbranded low quality-low price segment. The industry is currently growing at a rate of 19%. The research excluded unbranded segment from discussion as global quality mandate of Unilever prohibits UBL from competing in that market. Branded common format is dominated by Igloo with more than 51% share with followers like Kwality and Polar where Milk Vita and Savoy are minnows. Boutique segment is competed by Club Gelato (20% share), MövenPick, Andrsen’s (3 outlets) and Gelateria Igloo (3 outlets). These three have around 17% share. The market is characterised by low competitive rivalry where Dhaka still contributes to more than 61% of total country’s sales. This is due to issues regarding electricity and requirement of cold distribution chain by the industry. There are still huge untapped areas of the country. However, the industry is extremely capital intensive and there are lots of entry barriers. Only manufacturers with large capital can invest and thus there has been no big player in the common format segment since Kwlaity (1999). Products or of quite high quality in the Bangladeshi market but price is still out of reach of rural and lower SEC people who belong to low disposable monthly income group. Distribution is mainly done through refrigerated trucks alongside use of carts in the country. Boutique format players serve at their premises, ice cream and other dessert items to offset seasonality of ice cream sales. Promotion in the common format is mainly in newspapers and billboards along with trade based consumer promotions and trader schemes. Consumers of ice cream are mainly Urban kids in the age group of 5-14 who mainly consume normal sticks, cups, cones innovative fillers and water ice creams; there is urban youth in the age group of 15-24 who consume premium and extrusion sticks and cones and urban mothers in the age group of 25-35 who are the decision makers for kids and family ice cream purchases. The consumers can be

Evaluation of Entry into Ice cream Business for Bangladesh Limited II

segmented based on their desired satisfactions from ice cream occasion, portrayed personality traits of ice cream bands and the occasions when they consume ice cream. Analysis shows there is scope for market development and penetration in the country. There is also scope for ice creams that are health conscious and nutritional in the industry. Looking at the scenario of the Bangladeshi market, UBL is suggested to enter the industry in a grand way with tentative initial investment of BDT 45 Crore in manufacturing facility, cold distribution channel development and placing branded freezers at retail outlets. Expected brand is Wall’s, the regional ice cream brand of Unilever. Company is also suggested to enter in the boutique segment with Ben&Jerry’s the premium boutique brand of Unilever. Products should be differentiated and nutritional with the price range at par or higher than common format players and lower than the boutique format. Extensive promotion would be required and thus presence in television as ice cream is a brand that requires continuous innovation and hype around the brand. Expected outcome of the entry is to have sales of BDT 11 Crore with a market share of 10% in the first year. However, for the first three years company would have negative net profit and is expected to make a net profit of BDT 2.5 Crore with a gross slaes of BDT 38 Crore in the fifth year of business. Thus, Unilever can benefit from entering in this industry if they enter in a grand way. Obviously company has to balance the investment issues for the industry and also acquire necessary resource for ice cream as traditionally UBL is an HPC company. If they can address these issues tactfully they can do well leveraging their existing brand image.

Evaluation of Entry into Ice cream Business for Bangladesh Limited III

Table of Contents Topic Detail Pg. No

1.0 Introduction 1.1 Background of the Report 1 1.2 Objectives 1 1.3 Scope 2 1.4 Methodology 2 1.4.1 Primary Research 2 1.4.2 Secondary Research 3 1.5 Limitation 4 2.0 Background of the Organization 5 2.1 Global Unilever Group 5 2.1.1 Home and Personal Care Divisions 5 2.1.2 Foods Division 6 2.2 History of Unilever 6 2.2.1 Soap and Margarine Origins 6 2.2.2 Surviving the Great Depression 7 2.2.3 Post-war Era: Adapting to New Markets and Technology 7 2.2.4 Restructuring and Major Acquisitions 7 2.2.5 Twenty First Century Unilever 7 2.2.6 Unilever of Today 8 2.3 Unilever Bangladesh Limited (UBL) 8 2.3.1 Manufacturing Facilities 9 2.3.2 Employees 9 2.3.3 Product Categories and Brands 9 2.3.4 Brand Launches by Year 10 2.3.5 Corporate Mission 11 2.3.6 Corporate Social Responsibility 11 2.3.7 Corporate Governance 11 2.3.8 Organizational Structure 12 2.3.9 Brands and Development Department 12 3.0 Global Ice cream Industry 15 3.1 Overview 15 3.2 Unilever Ice cream Business 15 3.3 Regional Ice cream Business and Unilever 16 3.3.1 Ice cream Consumption 16 3.3.2 India Ice cream Business and Unilever 16 4.0 Bangladesh Ice cream Industry 17 4.1 Industry Construct 17 4.1.1 Branded Market 17 4.1.2 Unbranded Market 18 4.2 Historical Progress of the Industry 18 5.0 Market & Competition Analysis 20 5.1 Market Description 20 5.1.1 Market Characteristics of the Common Format Segment 20 A. Market size 20 B. Competitive rivalry in the Market 20 C. Market Sales and Growth Rate 22 D. Market Share and Size of the rivals 22 E. Geographic Sales Orientation 23 F. Seasonality of Sales 23 G. Distribution/ Servicing System 24 H. Technology and Innovation 26

Evaluation of Entry into Ice cream Business for Bangladesh Limited IV

I. Production Capacity 26 J. Products and Pricing 27 K. Firms as Price Setters 28 L. Promotion 28 M. Players in the Common Format Segment 30 5.1.2 Market Characteristics of the Boutique Segment 35 A. Detail of Operation 36 B. Players in the Boutique Segment 37 5.2 Price Comparison of Common and Boutique Segments 41 6.0 Consumer Analysis 42 6.1 Target Group of Ice cream 42 6.1.1 Geographic Group 42 6.1.2 Target Age Group 42 6.1.3 Target SEC and DMFI Group 43 6.2 Ice cream in Consumer Lifestyle 43 6.3 Highlights of Purchase Habit of Ice cream 44 6.3.1 Common Habits across Target Groups 44 6.3.2 Habits of Kids 45 6.3.3 Habits of Youth 45 6.3.4 Habits of Mothers 45 6.4 Barriers to Ice cream Consumption 45 6.4.1 Emotional Barriers 45 6.4.2 Functional Barriers 45 6.5 Research Findings 46 6.5.1 Relevant Occasions in Daily Lives of Consumers 46 6.5.2 Frequency of Ice cream Consumption 47 6.5.3 Market Character: Relevant Occasions vs. Frequency of Consumption 48 6.5.4 Consumer Satisfaction from Ice cream Occasions 50 7.0 Industry Attractiveness and Entry Prospects 52 7.1 Driving Forces of Growth 52 7.1.2 Trade and Infrastructural Level 52 7.1.3 Consumer Level 52 7.2 Prospects of Entry 53 8.0 Entry Strategy for Unilever 54 8.1 Suggested Entry Areas for UBL 54 8.2 Products 54 8.3 Placement 55 8.4 Price 55 8.5 Promotion 55 8.6 Scope of Opportunity 55 8.6.1 Geographic Contribution 56 8.6.2 UBL objectives 56 8.7 Critical Success Factors 56 9.0 Business Projection 57 9.1 Basic Assumptions 57 10.0 Conclusion 58 References

List of Tables

Evaluation of Entry into Ice cream Business for Bangladesh Limited V

Detail Page No.

Table 1: Detail of Trade Visit 2 Table 2: Detail of Consumer Research 3 Table 3: Third-Party Factories of UBL 9 Table 4: UBL Categories and Brands 10 Table 5: History of Brand Launch 10 Table 6: Unilever’s Global Ice cream Business 15 Table 7: Per Capita Ice cream Consumption of Countries 16 Table 8: Glimpse of India Ice cream Business 16 Table 9: Market Sales and Growth Rate of Branded Common Format Market 22 Table 10: Volume Based Market Size 22 Table 11: Market Share of Competitors 23 Table 12: Seasonality of Ice cream Sales 24 Table 13: Distribution Method of Market Players 24 Table 14: Production Capacity of Current Market Players 26 Table 15: Ice cream Serve types 27 Table 16: Rank of SKUs 27 Table 17: Rank of Flavours 27 Table 18: Volume Share of Different Serve Types 27 Table 19: Products of Igloo 30 Table 20: Igloo Facilities and Logistics 32 Table 21: Strengths and Weaknesses of Competition 35 Table 22: Players and Shares in Boutique Segment 36 Table 23: Detail of Club Gelato 38 Table 24: Detail of MövenPick of Switzerland 39 Table 25: Detail of Andersen’s of Denmark 40 Table 26: Detail of Gelateria Igloo 41 Table 27: Comparative Price Analysis 41 Table 28: Relevant Occasions in Consumers’ Lives 46 Table 29: % of Variance Explained by Consumer Clusters 55 Table 30: Requirements & Product Attributes Desired by Consumer Clusters 50 Table 31: Value and Volume Based Scope of Opportunity for UBL 55 Table 32: Assumptions for Business Projection 58

Evaluation of Entry into Ice cream Business for Bangladesh Limited VI

List of Figures

Detail Page No.

Figure 1: Unilever’s Business Areas and Sales Contribution 5 Figure 2: Unilever’s Governing Structure 12 Figure 3: Departments and Leadership Team of UBL 12 Figure 4: Organogram for Brands and Development Department 14 Figure 5: Unilever Ice cream Portfolio 15 Figure 6: Market Construct of Bangladesh Ice cream Industry 17 Figure 7: Geographic Sales Orientation 23 Figure 8: Serve Types and Pricing 28 Figure 9: Igloo Supply Chain 31 Figure 10: Distribution Process of Igloo 31 Figure 11: Target Group wise Consumption Pattern 42 Figure 12: Ice cream in Consumer Life style 43 Figure 13: Frequency of Occurrence of Occasions 47 Figure 14: Frequency of Ice cream Consumption 48 Figure 15: Relevance of Occasion-Frequency of Consumption Mapping 49 Figure 16: Required Market Strategy for Bangladesh 49

Evaluation of Entry into Ice cream Business for Bangladesh Limited VII

Evaluation of Entry into Ice cream Business for Bangladesh Limited VIII

1.0 INTRODUCTION

This section presents the background of the report, “Evaluation of Entry into Ice cream Business for Unilever Bangladesh Limited” and outlines its objectives, scope, methodology of project

completion and report preparation used in its formation, and limitations of the report.

1.1 Background of the Report

This project was assigned as part of the Internship Program of Institute of BRAC University upon

completion of four year BBA graduation program. In accordance with the specifications of the

Program, the author has completed the 12-week period of the internship at an organization, Unilever

Bangladesh Limited (UBL).

The project was completed and report was prepared under kind supervision of Academic supervisor,

Sharmin Shabnam Rahman, Lecturer, BRAC University and Official supervisor, Muhammad Risalat

Siddique, Brand Manager, UBL. The project, on which this report is based, was assigned as a job

responsibility of me my self.

1.2 Objectives

Broad Objective: Main objective of the project was to evaluate feasibility of entering into ice cream business for UBL.

To achieve this broad objective, some specific objectives were accomplished. These are outlined

below.

Specific Objective: Identify current global ice cream business situation and view of Unilever towards Asian region.

Identify ice cream industry construct of Bangladesh and its parameters and characteristics.

Analyze sales, financing, marketing, and supply chain issues of branded ice cream segment.

Analyze current market players of the branded segment.

Analyze consumers of Ice cream in detail.

Assess industry attractiveness and entry prospects for UBL.

Suggest entry strategy for UBL.

Estimate tentative five year business projection for UBL in ice cream business.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 1

1.3 Scope

Scope of research for the project has been limited to Dhaka and outskirts of Dhaka only. As of

current market situation, ice cream is primarily an urban product (due to electricity issues of the

country) and Dhaka contributes more than 50% of the market and all the major marketing activities

are concentrated in Dhaka and thus this scope does not limit overall understanding of the market.

The report puts emphasis on branded ice cream segment and takes a cursory glimpse of the

unorganized unbranded segment. While carrying out the competitor analysis, all the existent branded

segment players and only the major players in the premium boutique segment have been analyzed.

Special emphasis has been placed on market leaders and their marketing strategies while formulating

the entry strategy for UBL.

1.4 Methodology

Both primary and secondary research sources were used to complete the analysis. Primary research

was mainly qualitative and was used to understand the ice cream industry first-hand and validate the

information collected from secondary sources. Details of both methodologies are provided below.

1.4.1 Primary Research: Trade Visit:

During market visit, a total of 60 shops were visited with formal questionnaires in different areas of

Dhaka city. Areas were selected based on SEC orientation of different areas. The areas were:

Table 1: Detail of Trade Visit

Zone Major SEC Orientation Channels Visited (All Zones)

Gulshan, Dhanmondi, Uttara SEC A++

Kamalapur, Mirpur, Mohammadpur, Lalmatia

SEC A

Malibagh, Rampura, Khilgaon, Shantinagar SEC A & B

Azimpur, Lalbag, New Market, Dhaka University, Sadarghat

SEC B & C

1. Urban General Stores (UGS) 2. Urban Neighbourhood Grocer

(UNG) 3. Premium General Store (PGS)/

SMMT 4. Modern Trade (MT) 5. Confectionary/ Bakery 6. Fast Food shops

10 (6 Igloo and 4 Kwality) cart sellers were interviewed to understand cart distribution and selling

method.

4 highest performing boutique players (Club Gelato, MövenPick of Switzerland, Andersen’s of

Denmark and Gelateria Igloo) were formally interviewed to understand the boutique segment.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 2

Consumer Visit:

To understand consumer perception about ice cream and current industry, focus target groups of ice

cream were identified and group discussions were conducted with them. The groups were:

Urban kids in the age group of 5-14:

Informal discussions with 10 kids regarding their perception of ice cream and how their

parents influence their ice cream consumption.

Urban youth in the age group of 15-24

Two group discussions were conducted students of IBA and NSU, each consisting of 10

members.

Urban mothers in the age group of 25-35

Two group discussions were conducted with mothers at Green Herald Int’l School and Rifles

Public School.

1.4.2 Secondary Research: Secondary research sources provided useful insight into background and upcoming issues of global

and Bangladesh ice cream industry. These were used as information source and then cross validated

against each other and using primary research.

Internal sources:

Unilever’s internal sources that contributed to the research were:

Unilever global web archive.

Unilever Ice cream Academy web site.

Unilever Pakistan Ltd, Consumer & Market Insight (CMI) Division.

Unilever Bangladesh Ltd archive.

External sources:

External sources that contributed were:

AC Nielsen, Bangladesh.

Market Research Information from India.

Market Intelligence from Bangladesh.

Company web sites of competitors.

Earlier reports on the Ice cream industry of Bangladesh.

The Internet.

1.5 Limitation

This study had few limitations that restricted the research analysis. They are outlined below.

By policy, UBL does not disclose any financial, research, production or sales data to any entity

outside the company. Because of this policy, it has not been possible to include the data and

Evaluation of Entry into Ice cream Business for Bangladesh Limited 3

other information used to estimate different financials and work out the entry strategy for UBL in

this report. This is especially true in case of the business projection section, where information on

the exact size of the target group, market share for the initial years, distributor and trade margins,

supply chain costs, etc. have been omitted. Much of the data provided has been modified to

maintain confidentiality.

First of all, convenience sampling was used for research and this warranted for some biasness in

input from traders and consumers of qualitative study.

All the market competitors are private companies and thus amount of available public information

is few. Also, no research or advertising agency formally tracks the industry. In many cases recent

concrete data was not available and estimations had to be made.

Research was conducted only in Dhaka even though ice cream consumption habits and

distribution issues (e.g. electricity) in other areas of the country can vary in future with proper

expansion of the ice cream industry beyond capital and metro cities.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 4

2.0 BACKGROUND OF THE ORGANIZATION

2.1 Global Unilever Group Unilever is one of the world’s leading suppliers of fast-moving-consumer-goods (FMCG), with 400

brands spanning 14 categories of Home, Personal Care and Foods products. In fact, 150 million times

a day people use Unilever products at key moments of their day. Unilever employs more than 206,000

people in 150 countries and had worldwide revenue of just over US$47 billion or BDT 3290 billion in

2009.

Unilever has two parent companies - Unilever NV and Unilever PLC. Unilever N.V is a public limited

company registered in the Netherlands and Unilever PLC is a public limited company registered in

England and Wales. The two parent companies, NV and PLC, together with their group companies,

operate as a single economic entity (the Unilever Group, also referred to as Unilever) with the same

board of directors. Unilever's corporate centres are in London and Rotterdam.

Unilever’s brand portfolio includes worldwide favourites: Lipton, Knorr, Dove, Axe and Vaseline. Their

portfolio is diverse in response to the varying needs of their customers across the globe. Unilever

offers world-class brands, many of which are customized for local markets. Unilever invests €1 billion

or BDT 94.4 billion every year in cutting edge research and development and has five laboratories

around the world that explore new thinking and techniques to help develop their products. The

following figure shows the portfolio of categories Unilever operates in:

Figure 1: Unilever’s Business Areas and Sales Contribution

The following are some recent highlights from Unilever’s three global divisions - Foods, Home Care

and Personal Care:

2.1.1 Home and Personal Care Divisions: Lux became the first mass-marketed soap when it launched in 1924. Today it achieves annual

global sales of over €1 billion

Evaluation of Entry into Ice cream Business for Bangladesh Limited 5

Unilever’s oral care brands Mentadent, Pepsodent and Signal have teamed up with the world's

largest dental federation, the FDI, representing 750 000 dentists around the world

First launched in France in 1983,Unilever’s leading male grooming brand, Axe, now gives men

the edge in the mating game in over 60 countries

Hindustan Lever has launched a Surf Excel Quick Wash, with a low foaming formulation, reducing

the amount of water needed for rinsing by up to two buckets per wash

Recent breakthroughs at Rexona include Rexona Crystal, a deodorant that eliminates unsightly

white deposits on dark garments.

2.1.2 Foods Division: Unilever is the world's leading ice cream producer, with brands such as Algida and Wall's in

Europe, and Ben & Jerry's in the United States.

Unilever is the largest seller of packet tea in the world through the Lipton brand.

The acquisition of Bestfoods in 2000 brought Unilever leadership in the culinary category. Knorr is

now their biggest brand, with €2.3 billion sales in over 100 countries and a product range covering

soups, bouillons, sauces, noodles and complete meals.

Becel/Flora pro.activ products have been recognized as the most significant advancement in the

dietary management of cholesterol in 40 years.

2.2 History of Unilever

2.2.1 Soap and Margarine Origins: The Anglo-Dutch Group, Unilever, was created in 1930 when the British soap-maker Lever Brothers

merged with the Dutch margarine producer, Margarine Unie. At the time, an international merger was

an unusual move. However, the owners of the two companies could see that bringing together

complementary businesses with strong global networks would create new opportunities. The

companies were competing for the same raw materials, both were involved in large-scale marketing of

household products and both used similar distribution channels.

Lever Brothers was founded in 1885 by William Hesketh Lever with his brother James. The company

produced Sunlight, the world's first packaged, branded laundry soap. Sunlight was a revolutionary

product that helped popularize cleanliness and hygiene in Victorian England. Its purpose was 'to

make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal

attractiveness, that life may be more enjoyable and rewarding for the people who use our products.'

In 1930, Lever chose Margarine Unie as a merger partner. Margarine Unie, a Dutch company had

grown through mergers with other margarine companies in the 1920s. The logic for the Anglo-Dutch

merger was clear: animal fats were the raw materials for both margarine and soap.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 6

2.2.2 Surviving the Great Depression: The Great Depression struck not long after the new company was formed. As prices and profits

around the world threatened to collapse, Unilever had to act quickly to build up an efficient system of

control. But it was not until the end of World War II that Unilever began to recognize the important

relationship between marketing and research. In the meantime, Unilever expanded its U.S. operations

through two important acquisitions: Thomas J. Lipton Company, manufacturer of tea and the

Pepsodent brand of toothpaste.

2.2.3 Post-war Era: Adapting to New Markets and Technology: Unilever's greatest achievements between 1945 and 1965 were its adaptation to new markets and

technology. Unilever's strategy was to acquire companies in new areas, particularly food and

chemical manufacturers. Among the post-war acquisitions were U.K. frozen foods maker Birds Eye

(1957) and U.S. ice cream novelty maker Good Humour (1961). The advent of the European

Economic Community, or Common Market, also created new opportunities for Unilever.

2.2.4 Restructuring and Major Acquisitions In the 1980s Unilever undertook a massive restructuring. The company sold most of its service and

ancillary businesses, such as transport, packaging, advertising, and other services that were readily

available on the market, and went on a buying spree, snapping up some 80 companies between 1984

and 1988. Specifically, Unilever's core businesses were detergents, foods, toiletries, and specialty

chemicals.

2.2.5 Twenty First Century Unilever: Unilever's fastest growing market in the early 1990s was in Asia. Asian sales of personal products,

detergent, and packaged foods were growing more than twice as fast as sales in the United States

and Europe. Unilever continued to make acquisitions in the mid-1990s, completing more than 100

purchases between 1992 and 1996, more than half of which were in foods. In 1993 Unilever gained

the number one position in the U.S. ice cream market through the completion of two acquisitions. One

the largest acquisitions of this period was the 1996 takeover of Chicago-based Helene Curtis

Industries Inc., manufacturer and marketer of personal care products, primarily shampoo and

conditioners, hand and body lotions, and deodorants and antiperspirants.

Unilever ended the 20th century with the launch of Path to Growth, a five-year strategic plan that

included a focus on top brands within core market sectors and an emphasis on growth within

developing countries. In the face of considerable competitive pressures in various markets around the

world – particularly from Procter & Gamble, the company announced that it would eliminate about

1,200 of its brands to focus on around 400 regionally or globally powerful brands.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 7

2.2.6 Unilever of Today: Unilever is truly a ‘multi-local’ multinational with operating companies and factories on every continent.

They have a portfolio of brands that are popular across the globe - as well as regional products and

local varieties of famous-name goods. This diversity comes from two of their key strengths:

Strong roots in local markets and first-hand knowledge of local cultures

World-class business expertise applied internationally to serve consumers everywhere

Unilever recently completed the five-year Vitality company initiative in which it began to converge the

marketing of disparate arms of their business, including personal care, dieting, and consumables into

an umbrella function. More than ever, Unilever brands are helping people 'feel good, look good and

get more out of life' – a sentiment close to William Lever's heart over a hundred years ago.

2.3 Unilever Bangladesh Limited (UBL)

Lever Brothers Bangladesh established its manufacturing facility in 1964 at Kalurghat in Chittagong.

Productions started off with Lux and Lifebuoy soap. After meeting the local demand, the surplus

production was shipped to Pakistan. It was after independence that Lever Brothers Bangladesh Ltd

was constituted with Unilever owning 60.75% shares and the Government of Bangladesh owning the

remaining 39.25% shares. In 2004, Lever Brothers was renamed Unilever Bangladesh Limited in

order to align their corporate identity and logo with the global Unilever.

By tapping into the vast know-how base of the parent company - Unilever, Lever Brothers was able to

make their products available to the consumers at an affordable price. In the last decade, Unilever

has consistently been achieving double-digit growth in Bangladesh, with an annual turnover reaching

at BDT 1 billion in 2006. Unilever procures 40% of its inputs from local sources and spends about

BDT 150 crores annually in Bangladesh for promotional activities, including advertisements, for its

products.

Its current offices are located in:

Factory: Unilever Bangladesh Limited 51 Kalurghat Heavy Industrial Area P. O. Box # 125 Chittagong – 4000 Bangladesh Corporate Office: Unilever Bangladesh Limited ZN Tower Plot No. 2, SW (1) Road No. 8 Gulshan – 1 Dhaka – 1212 Bangladesh

Evaluation of Entry into Ice cream Business for Bangladesh Limited 8

2.3.1 Manufacturing Facilities: The company has a Soap Manufacturing factory and a Personal Products Factory located in

Chittagong. The factory has to adhere strictly to four important policies:

Quality Policy

Occupational Health and Safety Policy

Environmental Policy

Quality & Consumer Safety Policy

Total Productive Maintenance Policy

Besides these, there is a tea packaging operation in Chittagong and four manufacturing units in

Dhaka, which are owned and run by third parties exclusively dedicated to Unilever Bangladesh.

The following are the details of these third party operations:

Third-Party Factory Brand

ARC Surfactants

91, Tongi Industrial Area, Gazipur

Wheel Washing Powder ,

Surf Excel

Progati Soap Factory

Tongi Industrial Area, Gazipur

Lifebuoy Soap – 70gm

SMAH Limited 96, Tongi Industrial Area, Gazipur

Wheel Washing Powder

SMAH Limited 115-116, BSIC Industrial Estate, Konabari, Gazipur

Pond’s Talcum Powder

Table 3: Third-Party Factories of UBL

2.3.2 Employees: Unilever operations in Bangladesh provide employment to over 10,000 people directly and through its

dedicated suppliers, distributors and service providers. Ninety-nine percent of UBL employees are

locals.

2.3.3 Product Categories and Brands: In Bangladesh, Unilever offers consumer brands which spans across three categories which are as

follow:

Home care, which in turn is divided into:

Fabric cleaning

Household care

Personal care, which in turn is divided into:

Skin Cleansing

Skin Care

Oral Care

Hair Care

Foods

Evaluation of Entry into Ice cream Business for Bangladesh Limited 9

There are currently 14 brands across the above-mentioned categories:

Category Brands

Skin Cleansing Lux, Lifebuoy and Dove

Skin Care Fair and Lovely , Rexona and Ponds’

Oral Care Pepsodent and Close Up

Hair Care Sunsilk, Dove and Clear

Fabric Cleaning Wheel, Surf Excel

Household Care Vim

Foods Lipton Taaza

Table 4: UBL Categories and Brands

Leveraging their global network and combining it with local consumer insight, Unilever Bangladesh

has introduced relevant innovative products throughout the years. This has led to the development of

products in categories such as Detergent powders, Dish wash Bar, Face wash and Deodorants, thus

enriching the lives of Bangladeshis. The following table illustrates the way UBL has continuously

introduced new brands and even more so in the last decade.

2.3.4 Brand Launches by Year:

Year Brands

1964 Lifebuoy

1964 Lux

1972 Wheel Laundry Soap

1982 Sunsilk

1987 Close Up

1987 Vim

1989 Clear

1988 Fair & Lovely

1990 Lipton Yellow Label

1991 Ponds'

1991 Pepsodent

1992 Taaza

1993 Surf Excel

1997 Wheel Washing Powder

2002 Clinic

2002 Rexona

2003 Vim Bar

2003 Pepsodent Tooth Powder

Table 5: History of Brand Launch

2.3.5 Corporate Mission:

Evaluation of Entry into Ice cream Business for Bangladesh Limited 10

Unilever states its mission as follows:

“Our mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene and personal care

with brands that help people look good, feel good and get more out of life.”

Its goals are:

To manufacture high-standard products

Promoting products to the highest extent

Producing large volume to achieve production cost economies

Enabling quality products to be sold out at obtainable prices

2.3.6 Corporate Social Responsibility: Unilever Bangladesh supports community development through various initiatives.

The Fair and Lovely Foundation undertakes various projects throughout the country to empower

women with access to information and resources in the areas of Education, Career and

Enterprise. Workshops for rural women teaching them business and vocational skills like pickle

making , poultry farming, etc. have been held and Projects on IT education for women will also be

implemented through this Foundation

Unilever Bangladesh has sponsored the modernization of existing surgical facilities and the

setting up of a modern operation theatre and intensive care unit at the Maa Shishu O General

hospital in Chittagong, which significantly enhanced access to modern health care for the

underprivileged people of the city

Unilever is the main sponsor of the Lifebuoy Friendship Hospital bringing health care to

thousands of underprivileged riverine population in the country

UBL also sponsors students from various education institutes in Chittagong as well as members

of the British Council Library and provided scholarships to meritorious students.

2.3.7 Corporate Governance: Unilever's highest executive body is called the Unilever Executive (UEX). It is led by the Group Chief

Executive (GCE), Patrick Cescau. The UEX define the top level organisation structure and manage

tradeoffs within the corporate portfolio. They are accountable for all aspects of company operations,

managing business performance and overall profit responsibility for the Group.

The Unilever Executive is also responsible for defining and shaping the culture, leadership capabilities

and behaviour needed to deliver Unilever’s corporate strategy. They have responsibility for all internal

communications and some aspects of external communications (customers, suppliers, professional

bodies, media and investor relations). They are responsible for managing corporate risk and

reputation.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 11

Figure 2: Unilever’s Governing Structure

The Category Presidents for Foods and Home and Personal Care are responsible for Category

strategies, brand development and innovation. The Regional Presidents are responsible for managing

the business, deploying brands and innovations effectively and winning with customers. They are

supported by the Finance and HR functions.

2.3.8 Organizational Structure: Unilever Bangladesh is headed by a Chief Executive Officer, Mr. Rakesh Mohan, in Bangladesh.

There are five departments headed by five individual directors. Presently the company has the

following departments at its corporate headquarters:

CEO & Chairman

Rakesh Mohan

Brands & Development K.S.M. Minhaz

Finance IT & Legal

Mahatabuddin Ahmed

Human Resources Jerry Jose

Supply Chain

Imran Momin

Customer Development

Mizanur Rashid

Figure 3: Departments and Leadership Team of UBL

2.3.9 Brands and Development Department: This department has five parts working together. These are:

Brands

Development

Consumer and Market Insight (CMI)

Media

Activation

Evaluation of Entry into Ice cream Business for Bangladesh Limited 12

Evaluation of Entry into Ice cream Business for Bangladesh Limited 13

This department is responsible for nurturing a brand towards market leadership and offering

consumers with innovation and novelty in brands. With a deep consumer insight, the Brand Managers

look after the brands on a daily basis: planning and organizing activities that boost their image and

increase their exposure. The Brands Team has been expanded to Brands and Development, thus

providing the opportunity of increased coordination between the Marketing and Development Team

and to ensure a successful innovation process at Unilever. The Development team is responsible for

developing cost-effective formulations and packaging for the products and developing and improving

the processes involved in their manufacture.

However, Bangladesh still remains a Brand-Building country while Development generally takes place

at regional level. Brand Developing countries are responsible for the brand category strategy,

identifying new consumer and technology opportunities, product formulation and packaging design

and communication strategy. The critical role of Brand Building is to lead the specific country category

and brand operations team to create, execute and evaluate the insight-led Category Building Plan and

Brand Marketing Plans created by Brand Development. Development at local levels takes place in the

form of packaging innovations and minor product modifications to fit local consumer needs and

production methods.

Marketing information is crucial for UBL and the company decisions are based to a large extent on the

accuracy and timeliness of such information. Consumer and Market Insight (CMI) team ensure that

data are collected cost effectively to provide consumer information to aid the company to attain a

competitive advantage. This helps to achieve a proactive understanding of the Bangladeshi

consumer. The CMI team carries out various market and consumer research through external

research agencies such as Sirius and AC Nielson and also coordinates with regional CMI team to

gather category research done globally.

Brand activation is the core marketing process through which a brand is brought to life through a

variety of brand experiences. The activation team builds a brand by creating a physical or emotional

space in the consumers’ lives that enables the brand to interact in a meaningful way. These activation

programs drive purchase and preference by building consistent, long term relationships with

consumers. The responsibility of the media team is to buy media space, settle the different media

packages for each brand and coordinate various partnerships and events with media partners.

The Organogram on the following page depicts the different positions in Brands, Development, Media,

Activation and CMI.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 14

Brands & Development Director

Product Group Manager

Fair & Lovely

Product Group Manager

Hair Care

Product Group Manager Pepsodent

Co. Media Manager/ Product Group Manager

Lux

Chairman & Managing Director

Company CMI Manager

Marketing Manager Colour, Oral &

Pond’s

Senior Brand Manager Pond’s

Company Activation Manager & Senior Brand

Manager – Tea

Marketing Manager Skin cleansing, fabric

Wash & Household & Head of CMI

Senior Brand Manager Wheel

* Company Media Manager reports to BDD for media related issues while has a double reporting line to MM for Lux related issues

Company Development Manager

Packaging Development

Manager

Product Development

Manager

Activation Planning & Media Operations

Manager

Senior Brand Manager - Lifebuoy

Figure 4: Organogram for Brands and Development Department

3.0 GLOBAL ICE CREAM INDUSTRY

3.1 Overview

Global Ice cream industry is estimated at 43 Billion Euros1 ($54 Billion) at the end of 2009. Unilever

business is currently at 4.7 billion Euros ($6.04 Billion). Nestle’ outpaced Unilever with recent

acquisition of U.S. Company Dreyer's Grand Ice Cream Holdings Inc and became world’s largest ice

cream manufacturer with 28% market share compared to that of 17.6% Unilever share.

3.2 Unilever Ice cream Business

Unilever Ice cream business under the umbrella name of “Heart” brand (also known as Wall’s,

Algida, Ola etc in different countries) has been one of the most successful businesses in the food

category. As of 2009, Unilever ice cream sales stands as following.

Region 2007 2008 2009

Europe 2315 2,392 2,455North America 1,269 1,283 1,298Asia 444 506 576 Latin America 408 430 452 Total (Mln. Euros) 4,412 4,611 4,781

Table 6: Unilever’s Global Ice cream Business

Current market standing based on Underlying Sales Growth (USG) and Market share for Unilever in

Asia is excellent and market is currently growing at a very high rate compared other three regions.

Market is not saturated and many untapped countries like Bangladesh can provide more growth from

this region. Unilever Portfolio under “Heart” or “Wall’s” brand looks as follows:

Magnum Cornetto Carte d'Or Carte d'OrLight

Breyers CarbSmart

Solero Ben&Jerry’sMagnum

Figure 5: Unilever Ice cream Portfolio

Among these Magnum is Premium Extrusion stick, Cornetto is Cone, Solero is fruit based and

Ben&Jerry’s is super premium ice cream that is sold through dedicated boutiques. Others are filled

SKUs. In recent times there have been additions of sub-brands like Frusi and Moos.

1 Source: Reuters (Global AC Nielsen study)

Evaluation of Entry into Ice cream Business for Bangladesh Limited 15

3.3 Regional Ice cream Business and Unilever

3.3.1 Ice cream Consumption: World ice cream consumption data shows scopes and opportunities for Unilever in this category. Per

capita consumption (PCC) of ice cream in the South Asian region is pretty low with 0.1 litres per year.

Bangladesh PCC is also estimated to be similar where people consume ice cream less than once a

month as can be seen from the following chart2.

Country Per Capita Consumption

Volume (ltrs/yr)

Value (Euros/yr)

Consumption Pattern

Australia 18.0 48.0 > 8 times / month Hong Kong 2.4 11.0Singapore 2.4 11.9Malaysia 1.6 3.0Thailand 1.5 1.8China 1.0 1.1Philippines 0.8 1.5

2 -3 times / month

Pakistan 0.4 0.4Indonesia 0.2 0.4India 0.1 0.1

< 1 once / month

Table 7: Per Capita Ice cream Consumption of Countries

This represents the challenge for the category in this region to be: “To Grow the Category & Increase Market Share”.

3.3.2 India Ice cream Business and Unilever: Overall Ice cream industry in India is as follows:

Detail Total

Market ImpulseTake Home Artisan

Value (Cr BDT) 1687 56% 34% 10% Volume (‘000 Ltrs) 75407 54.5% 40.2% 5.3% CAGR (Volume) 11% 10.43% 11.33% 12.63% CAGR (Value) 13.52% 13.19% 13.91% 14.02% Gross Profit 49.9% 48.20% 51% 55%

Table 8: Glimpse of India Ice cream Business

This market data has been considered to understand a similar but evolved market. In the Indian

market, Kwality Wall’s (a merger between Unilever and Kwality) with its mother brand and two sub

brands Cornetto and Max has 16.19% market share in the market. However recent strategic change

towards focused distribution and marketing approach in six major cities (Mumbai, Delhi, Calcutta,

Chennai, Hyderabad and Bangalore) that contribute to two thirds of total Unilever sales has provided

Unilever recent success in the category in India.

2 Source: Unilever Pakistan Ltd. CMI

Evaluation of Entry into Ice cream Business for Bangladesh Limited 16

4.0 BANGLADESH ICE CREAM INDUSTRY

4.1 Industry Construct

The ice cream industry of Bangladesh is a growing one. With an estimated market size of BDT 220 Cr

in 2009, the market can be subdivided broadly into branded and unbranded categories.

Total Market [BDT 220 Cr]

Branded [BDT 131 Cr]

Unbranded [BDT 79 Cr]

Common [BDT 121 Cr]

Boutique [BDT 9.8 Cr]

Around 20,000 local manufacturers

Figure 6: Market Construct of Bangladesh Ice cream Industry

4.1.1 Branded Market: The branded market segment is around BDT 131 Cr with players in both common/ conventional ice

cream format (BDT 121 Cr) and boutique format which is still very small in size (BDT 9.8 Cr).

Common Format: Common format ice creams are generally produced and packed in factory. These are distributed and

sold through retail channels/ carts to the shoppers. Products can be single serving like stick and

cones or multiple serving like containers. Moreover, single serving can either be water based where

only water and flavours are mixed or cream based where milk cream and flavours are mixed.

Branded common format ice cream industry has only five players in the market. They are Igloo, Polar,

Kwality, Savoy and Milk Vita. Igloo is currently the market leader. Polar stayed market leader for 10

years (’86-‘96) in their initial days and Kwality challenged and took Polar’s second position in recent

times. However, Igloo bounced back every time they faced challenge. Milk Vita came in the market

with proper dairy ice cream but failed to create an impact as their core business is not ice cream.

Boutique Format:

Boutique format ice creams are sold through dedicated outlets where there is seating facility for

consumers. They can see the products/ flavours open in freezers and can choose directly. Also

consumers can decide what type of packing to use e.g. cup, cones or containers and based on the

consumers decision product is either served for consumption at the premises or take away.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 17

Boutique format has seen an upsurge from year 2000 with introduction of premium, franchise and

imported ice creams. This segment is driven by Dhaka and Chittagong based players. Club Gelato,

MövenPick, Andersen’s, Gelateria Igloo, Baskin31Robbins and Sub Zero are the major players in the

segment. Among these, Gelateria Igloo and Sub Zero are run by common format players Igloo and

Kwality respectively.

4.1.2 Unbranded Market: The unbranded market basically is constituted with around 20,000 local small producers that do not

use any brand leverage and compete in the market based on significant lower price in the range of

BDT 1-5.

Market size of this segment is significantly high with BDT 79 Cr. These producers are mainly rural and

suburb based where concentration of SEC C and lower SECs are high. They mainly produce water

ice cream sticks or in colloquial terms “Baarfi”. These are made with saccharine and colours. They

also produce small amount of milk based kulfi. These ice creams are very unhygienic and of low

quality.

4.2 Historical Progress of the Industry

Before 1964: Ice cream market dominated by unorganized unbranded approach.

1964: Igloo started large scale organized approach under K Rahman & Co. Ltd.

1965: Igloo opened up the first ice-cream parlour in Dhaka.

1971: Igloo was nationalized by the government of Bangladesh after liberation.

1972: In June Igloo was handed over to Bangladesh Sugar & Food Industries Corporation.

1983: Abdul Monem Ltd. acquired Igloo under privatization policy.

1986: Polar started operation; introduced food grade plastic based packaging. They immediately

became market leader with extensive campaign.

1988: Dolce Vita Gelato, one of the dedicated boutique operator brought premium ice cream.

Early 1990s: Rainbow and Snow White started extensive operation in the boutique segment.

Late 1990s: American Soft Ice cream started promoting the soft ice cream format.

1995: Savoy was introduced but failed due to product quality though in suburban areas they

grabbed share with low price.

1996: In September, Igloo organized a massive marketing campaign

Introduced the first straight line extrusion ice-cream in the market

They initiated a massive campaign and became market leader after 10 years

1997: In February, Igloo took a devastating decision to increase price for the cup line

Igloo not only incurred substantial financial loss but also lost the hard earned market

share. The question of sustaining became a central issue.

In summer, Price of 11 items were revised and communicated as special discount.

This instantly pushed them to the number one position.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 18

1999: Kwality ice-cream entered the market

2000: Entry of the premium boutique operators like Club Gelato, MövenPick and

Baskin31Robbins.

2002: Kwality launched an extensive campaign and started to capture the ice-cream outlets of the

city by providing freezers.

2004: Kwality’s number of freezers exceeded Polar’s and moved to second position.

2005 onwards: Igloo leads the market and there is immense competition among Polar and

Kwality for the coveted 2nd spot.

Historical progress of this industry is of great importance. Bangladesh ice cream industry has

traditionally been exposed to high quality products for a long time. Igloo initiated the progress of

boutique segment (1965) but it lost its way over time. The segment picked up once again in the recent

years. Also high quality products and innovations in the common format segment have created an

appreciation for continuous innovation and better products in the minds of the consumers. Consumers

in Bangladesh see ice cream as a fun product which requires novelty and quality coupled with

continuous hype around the brand. This is why we see Kwality and Polar could create early impacts

with their entry into the industry as they came up with innovations in product or packaging and

arranged massive marketing campaigns during their launches. Igloo had to minimize their effects with

similar campaigns to hold on to their position.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 19

5.0 MARKET & COMPETITION ANALYSIS

5.1 Market Description

Bangladesh ice-cream industry is growing. With increasing market demand, size of the industry is

growing but due to entry barriers of lengthy and complex production process and high investment few

companies enter this business. Although local companies in the branded segment have captured

most of the market share, small unbranded local companies own a huge market to themselves.

Where branded ice cream consumers look for innovation and quality, unbranded users outside metro

cities are currently inclined towards low price low quality products. This creates an opportunity for

further market development on the hygiene and health platform. On the other hand, the boutique

industry is doing quite well with their approach towards ice cream as a dessert item along with service

of other snacks like cakes and coffee at their premises which help them reduce seasonality effects of

ice cream.

With a complicated scenario in the market, to analyze the industry condition and understand the

competitive realities, details of market characteristics and players of both common and boutique

segments are explained in following sections. However, unbranded segment is excluded from

discussion as Unilever’s portfolio does not match the characteristics and price level of this category.

5.1.1 Market Characteristics of the Common Format Segment: A. Market size:

Due to promotion, innovation and exposure to different cultures the consumption of ice cream has

increased. As a result the total market size is expanding. At present the local companies in the

common format segment have a huge market of about BDT 121 Cr. This market is 16 times larger

than the boutique segment and nearly doubles the unbranded segment. Over the years, the size

increase of the industry shows the prospect of converting unbranded unhygienic ice cream consumers

into branded ice cream consumers. However, price level still remains a big problem for the branded

category as petty unbranded ice cream companies with a price range of Tk.1 to Tk.5 have a total

market size of BDT 79 Cr which shows a hint of high price sensitivity in lower SEC consumers.

Overall market size of 220 Cr indicates that most of the people in the country are exposed to ice

cream or some kinds of derivatives of ice cream like “Baarfi”, however, they probably cannot afford

higher priced icy fruit sticks (BDT 6-10) available in the branded segment.

B. Competitive rivalry in the Market:

Competition is not very intense among the existing five companies because the number of operators

is very small considering the total population. Also, complexities of production and distribution process

and other entry barriers are stopping new companies from entering the industry.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 20

Igloo is confident about its unbeatable first position, but there is competition among other companies

such as Polar and Kwality for the 2nd position. However, in current market, no operator is showing

much aggressive and visible activity towards growth. It is expected that recent announcement

regarding introduction of ISIS diabetic ice cream by Polar in partnership with DANONE would again

create some hype in the market.

Reasons behind existing level of rivalry among competitors can be attributed to following reasons:

The ice cream industry has few sellers because there is economy of scale through large-scale

production. The larger firms have a cost advantage over smaller firms; they can produce more

cheaply- making it hard for small firms to survive.

Market is bigger than capability of current players and can accommodate them without much

trouble. This is because PCC of ice cream in the country is still pretty low.

This market has substantial amount of “barriers to entry”, making it difficult for a large number of

competitors to enter the market. The cost of setting up a new plant in this industry is quite high.

The cost of entry works as an entry barrier.

To get people to try new product, the potential entrant will have to run a big competitive

advertising or massive promotional campaign, which is expensive. The prevailing companies

created barriers in entry for potential rivals by using extensive advertising and product

differentiation earlier which has its effects till now. Another fact is that product awareness and

brand loyalty to the existing firms make it expensive for potential rivals to enter.

To further elaborate present competitive reality of the industry the five competitive forces are

discussed below:

The rivalry among the competing sellers is weak as market is yet to develop more.

With various entry barriers not many new companies are attempting to enter this industry.

As there are no direct substitute products to ice-cream, the companies don’t face any

competition from other industries.

As the number of suppliers is very low and, the companies especially Igloo as the best

product enjoys high bargaining power or leverage over rivals. But some of the companies

such as Savoy are concentrating on increasing profit margin of the retailers for securing a

more prominent position in the market.

Mainly consumers or buyers decide the pricing. Keeping in mind the various buying power

of people, the companies decide the price of each items. Price of the Items that have the

most market demand is kept low so that they are in the reach of the general customers.

By lowering the price some companies such as Savoy are trying to maintain a competitive

edge.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 21

C. Market Sales and Growth Rate:

Sales information of the five existing companies for the current years shows the following trend.

Company Name 2007 2008 2009

Total Market 113.07 121.20 131.22Igloo 57.85 60.86 64.25Polar 16.8 18.35 20.19Kwality 30.6 33.5 37.4Savoy 3.88 4.15 4.58Milk Vita 3.94 4.34 4.88

Table 9: Market Sales and Growth Rate of Branded Common Format Market

Volume based market size shows the following scenario prevailing in the Bangladesh market in 2009.

Company Name

Single Vol ('000 Ltrs)

Multi. Vol ('000 Ltrs)

Total Vol ('000 Ltrs)

Total Market 3275.9 4296.7 7573 Igloo 1676.0 2198.3 3874 Polar 486.7 638.4 1125 Kwality 886.5 1162.8 2049 Savoy 112.4 147.4 260 Milk Vita 114.1 149.7 264

Table 10: Volume Based Market Size

The total volume of the branded common format ice cream industry is 7500 Tons of which more than

50% belongs to Igloo, followed by Kwality with 27%.

D. Market Share and Size of the rivals:

Market share data for all the local companies show a trend where Igloo is the biggest ice-cream

company dominating with a huge market share. Although even 1-2 years ago there was intense

competition between Kwality and Polar but now it seems that Kwality is 2nd largest ice-cream

manufacturing company in Bangladesh. Polar is in the 3rd position with Savoy and Milk Vita trailing in

the market. Market share percentage over the years is presented in the following table.

Company Name 2007 2008 2009

Igloo 50% 50.31% 51.16%

Kwality 25.6% 26.66% 27.06%

Polar 17% 16.1% 14.85%

Milk Vita 3.4% 3.32% 3.48%

Evaluation of Entry into Ice cream Business for Bangladesh Limited 22

Savoy 3.9% 3.65% 3.43%

Table 11: Market Share of Competitors

E. Geographic Sales Orientation:

Ice cream still continues to be a city-oriented product and its demand is comparatively low in the rural

areas. Reasons behind this are electricity problem outside urban areas and purchasing power of

people. Geographic sales orientation of the common format ice cream industry is provided below.

61%18.90%

6.90%4.80% 5.90%2.50%

Dhaka Chittagong Khulna Comilla Barisal Others

Figure 7: Geographic Sales Orientation

Dhaka still is the largest contributor in the ice cream segment. Nevertheless, over the years this trend

is shifting. Areas outside Dhaka are also growing making Dhaka’s share lower by small percentage.

As urban markets are the major contributors, companies design their products keeping in mind the

tastes and styles of the urban consumers. Compared to the other companies Igloo is the most

expensive in the common format segment, so they target only city based customers who have the

purchasing power. Although other companies such as Savoy are offering low priced product, even

their main target is urban people due to nation wide electricity problem.

F. Seasonality of Sales:

Ice cream industries in warmer part of the world are highly seasonal. Same is true with Bangladesh.

According to secondary data sources sales seasonality looks as follows:

Period Name Months Contribution

Super-Peak April, May, June 46%

Peak March, July, August 36%

Off-Peak February, September, October, November 15%

Super Off-Peak December, January 3% Table 12: Seasonality of Ice cream Sales

This data was validated through interviews with retailers during market visit. According to them more

than 75% sales of ice cream came in the hot months. Another insight that could be identified was

Evaluation of Entry into Ice cream Business for Bangladesh Limited 23

various festivals and programmes provide scope for higher volume of ice cream sales. According to

companies where only 10-15% sales occurs in the winter season, same amount of sales occurs

during festivals like the two Eids and Nobobarsha.

G. Distribution/ Servicing System:

Mainly common format ice-cream is distributed in two methods that are directly to retail shops and

through hawkers with ice cream carts/ trolleys.

The various channels of retail shops other than cart that serve as distribution outlets for Ice cream

are:

7. Urban General Stores (UGS)

8. Urban Neighbourhood Grocer (UNG)

9. Premium General Store (PGS)/ SMMT

10. Confectionary/ Bakery

11. Modern Trade (MT)

12. Fast Food shops (Recently some fast food shops keep branded ice cream cabinets)

Distribution details of all the companies are provided below. However, detail of Milk Vita is not

available as they are mainly milk producer and they have no dedicated ice cream cabinet for retail

stores and currently they are not distributing ice cream in Dhaka city.

Company Distribution

Method Frequency No. of

Cabinets No. of Carts

Igloo Distributor/ Cart 2 to 3 times a week 4000 100 Kwality Distributor/ Cart 1 to 2 times a week 1050 20 Polar Distributor/ Cart 1 to 2 times a week 800 50 Savoy Company 1 to 2 times a fortnight 176 - Milk-Vita - - - -

Table 13: Distribution Method of Market Players

Distribution Process: Distribution process through both methods is described below.

Retail Distribution: The general distribution that is followed by companies is that distributor sends

large refrigerated trucks dedicated to specific territories. These trucks are accompanied by small

refrigerated vans. Main road side shops are served directly from the large truck and shops that are

inside small streets are served by the small vans.

Order and delivery are done on the same day. The strategy followed is that of replenishment. If the

branded freezer of the company is empty, they simply fill it up according to requirement of different

SKUs as the delivery people see fit. However, shopkeepers have to buy full cartons (usually 24 pieces

in a carton) of single serve ice cream; they cannot buy in pieces.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 24

Among the retail shops, there are about equal numbers of branded and unbranded freezers. This is a

normal scene in Dhaka where all shopkeepers require freezer to keep other cold products. However,

basic distribution policy is that, if a shop has branded cabinet of a company, they cannot keep

competitor ice cream in that cabinet. Thus, penetration can be made possible in shops where

unbranded freezers are available.

General branded freezer contract policy with Igloo and Polar is that traders have to pay BDT 5000 to

take a freezer. Maintenance of branded freezers is responsibility of the company but electricity bill is

paid by shopkeeper. However, Polar is not currently giving any new freezer. Kwality gave away their

freezers for free; however, they ensured safety of their freezers by checking background of the

shopkeepers.

Cart sellers: Cart sellers collect required amount of ice cream from nearby distribution house or

company showroom (Igloo has one showroom in Panthapath) on a daily basis. They also have to buy

cartons of products, not pieces. Kwality carts collect their ice cream from factory (Tejgaon) or nearby

distribution house. Cart sellers contribute around BDT 3000 sales in a day and generally sell at BDT

1-2 higher than set price of each product.

The cart sellers generally keep at least a two-day stock so that they can meet sudden upsurge in daily

demand of ice cream or if they get the opportunity to sell at parties, programs or any open air event

(Wedding at community centres or outside cultural programs at auditoriums). If cart sellers need

replenishment of stock, they even take service more than once in a day either revisiting showroom/

house or they call up company delivery people to serve them at their location if there is opportunity for

selling more ice cream.

Policy regarding Damaged Ice cream: All the ice cream producers have very good relationship with

the shopkeepers. If the retailers have refrigeration problem, company takes ice cream back until the

problem is fixed, whether it is stored in branded freezer or not. Also if any ice cream gets damaged or

there is bacterial formation, company takes them back. Usual return time varies from 15-30 days. For

large sellers however, they take less time.

Payment Method for Ice cream Purchase: All the companies give credit of around one month to

large volume contributing retail sellers and try to maintain good relationship with them. This trend is

seen in all channels. Also all the SMMTs and MTs are given credit of one month and payment is

made by cheque. Other small shopkeepers have to purchase with cash. However, according to

shopkeepers Igloo is currently trying to cut down on credit sales as they believe there is a consumer

pull for their brand. Companies like Polar and Kwality also give special commission to large sellers.

Polar gives 5% commission on every bill.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 25

H. Technology and Innovation:

Technological advancement in the ice cream industry has been very rapid. Starting with stick mould

and filler ice cream production, the companies have come a long way. Assessing the consumer

choice and demand the companies are introducing new products very often. Improved and new

technology is used for faster production and better quality. Igloo is trying to meet the international

standards and launching products such as Sundae, Cornelli, and Nuggets. Other companies are also

introducing new flavours suitable for their target segments. Igloo has both the ISO and the HACCP

certifications. These were awarded in the year 2003 due to their relentless pursuit of quality and

innovation. In September 1996, Igloo introduced the 3D Mould line and straight line extrusion

technology for the first time in the subcontinent. Basically, with Igloo’s pursuit, all the modern

technologies and quality innovations are available in the market.

I. Production Capacity:

Current production capacity of the major players in the common format ice cream segment is

estimated to be as follows:

Name Capacity

(Ltrs/ day)

Total Production ('000 Ltrs)

Required Capacity (at 300

production days ) Estimated unutilized capacity (Ltrs/ day)

Igloo 22000 3874.33 12914 9086Polar 6500 1125.13 3750 2750Kwality 12100 2049.34 6831 5269Savoy 1560 259.85 866 694Milk Vita 1330 263.87 880 450

Table 14: Production Capacity of Current Market Players

From the table we can see that all the ice cream manufacturers are operating with unutilized capacity.

However, one point to be noted is that different ice cream SKUs require different amount of item to be

produced. Exact machine production capacity at litre per day does not represent the accurate

scenario. Nevertheless, it can be safely assumed that all the manufacturers have unused machine

capacity at their premises. Moreover, the larger players like Polar and Kwality have new technology

available at their premises. Kwality bought second hand machines from Thailand but both Igloo and

Polar bought their’s from Italy and Denmark.

J. Products and Pricing:

Products: The products in the ice-cream market are differentiated. A few firms dominate the market,

but an endless variety of ice creams are offered to the consumers. Igloo pioneers all major

innovations in the market. The products that are available in the market can be classified into single

serving and multiple serving groups. Which are then categorized based on functional attributes/

designs. These are:

Single Stick Normal mould, 3D mould, extrusion

Evaluation of Entry into Ice cream Business for Bangladesh Limited 26

Cup and Sundae Flat cup, long cup Cone Normal cone (vanilla, strawberry etc), premium cone (Ripple)

serving

Innovative Fillers Snowball, Animal shaped containers, sandwich, nuggets etc Container 0.5 ltr, 1 ltr and 2 ltr containers Multiple

serving Family Pack Assorted packs, cakes, shahi kulfi etc Table 15: Ice cream Serve types

Among all the products available in the market, most selling SKU for all the companies is Choc-bar

stick and highest selling flavour is Vanilla. Following are the ranks of most selling SKUs and flavours.

SKU Name RankChoc-bar (70 ml) 1Vanilla Cup (100 ml) 2Vanilla Box (0.5 and 1 Ltr) 3Lemon Lolly (70 ml) 4Normal Cone 5

Flavour Rank Vanilla 1 Chocolate 2 Strawberry 3 Ripple 4 Mango 5

Table 16: Rank of SKUs Table 17: Rank of Flavours

Choc-bar is one of the earliest vanilla based chocolate coated SKU that has dominated the market

strongly over the years. Shopkeepers could not provide an exact percentage on SKU based sales

contribution. Most of them ranked the SKUs and flavours according to sequence shown in the above

table. Also, according to newspapers and secondary sources Vanilla is the most selling flavour with

60% sales contribution. According to secondary sources percentage sales contribution of various

types of SKUs in the common format segment are as follows:

Type of Ice cream Value Share

Volume Share

Impulse dairy ice cream 51.4% 44.3% Impulse water ice cream 11.2% 13.8% Take-home dairy ice cream 37.4% 41.9%

Table 18: Volume Share of Different Serve Types

Impulse dairy ice cream provides more value share as price per litre is higher than take home multiple

serving ice creams. Impulse water ice cream shows a similar trend as of take home ice cream.

Pricing: Product pictures and price ranges of each category are provided below.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 27

Normal Premium

Price Tk.12 Tk.20 Tk.25

Cup &

Sundae

Normal Cup Sundae Premium Cup

Price Tk.20 Tk.25

Cone Normal Premium

Price Tk.20 Tk.25

Innovative Fillers

Price/Ltr. Tk.100 Tk.175

Container Normal Premium

Price/Ltr. Tk.150 Tk 175 Tk 190

Family Packs

Kulfi Mixed Pack Cake

Single Serving

MultipleServing

Normal Ice Fruit 3D Mould Premium Extrusion

Price Tk.10 Tk.15 Tk.15 Tk.20

Stick Normal Cream

Figure 8: Serve Types and Pricing

As it can be seen from the above chart, all impulse ice creams are priced within the range of BDT 10

to 25. Other take home multiple servings are priced within the range of BDT 50 (0.5 Litres) to BDT

220 (2 Litres). Another noticeable factor in price is that there are both normal and premium flavours in

all types of ice creams.

K. Firms as Price Setters:

The firms have capability to affect the market price to be low as profit margin is very high. If Igloo

reduces the price of an item below the prevailing price level in order to increase its sales, its

competitors will fear that their customers will go away from them to buy Igloo products. To retain their

customers they will be forced to match the price cut of Igloo. Historically this has been proven to be

true. However, due to price sensitivity, companies cannot drastically increase price even if they

provide higher quality of product. It was seen in 1997 when Igloo increased price of 11 SKUs and

faced drastic sales fall during that time. It shows that the industry might welcome overall industry price

increase but not individual company price increase.

L. Promotion:

The promotion scenario in the industry is not quite organized as of now. Even proper data regarding

promotional expenditure is not available from research sources. The reason being, there is not much

consumer related activity seen in the market. After Kwality’s introduction in the market in 1999, Igloo

went on with massive Television promotion of their new products that were available at that time.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 28

However, in current times there is no TVC running from any company. Companies promote their

launches mainly through billboards and newspaper promotions which is currently the most used

source of consumer promotion. Some promotional activities that were done by the companies over

the years are listed below.

Consumer Promotions: 1. Larger players like Igloo and Kwality goes on with campaigns like “Gift on stick” where various

prizes’ names are written on the sticks and consumers can get them.

a. Igloo ran a program on their launch of Macho variant where gift varied from cricket

bat to personal computer.

b. Igloo had a program in 2006 where gifts on sticks varied from Bangkok visit to

sunglass.

c. Igloo ran one campaign in 2007 where gold bars were given on purchasing Choc-bar.

d. Kwality ran a similar program in 2008 where gifts varied from wrist watches to

motorcycle.

2. Some companies ran consumer TTS and gift programs where company products were given

free.

a. Igloo had a program in 2006 where Igloo butter was given free on purchasing Igloo

ice cream cake.

b. Kwality ran a program in 2008 where one SKU was given as gift with another SKU

randomly.

c. “Cone Ice cream at your Home” program was run by Igloo in 2002 where six cone

biscuits were given free with purchase of one litre ice cream.

3. Media placement is another form of placement done by larger companies.

a. Igloo purchased “Glimpse into World Cup Result” space in daily newspapers during

World Cup Football 2002.

4. One interesting program is done by only Igloo in Bangladesh. They did it in June 2006. The

program was “Igloo Ice cream Festival” with main attractions of “Get as much ice cream as

you want for BDT 200”, “Get a Fantasy Kingdom Entry ticket with each Entry Coupon”, “Lucky

Draw” and “Celebrity Adda”.

Trade Promotions:

5. Trade promotions are mainly given to “Highest retail purchasers” and also based on time

bound trade schemes where various slabs of purchase amount are mentioned for different

prizes.

a. Igloo takes their highest purchasers to visit countries like Singapore and Thailand.

b. Savoy has a purchase slab scheme where first prize is table fan.

c. Polar gives special sales commission to their highest purchasers (around 5%).

Evaluation of Entry into Ice cream Business for Bangladesh Limited 29

M. Players in the Common Format Segment:

Branded common format ice cream segment is constituted of five players only. Among them Igloo is

the largest player and Milk Vita is the smallest. The following sections detail the basic company detail

of all the companies with special emphasis on Igloo, the market leader.

Igloo:

The pioneering ice-cream company in Bangladesh started its operation in 1964 in Chittagong under K

Rahman & Co. Limited (KRC) with a small factory inside Coca Cola bottling factory of KRC. After the

independence of Bangladesh in 1971 Igloo was taken over by the government of Bangladesh. Later in

1983, Abdul Monem Limited purchased the entire production setup of KRC Limited including Coca-

Cola bottling plant and Igloo ice-cream factory. After taking full charge of Igloo ice-cream by Abdul

Monem Limited the manufacturing operations continued in Chittagong till 1990. Although, Dhaka

fetched the maximum share of the total revenue, the distribution cost increased tremendously in the

process of meeting the demand of Dhaka city. To cope with the distribution problem and handle Polar

threat, Abdul Monem Limited transferred the factory to Dhaka, changed the ice-cream packaging from

the conventional paper to plastic and expanded their market and distribution operation. The new

factory of Igloo was setup at Shyampur, Narayanganj and was nine kilometres away from the

Motijheel office. The company apart from catering the capital city started to expand its operations in

Comilla (1991), Khulna (1992), and North Bengal (1993). These markets were served directly from

Dhaka since the storage facilities were not developed till then. The company is now the market leader

since 1997 with clear market share victory over others with sweeping 51% share. It is to be noted that

Igloo is also a player in the boutique segment with three parlours (2 in Dhaka and 1 in Chittagong). Product Range: Igloo offers the widest choice of ice cream, more than any other competitor in the

market. Igloo is offering a total of fifty items, including normal premium and novelty cup, stick and

family pack items. Igloo has thirty flavours, more than anyone else in the industry and is continuously

launching new and innovative delicacies.

Igloo ice-cream can be classified in six groups. They are:

Stick Macho, Choc-bar, Mini Choc, Clown, Mega, Shell n core, Lolly Cone Cornelli 2 in one, Cornelli classic Cup Shahi kulfi, Vanilla, Strawberry, Mango, Snow ball Container Vanilla, Strawberry, Mango, Chocolate, Coffee, Diet Vanilla, Tutti

Frutti, Ripple, Pralin, Pistachio Innovative Nuggets, Sandwich Family Ripple cake, Party time, Shahi Kulfi

Table 19: Products of Igloo

Single serve stick, cups and cone items are easy to carry around and convenient to eat which makes

it most sold. The core target segment of ice-cream is 6-24 years and this generation is always on the

Evaluation of Entry into Ice cream Business for Bangladesh Limited 30

move and thus prefers independent cone, stick or cup items. As Igloo initiated the concept of ice-

cream as a family product, they offer some items to be enjoyed with the whole family.

Quality and Innovation: Igloo is committed to maintaining the highest quality standard, through its

continuous R&D activities. The major ingredients, raw materials and packing materials are procured

from the best European sources. Strict quality control is done at every stage of the manufacturing

process, from procurement of material, mixing, material flow, ice cream making, packaging, storing (at

main warehouse), distributing and market shelving, by the Quality Control Department. Current supply

chain for various materials of Igloo is as follows:

Australia (Milk Powder)

Denmark (Ingredients, emulsifiers &

stabilizers)

China & UAE (Food grade

sticks)

China, Denmark, Singapore &

Thailand (Food grade

packing materials)

Figure 9: Igloo Supply Chain

Distribution Network: Their distribution network is stretched all over the country with a long fleet of

refrigerated vans. Firstly, the ice cream products are stored at the central warehouse of the factory,

and from there they are distributed through the haulage vehicle to the operational centres located in

Dhaka, Chittagong, Comilla, Rajshahi, Barisal, Bogra, Rangpur and Khulna. Strictest cold chain

maintenance during the distribution and selling of the ice creams is ensured. Their distribution process

is as follows:

Manufacture Stored at -24c Transported by Refrigerated trucks at -

Reaches & Preserved in

Eight regional stores

Refrigerated vehicles

(Distributors)

Retail outlets (Deep freezers)

Figure 10: Distribution Process of Igloo

Evaluation of Entry into Ice cream Business for Bangladesh Limited 31

Trolley Operation: Igloo also operates through trolleys for extending its reach to consumers at the

furthest points. The trolleys are operated near schools, alleys, streets, parks etc. and play rhythmic

music to attract the consumers. These are very colourfully decorated with Igloo umbrella and the

puller wears specific uniforms. Igloo was the first in introducing and operating these trolleys in

Bangladesh for any Fast Moving Consumer Goods (FMCG). Igloo has around 125 trolleys operating

throughout the country. Individual trolleys are provided with a regular supply of igloo ice creams.

Marketing: The marketing commitment of Igloo is based on the relationship with its customers and

consumer by not only manufacturing the highest quality product but also delivering the product by

maintaining this quality. To satisfy the ever-changing needs of the customer, Igloo has regularly

launched new ice creams and introduced new flavours. And this commitment has positioned Igloo as

the market-leading brand by gaining the consumers trust with the positioning as: “A WORLD OF

GREAT TASTE”.

Facilities and Logistics at a glance: As of 2009, following are the facilities and logistics enjoyed by

the company.

Factory location Dhaka Production Lines 4

Packages Stick, Cup, Family pack, Others (Nuggets and sandwich)

Machine suppliers

Mark-Italy Tetra Pak(Hoyer)-Denmark Sabore, Denmark Hass- Austria

Machine models Freemark 1100, Italy FM 3000, FM 6000, Italy SL600, Denmark

Cone baking Hass- Austria Chocolate making Macentyre-UK Coverage Nationwide Operational centre 10 Total market vehicles 30 Distribution channel Direct/through appointed distributors Outlet service 7500 Injected deep freezers 4000 Trolley operations 125 Warehouse no 8

Table 20: Igloo Facilities and Logistics

Kwality:

Kwality is currently the second largest ice cream manufacturer of the country. The mother company

for the Kwality brand is Sanowara Drinks & Beverages Ltd, a sister concern of Sanowara Group. The

company is famous for powdered milk brands Red Cow and Diploma in Bangladesh. The drinks and

beverage concern of Sanowara made an entry into the market in 1997 with “Yes” brand drinking water

and launched the ice cream brand in 1999. With heavy communication and novelty products it

Evaluation of Entry into Ice cream Business for Bangladesh Limited 32

successfully removed Polar from the second place with a current market share of 27%. The company

also operates in the boutique segment with two parlours in Dhaka and Chittagong.

Kwality ice cream factory is situated in Chittagong with a floor space of 35,000 sft and fully automated

machinery/ wrapping/ mix machinery equipments from Italy having capacity of around 20,000 litres of

ice cream per shift. The ice cream factory employs 140 people. The company is ISO 9001-2000

certified.

Kwality was the first true competitor for Igloo products with some major innovation in product design

and communication but their quality is perceived to be lower in the minds of the consumers and they

do not have extrusion ice cream. The product prices are also similar to that of Igloo but they charge a

bit lower than Igloo in premium multiple servings. However, during market visits it was seen that

shops that keep only Kwality or Igloo and Kwality both, they can sell Kwality too although the sales

amount is lower than that of Igloo. People who look for Igloo, shopkeepers give them that directly but

if they get a chance and Kwality ice cream stock is high, they also push Kwality to dry the stock out.

This gives an indication that market is larger than what the current players are capable of serving

even in Dhaka.

Kwality follows a similar distribution model like Igloo but distribution frequency is lower and amount of

cart sellers is limited to 25 and they operate only in Dhaka.

Polar:

Once a giant in the industry, Dhaka Ice Cream Industries Ltd. introduced the first hygienically packed

ice cream in Bangladesh in 1987 and the brand name "Polar" was thus born. In the early days, the

company started ice cream business with a wide range of products and a variety of flavours in Dhaka

city. In 1988, the company started its distribution in the city of Chittagong, then Bogra, and continued

to cover more cities. Presently, Polar ice cream is available throughout Bangladesh. The company

today trails in the market with 15% market share in the common format segment. Recently, Polar has

announced launch of ISIS diabetic ice cream with support from DANONE to turn around in the market.

The company has its head office, as well as a modern, large-scale industrial plant in Dhaka. Polar ice

cream is made with Danish expertise, using Danish equipment and technology. The production

activities and quality control measures are supervised and managed by Danish experts. Polar offers a

wide range of delicious flavours and tastes made by ingredients imported from Europe.

Dhaka Ice Cream at present has 3 cold stores in Dhaka, Chittagong and Bogra, in Bangladesh. From

Dhaka cold store, they distribute ice creams in Mymensingh, Tangail, Jamalpur, Sherpur, Kishoreganj,

Netrakona, Comilla, Narsingdi, Barisal, Madaripur, Agaeljhara, Faridpur, Magura, Chuadanga,

Jessore, Satkhira, Khulna, Pirojpur and Sylhet through their distributors. In case of long distance

delivery points, the company uses auto cooling freezer van.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 33

In Dhaka city, they distribute ice creams directly to retail stores in freezer vans. Besides that, they

have several distributors at different points of the city. Distributors cover their individual areas where

company is not able to supply directly in their freezer vans. Similar model is followed by the company

to distribute ice cream from their other cold storages through out the country. For storing and selling

ice creams in retail stores, the company like the other players arranges a deep freezer with the Polar

logo and canopy light box.

In addition to this distribution, the company also undertakes home delivery of ice creams for special

occasions.

Savoy:

Savoy Ice-cream brand is owned by Sena Kalyan Sangstha (SKS) Group of industries. It started its

journey in March 1995 with a factory in Tejgaon, Dhaka. Yearly turnover is estimated at BDT 3.88

crores with a market share of roughly 3.5%.

The factory has been established with Sonali Bank finance at 60:40 equity ratio. The total production

capacity of the factory has been estimated at 2400 litres of Ice-cream per day. Total land area of the

factory premise is 1.16 Bigha with 8,000 sft area covered with a total project cost of BDT 1.44. The

factory employs 73 people.

Product ranges of the company include all the basic designs and flavours of the industry. However,

the company has not been much of an innovator in the industry. Their product quality is substantially

low than that of other players and they price their products at 10-15% lower than the other

competitors. The company imports raw materials mainly from Europe. The general raw materials are

Euro cream, Skimmed Milk Powder, Cocoa Powder and Flavour (Vanilla, Mango and Strawberry),

Colour (Yellow, Red, Chocolate and Green), Ripple Sauce, Cheney Fruit, Palm Kernel Oil,

Anhydrous, Butter Oil (Ghee) and Sugar etc.

Milk Vita:

Milk Vita is one of the most famous brand names in Bangladesh for its liquid dairy milk. Owned by

Bangladesh Milk Producers’ Co-operative Union Limited (BMPCUL), the company came in the market

with proper dairy milk ice cream in form of cups and choc-bar. With a production capacity of around

1600 litres per day, the company is trailing in the market place with 3% market share.

Although the Milk Vita Choc-bar was perceived to be extremely tasty by consumers, they probably

could not do well due price competition. Currently they do not even distribute ice cream in Dhaka.

However, their presence is seen in outskirts of Dhaka and other nearby towns.

If the current market situation prevails, Milk Vita would lose their remaining market share and other

companies would benefit, especially Igloo. However, one of the advantages of Milk Vita remains to be

Evaluation of Entry into Ice cream Business for Bangladesh Limited 34

their nation wide milk supply network. They have skimmed milk powder production plant that Igloo

does not have. Thus, they can combat the seasonality of milk supply that Igloo with its huge

requirement of milk cannot.

Strengths and Weaknesses of Competitors:

Company Strengths Weaknesses

Igloo

Strong brand image High product quality Highest no. of variety Strong distribution network Highest visibility Strong promotion High production capacity Presence of extrusion ice cream

Items are generally a bit pricy Igloo does not give free freezers like

other companies. Reluctant in recent times regarding

innovation Local sourcing of liquid milk does not

meet demand Failure to use ERP technology,

slowing decision making

Kwality

Product variety Strong promotion Free freezer distributed Presence in all price segments High production capacity

Weak distribution Lower exposure low amount of carts in operation

Polar

Free freezer Quality perceived to be high

compared to Kwality

Discoloured freezers Lower exposure Low product variety Unused capacity

Savoy

Price is lower Discoloured freezers Low product variety Weak distribution Small amount of freezers Low production capacity

Milk Vita

Quality is good due to dairy cream Brand leverage from Milk Vita milk

Low exposure Low variety

Table 21: Strengths and Weaknesses of Competition

5.1.2 Market Characteristics of the Boutique Segment:

With a small market of BDT 9.8 Cr and 5.67% share in the branded ice cream market, the boutique

segment is currently an increasing segment in the ice cream industry. Boutique segment’s history

dates back to 1960s when Igloo launched boutiques in Dhaka to save distribution cost and promote a

culture of “ice cream eating out”. In later years, boutiques lost their glamour and retail common format

segment picked up growth. However, with Dolce Vita in the late ‘80s, craze for Italian Artisan ice

cream was recreated in the market. Although Dolce Vita is failing in recent times, emergence of

MövenPick and Club Gelato in 2000 has uplifted the segment once again. Current growth rate of the

Evaluation of Entry into Ice cream Business for Bangladesh Limited 35

segment can be estimated to be approx. 20-22% (higher than the common format segment).

Following are the basic detail of all the major players in the segment with their estimated sales3.

Players Outlet # Sales (Cr Taka) Share

Club Gelato 1 1.36 19.9% MövenPick 1 1.19 17.4% Andersen’s 3 1.19 17.4% Gelateria Igloo 3 1.19 17.4% Sub Zero (Kwality) 2 0.51 7.5% Baskin Robbins 1 0.15 2.2% Dolce Vita 1 0.17 2.5% American Soft 1 0.09 1.2% Rainbow 1 0.09 1.2% Others (off site) 0.89 13.0% Total Market 6.82

Table 22: Players and Shares in Boutique Segment

A. Detail of Operation:

General operational procedure followed by all the operators is as follows:

Operating method: There is a variation in operational method among the large operators.

Club Gelato uses kitchen at own premise where imported ingredients and local milk (daily

special service from Milk Vita) are used to make ice cream.

MövenPick directly imports ice cream from Switzerland.

Andersen’s, Gelateria Igloo and Sub Zero produce ice cream at their factory with a mix of

imported and local ingredients.

Products: Around 30-35 flavours of artisan dairy ice cream are served at the premises.

Most sold flavours are Vanilla, Ferrero Rocher, Butterscotch, Chocolate, Caramel etc

Other Products: Larger players also serve ice cream desserts (milk shakes, ice cappuccino etc),

pastries and other desserts with normal coffee and tea facility at their premises.

Boutiques fight ice cream seasonality with the other products sales during off-peak ice cream

seasons. Usually ice cream and other products contribute at 60:40 ratio in summer and during

winter and off-peak seasons the ratio reverses.

Pricing: Usually the prices of products in this segment are 3-4 times higher than that of the

common format segment.

Prices do not vary with flavours. Variation depends on serve style (Cone/ tub) and use of

toppings and other ingredients (Chocolate sauce/ nut/ fruits) etc.

Usual margin charged is around 50-60% over production cost. Similar margin is charged for

other products like coffee, ice cappuccino etc.

3 Yearly sales is estimated based on company’s approximate daily sales collected during interview

Evaluation of Entry into Ice cream Business for Bangladesh Limited 36

Target Group: Most of the consumers belong to SEC A and higher SEC A with DMFI of at least

BDT 20,000.

Foreign delegates and resident foreigners also visit these boutiques.

Main purposes of visits in the boutiques are:

• Youth: hangout with friends and having ice cream and ice cream derivatives

• Family: Family night out or eat out at a restaurant and then having dessert

• Foreigners: Having dessert after dinner

Rush time at boutiques are: Afternoon 2-4 pm and at night 9-11 pm.

Offsite sales: Most of the large operators also sell offsite. They have small freezers for off-site.

Club Gelato and MövenPick serves ice cream at high society parties and programmes.

MövenPick also has kiosks in known hotels like Sheraton.

Promotion: No mass promotion is done by any of the companies. Word of mouth is the most

important source of promotion. Posters and banners outside the premise and occasional

newspaper advertisements are used to communicate special offers.

Growth Drivers: Market growth is driven by image, innovation, quality, decoration of facility,

environment and special offers.

Club Gelato has the image of selling true Italian dairy ice cream with an excellent hangout

environment.

MövenPick imports ice cream directly from Switzerland and is perceived to be of high quality.

Andersen’s operates with the image of ice cream from Denmark

Gelateria Igloo (from Igloo) and Sub Zero (from Kwality) could not establish the premium

artisan ice cream image.

B. Players in the Boutique Segment:

There are very few players who have significant impact in the boutique segment. Detailed information

of all the major boutique segment players is provided below.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 37

Club Gelato:

Basic Company Information Location: Banani, Road# 11 (Planning for a second one in Dhanmondi) Established in: 2001 Seating Capacity: 48 Area: 1250 sft (including kitchen) Owner: Mr. Jahangir Alam (Bangladesh) Business Type: Joint business partnership with Singapore Staff: 15 people (6 in the kitchen) Production capacity: 150 litres per day

Product Related Information

Product: Italian style parlour scoop ice cream, fruit juice, coffee and pastries Flavours: Around 32 flavours available Most selling: Ferraro Rocher, Vanilla, Pistachio Innovations: New variants and ingredients are communicated by their Italian supplier and Club

Gelato decides what to take from them. Serve type: Cup, Cone, Glasses, Box for take away

Consumer Profile

Primary: Teenagers and Young Adults (18-30) & Diplomats Secondary: Family consumers for eat out Income Group: High income customers; tentatively from SEC A and higher SEC A Geographic Area: Diversified Rush time: 8-10 pm

Sales and Price Information

Sales: BDT 50,000 (60% Ice cream, 40% other desserts) daily in summer. In winter however, other products sell more and thus they keep total sales at the same level.

Price: 750 per litre for any flavour. Sales Volume: 50-60 litres per day

Supply Chain/ Placement Information

Milk: Local sourcing from Milk Vita (40/50 litres per day) Chocolates & Flavours: Belgium, France, Germany Transportation: Mainly air (They can afford it due to high margin) Contribution of various materials: Flavours (30%), Milk (20%), other parts are water and air

Promotional Materials

Materials used are near premises POS materials for promoting the parlour only.

Table 23: Detail of Club Gelato

Evaluation of Entry into Ice cream Business for Bangladesh Limited 38

MövenPick of Switzerland:

Basic Company Information Location: Gulshan Established in: 2000 Seating Capacity: 55 Owner: Mr. Arif Mahmud Business Type: Franchise of International MövenPick Storage Capacity in Shop: 150 litres

Product Related Information

Product: Imported MövenPick ice creams, coffee, chicken sandwich and Frappe Flavours: Around 30 to 35 flavours available Most selling: Swiss Chocolate, caramel, Vanilla Dream, Espresso, Strawberry Innovations: New variants are communicated by their franchiser and they decide on flavours that

they want. Serve type: Cup, Cone, Glasses, Box for take away

Consumer Profile

Primary: Teenagers and Young Adults (18-30) (70%) & Diplomats Secondary: Family consumers for eat out Income Group: High income customers; tentatively from SEC A Geographic Area: Concentrated in Gulshan and nearby areas. Rush time: Afternoon- Young Adult, 10 to 11 pm Foreigners *the company also serves at parties and has freezers in known hotels where their ice creams are

served.

Sales and Price Information Sales: BDT 35-40,000 daily in summer. Price: 640 per litre for any flavour. Sales Volume: 55-60 litres per day

Supply Chain/ Placement Information

Transportation: Imported finished goods by ship. Ship travel time: 19 days Port clearance: 10 days Safety Cushion: Extra 10 days

Promotional Materials

Materials used are near premises POS materials for promoting the parlour only.

Table 24: Detail of MövenPick of Switzerland

Evaluation of Entry into Ice cream Business for Bangladesh Limited 39

Andersen’s of Denmark:

Basic Company Information Location: Gulshan, (2 others in Uttara, Dhanmondi) Established in: 2001 Seating Capacity: 48 Owner: United Group Business Type: Franchise of Australian company Andersen’s of Denmark Production: Tongi Factory of United Group Production capacity: 2000 litres per day in factory Storage Capacity in Shop: 150 litres

Product Related Information

Product: Danish parlour scoop ice cream, and coffee Flavours: Around 30 to 35 flavours available Most selling: Strawberry, Butter Scotch, Green Innovations: New variants and ingredients are communicated by their franchiser and they decide

on flavours that they want. Serve type: Cup, Cone, Glasses, Box for take away

Consumer Profile

Primary: Teenagers and Young Adults (18-30) (70%) & Diplomats Secondary: Family consumers for eat out Income Group: High income customers; tentatively from SEC A Geographic Area: Concentrated in Gulshan and nearby areas. Rush time: 8 to 10 pm

Sales and Price Information

Sales: BDT 10-12,000 daily in summer. Price: 460 per litre for any flavour. Sales Volume: 40-50 litres per day

Supply Chain/ Placement Information

Milk: 20/25 kg packs are imported Chocolates & Flavours: Imported Butte paper: Local sourcing Transportation: Ship

Promotional Materials

Materials used are near premises POS materials for promoting the parlour only.

Table 25: Detail of Andersen’s of Denmark

Evaluation of Entry into Ice cream Business for Bangladesh Limited 40

Gelateria Igloo:

Basic Company Information Location: Banani, Kemal Ataturk Avenue (Two others in GEC Mor, Chittagong and Naya Paltan) Established in: 2000 Seating Capacity: 20 Production: From Igloo factory in Shyampur, Narayanganj

Product Related Information

Product: Parlour scoop ice cream and coffee only Flavours: Around 30 flavours available Most selling: Vanilla, Strawberry, Chocolate, Pistachio, Butter Scotch, Tutti Fruity Serve type: Cup, Cone, Glasses, Box for take away

Consumer Profile

Primary: Teenagers and Young Adults (18-30) Secondary: Family consumers for eat out Income Group: High income customers; tentatively from SEC A and B Geographic Area: Diversified Rush Time: afternoon and evening

Sales and Price Information

Sales: BDT 8,000 to 10,000 daily in summer. Nearly one fourth in winter. Price: Varies but 350 per litre of vanilla

Promotional Materials

POS materials at the premises.

Table 26: Detail of Gelateria Igloo

5.2 Price Comparison of Common and Boutique Segments: Price ranges of both common format and boutique segment cannot exactly be pin pointed as products

do not follow common structure and variations occur with use of toppings, mixing of flavours and use

of coatings. However, a price comparison has been made among the brands based on their price of

per litre of vanilla flavoured ice cream in the market. It appears to be as following:

Company Price/ Litre Vanilla Club Gelato 750 MövenPick 640 Andersen’s 460 Dolce Vita 440 Igloo 100 Kwality 100 Polar 100 Milk-Vita 90 Savoy 85

Table 27: Comparative Price Analysis

As it can be seen, there is price gap within the range of BDT 100-400. Ice cream kiosks and small

scooping boutiques can operate within that range.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 41

6.0 CONSUMER ANALYSIS

6.1 Target Group of Ice cream

Who are the consumers of ice cream? This question does not have a clear answer. Ice cream is a

food for all. It is the only food consumed by a human being at less than 0 degree centigrade

temperature and people of all ages feel indulged to have it. However, we can determine focus target

groups for both branded common format and artisan boutique ice cream. Group discussions and

market visits were done to get insight into the consumers along side resources form secondary

sources. Age based target group is common for both segments but variation among the groups occur

mainly based on SEC and DMFI classification.

6.1.1 Geographic Group: Branded ice cream remains an urban product till date. Geographically branded ice cream has reached

urban and semi urban areas up to Thana Head Quarter levels. Ice cream has reached areas where

electricity is available. Small artisan players are available in places where large branded players have

no distribution.

6.1.2 Target Age Group: Age wise grouping of target consumers is as follows:

Urban kids in the age group of 5-14

They mainly consume normal sticks, cups, cones innovative fillers and water ice creams.

Urban youth in the age group of 15-24

They consume premium and extrusion sticks and cones.

Urban mothers in the age group of 25-35

They determine the family purchases. Even when the father purchases ice cream, decision is

taken by them.

Consumption pattern of various age groups are depicted in the following chart.

Ice cream consumption pattern

50%

20% 30%

05 to 14 yrs 15 to 24 yrs 25 to 35 yrs

Figure 11: Target Group wise Consumption Pattern

Evaluation of Entry into Ice cream Business for Bangladesh Limited 42

6.1.3 Target SEC and DMFI Group: Common Format:

SEC A and B is the target group for common format ice cream. However, with rapid increase in price

level over the years, has made it a “hard to consume” product for SEC B consumers who belong to

lower DMFI group.

Boutique Format:

Boutique format’s higher margin and high price range makes it an exclusively SEC A ice cream.

People belonging to upper and upper middle class have access to the mediocre boutiques and only

higher upper class can have premium ice creams like Club Gelato and MövenPick.

Another unique target group for boutique format are the foreigners who live in Bangladesh. These

people tend to visit the parlours to have ice cream as dessert especially after dinner.

6.2 Ice cream in Consumer Lifestyle

Figure 12: Ice cream in Consumer Life style

This simple overview of ice cream in consumer lifestyle was determined based on in-depth research

analysis of UBL and validated through qualitative group discussions by the author. However, detail of

in-depth research is provided in a later section of this chapter.

Post Dinner School Time Summers

When

Fun & Excitement Social Togetherness Indulgence Affection for children Boredom relief Pacifier/ Reward

Context

Friends Family Companion/ Spouse Guests

Social Setting

Treat / Celebration Holidays Hangout

Where

Ice Cream is best

enjoyed in shared company

Evaluation of Entry into Ice cream Business for Bangladesh Limited 43

6.3 Highlights of Purchase Habit of Ice cream

6.3.1 Common Habits across Target Groups: There are some common habits that were identified in earlier researches and group discussions with

consumers. Common habits mean the consumer approach towards ice cream that is seen across all

target groups e.g. kids, youth and adult purchasers. These are outlined below.

Ice cream is mainly seen as a dessert or a snack. Impulse ice cream is seen as a quick snack

that is consumed when it is in sight. Visibility plays a big role here. Regarding family packs,

people see it as a post-food dessert.

Ice cream purchase is commonly a planned event. When the contexts arise, people generally

take a bit of time to decide whether or not to have ice cream or when they want to go to a

boutique they make due considerations regarding which boutique to visit.

Ice cream purchase decision is taken based on favourite flavour. People tend to try out new

variants and flavours when they first see it. They compare the taste with earlier experience and

when they purchase later they choose the flavour they have liked most.

For In-Home segment decision is mostly taken on the flavour. Generally people come up with

different flavours of choice and most voted flavour is chosen.

People become aware of new variants or flavours mainly through word-of-mouth. Advertisement

(new launches, special offers and festivals) in newspaper is another source of awareness.

People are currently indifferent towards the price level of premium flavours. However, some feel

that price of Choc-bar, or water ice creams (lolly) is a bit much. If less, they would have consumed

more. Some also feel that companies should come up with branded ice cream in the price range

of BDT 5-8.

Ice cream is purchased from nearby shops. If required brand and flavour is not available, 2-3

shops will be visited and then available flavour will be selected even if the required one is not

found. This is done mainly not to ruin the mood for ice cream.

People are very open to try new brands and flavours especially if it comes from a credible source.

They would try new flavours and if they are satisfied with the taste, they would repeat purchase.

Regarding boutique visits, people feel that boutiques need to have a proper environment, enough

flavours and other snacks.

While visiting boutique with family or companion, they want variation in flavours, so that they

would order different flavours and taste each other’s ice cream. It is seen as a sign of

togetherness.

Frequency of ice cream purchase varies among people. It depends on peer pressure, collective

family decision, summer heat and attitude towards “ice cream” itself as a product.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 44

6.3.2 Habits of Kids: Kids choose ice cream flavours by the look of the product (generally pictures shown in POS

materials and carts). They love colour and designs of the products let it be a common format or a

boutique ice cream.

Kids (when in house) would go with the housemaid to the nearby shop, choose the flavour they

want (within range of the amount given to the maid) and buy it.

When with parents, they would take the product they like even if the price is lower than some

other product. However, mothers play a role in this decision. They would want their children not to

choose too high priced a product or coloured products.

6.3.3 Habits of Youth: Young people are the main consumer of impulse ice cream. They also are one of the major

consumers in the boutique segment.

Young people love to try out new products that come into the market. Another side of the coin is

that, they are not very loyal to a brand or a flavour and tend to switch a lot.

Regarding boutique visits, young people go to boutiques to have an “ice cream hang out” with

peer groups. They would stay there for a longer period of time while they have their ice cream.

Some times young people make milk shakes and other ice cream based desserts.

6.3.4 Habits of Mothers: Mothers worry about their children’s health and they prefer “vanilla” type of brands. However,

when price constraint occurs, they go for water ice creams for their children. They try to convince

their kid’s purchase decision.

Regarding family purchase, mother’s decision is sometimes prioritized by the whole family.

6.4 Barriers to Ice cream Consumption

6.4.1 Emotional Barriers: Overindulge (close to sinful)

Undisciplined (no control)

Childish (licking)

Artificial Image

6.4.2 Functional Barriers: People of SEC B feel that ice cream is an expensive dessert (If less expensive would consume

more often).

It leads to cold / cough - especially in winter / rainy season.

It contains artificial additives / preservatives

It is very high in calories that lead to fattening.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 45

It does not quench “thirst”.

Less convenient (portable, immediate eat)

Messy / Dripping

6.5 Research Findings

The highlights regarding purchase habits, triggers and barriers of ice cream consumption provide a

glimpse into the consumer world of ice cream industry. However, UBL CMI conducted a formal

research exclusively on ice cream consumers to identify:

Occasions of ice cream

Frequency of ice cream consumption

Expectations from ice cream occasions

Personalities that they desire from ice cream

6.5.1 Relevant Occasions in Daily Lives of Consumers:

Research question regarding “usual occasions of life that occurred most frequently in day-to-day lives of the respondents” generated the following replies.

Occasion % of Respondents

saying "Yes"

Watching TV 93 Normal Dinner At Home 91 Normal Lunch At Home 89 At Home, While Reading/Music/Surfing 86 Informal Family Get Together 85 Out Of Home, Hanging Out With Friends 84 Out Shopping 84 Mid-Afternoon Break At Home 83 At Home By Myself During The Day 82 Special Dinner At Home 82 Informal Dinner Out Of Home 82 Normal Lunch Out Of Home 82 Leisure Walk 79 Coming Home From Work/School 78 Special Dinner Out Of Home 78 Celebration 78 A Night In With Friends 77 At Home By Myself In The Evening 77 Special Lunch Out Of Home 76 Mid-Afternoon Break Out Of Home 75 Special Lunch At Home 73 Day out with Partner 72 Midmorning Break 70 At Breakfast 68 Family Day Out 68 During Work Or At School 65

Evaluation of Entry into Ice cream Business for Bangladesh Limited 46

Travelling To/From Work/School 65 At The Cinema 61 Special Event 56 Clubbing/ At A Party 50 Post Gym/Sports 48

Table 28: Relevant Occasions in Consumers’ Lives

Respondents were then asked to mention “frequency of occurrence of the identified occasions”.

The identified replies are as follows:

Normal dinner at home

normal lunch at home

Coming home from w ork/school

Traveling to/from w ork/school

Day out w ith Partner/ Spouse

Mid-afternoon break at home

Out of home, hanging out w ith friends

Leisure w alk

Mid-afternoon break out of home

A night in w ith friends

Special dinner at home

Special lunch out of home

Family day out

Special event

Post gym/sports

Daily 2-3 Times A Week Weekly 2-3 Times A MonthOnce A Month Every 2-3 Months Less Often Never

Figure 13: Frequency of Occurrence of Occasions

This shows that “Normal dinner at home, Watching TV, Normal Lunch At Home, At Home, While Reading/Music/Surfing, Coming Home From Work/School, During Work Or At School, Travelling To/From Work/School, Midmorning Break, Day Out With Partner/ Spouse, At Home By Myself During The Day” are the most frequent daily rituals of busy lives of consumers.

6.5.2 Frequency of Ice cream Consumption:

Respondents were asked to mention “consumption pattern of ice cream during the identified occasion” on a scale of 1-5 depicting frequencies like “(5) always, (4) most of the times, (3) about half of the times, (2) sometimes, (1) never/ do not know”. The responses are depicted in the

following table.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 47

4 4 4 4 7 4 5 4 4 6 5 5 5 5 5 5 6 6 7 5 6 6 6 5 7 7 5 96 7 7 79

9 9 10 11 10 11 11 10 12 10 11 11 10 10 11 13 11 14 12 13 13 141610 11 12 14

11 13 12 16 18 15 19 18 1518 21 18 17 17 17 19 18 17 18 20 17 21 22

2130 3034 34 25

34 3740 37 41

39 40 46 38 39 44 46 47 46 45 37 45 41 46 41 3746 38

50 48 43 4148

39 3730 30 29 27 26 23 27 25 22 20 20 20 19

26 20 22 17 22 2213 17

Midm

orning break

While clubbing, at a

At the cinem

a

Special event

Norm

al lunch out of

A night in w

ith friends

Norm

al dinner at

Informal dinner out of

At hom

e by myself

At hom

e by myself in

Out shopping

Special lunch at

Day out w

ith Spouse

Watching TV

Alw ays most of the times About half of the times Sometimes never/do not know

Figure 14: Frequency of Ice cream Consumption

As it can be seen “Day out with Spouse, Special lunch at home, Special dinner at home, Watching TV, Family day out, Celebration” are the occasions where most frequently ice cream is

consumed.

6.5.3 Market Character: Mapping Relevant Occasions vs. Frequency of Consumption If we plot frequency of consumption on the X-axis of a chart and relevance of occasion occurrence on

the Y-axis taking the above mentioned values as cut-off values we get four quadrants in the chart

depicting four market scenarios that any ice cream manufacturer in Bangladesh market might

encounter given the current market situation. This market segmentation is based on frequency of ice

cream consumption in daily occasions of consumer lives.

The segments are:

OPPORTUNITY MARKET: High Relevant Occasions-Low Ice cream Frequency

QUESTION MARKET: Less Relevant Occasions-Low Ice cream Frequency

HIGH FREQUENCY MARKET: Relevant Occasions-High Ice cream Frequency

CAPTIVE MARKET: Less Relevant Occasions-High Ice cream Frequency

The chart looks as follows:

Evaluation of Entry into Ice cream Business for Bangladesh Limited 48

Figure 15: Relevance of Occasion-Frequency of Consumption Mapping

As it can be seen from the above chart, Bangladesh Market still lies in the Opportunity and Question

market zone with a pull towards High frequency and Captive Market zones. This is evident from

market data as penetration of ice cream still remains at Thana headquarters levels. Also, this explains

the high market growth rate of 17% as market is yet under developed and branded quality ice cream

has yet not reached all levels of consumers, especially rural level that constitutes around 75% of

Bangladeshi market.

From the above analysis, we can establish that target of ice cream manufacturers should be to

penetrate more into the Bangladeshi market to create higher frequency of ice cream consumption.

The following chart shows the strategies to follow for ice cream manufacturers.

Figure 16: Required Market Strategy for Bangladesh

Evaluation of Entry into Ice cream Business for Bangladesh Limited 49

As, relevance of ice cream consumption occasions can hardly be controlled by marketers, their

endeavour should be to create more “emotional and functional” attachment to ice cream in less

frequent occasions through “market development” strategy to earn share from overall food

expenditure of consumers and at the same time make them consume more ice cream in highly

relevant occasions through “penetration” strategy.

6.5.4 Consumers’ Emotional Requirements and Product Attributes:

All consumers under these clusters also identify the emotional requirements and the significant

product attributes they seek from their current preferred and future desired ice creams. These are

provided below.

Cluster Emotional/ Functional

Requirement Product Attributes Enjoyment Flavour/ Variety Combination of different flavours Combination of different textures Very sweet With wafer or biscuit With chocolate Of a well known brand Socially Involved Spoonable/ Rich Very creamy Only natural ingredients No mess Care Size/ Creaminess Big Rich, full taste Smooth Value for money No mess Unwind & Escape Economy Crunchy Economic Of a well known brand Nutritious Balanced Convenience Health Conscious Of a well known brand Nutritious Milk based Low sugar Low carbohydrates Filling Active Self-Grooming Fruit/ Vitamins Healthy Fruit based Low fat Liquid or drinkable Nutritious Of a well known brand Confidence Drinkable/ Light Low calories Light on the stomach Chewy or gooey Not so sweet Natural appearance Sensual Appeal or image No artificial additives

Evaluation of Entry into Ice cream Business for Bangladesh Limited 50

Natural appearance Melting slowly Attractive packaging High quality ingredients Of a well known brand

Table 29: Requirements & Product Attributes Desired by Consumer Clusters

Of these findings we see that the identified highlighted barriers to ice cream consumption are pretty

evident among the consumers. Mostly people want products of a reliable source or a well known

brand, low calories, quality ingredients, value for money/ economic type.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 51

7.0 INDUSTRY ATTRACTIVENESS AND ENTRY PROSPECTS

7.1 Driving Forces of Growth

As identified in the earlier sections, there are several driving forces behind the growth of ice-cream

industry in Bangladesh.

7.1.2 Trade and Infrastructural Level:

As a result of globalization newer varieties have been introduced to the local products. Many

foreign companies are also coming as franchise so there has been increased competition and

these boutiques are setting higher standards for the local producers.

The present market growth rate is 18-19% which is being influenced by larger players like Igloo

who are expanding their distribution nation wide with expansion of national electricity grid.

With entry of Modern Trade and recent organized business approach of retailers has made it

possible for ice cream manufacturers to penetrate into shops even without providing them with

branded freezers.

Weather change has increased “summer” season in our country, which has reduced negative

seasonal impact on ice cream.

Large companies like Igloo have taken global learning of using carts as an effective tool of

availability and visibility for ice cream.

New and improved technologies are being used in the production process. This technological

advancement has improved quality, increased speed of production and made the process more

cost effective.

7.1.3 Consumer Level: Only a few years back rich people could afford the luxury of having ice-cream but now it has

become a common product for everybody. Ice-cream companies are producing different products

with a wide price range for consumers of every class and status.

Nowadays companies are doing promotional campaigns more frequently; the customers get to

know about the product which makes it easier for them to buy the best one.

The improved standard of life and more modernized lifestyle of people is an important reason for

the increased consumption thus growth of the ice-cream industry.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 52

7.2 Prospects of Entry

The ice-cream industry of Bangladesh is an attractive one for the investors because there is a huge

market but number of producers is very small. The major reasons behind industry attractiveness are

as follows:

The industry’s current growth potential is very high with opportunity for market development.

The competition currently permits adequate profitability and the competitive forces are becoming

stronger with time.

Boutique segment is at a very high growth stage but no operator is currently operating with a mid

price range of BDT 100-400. Ice cream kiosks and small scooping boutiques can operate within

that range.

Current industry driving forces are favourable for the future industry profitability.

Globally oriented consumers look for variety in ice cream that is currently not available. Latest

innovations came in the market in 2002. People would welcome new variety and flavours.

There is a gap in the market for balanced convenience through ice cream where consumers can

get nutritional benefits for ice cream. Also, emotional attachment to ice cream could further be

improvised in promotional campaigns.

There is high scope for market penetration and development to increase frequency of ice cream

consumption.

Level of risk or uncertainty is very low in ice-cream industry because the consumer market is so

huge, any product with a standard quality and careful pricing will be able to make significant profit.

As for geographic reach of the industry, 60% market is still in Dhaka. There is scope of expansion

and a new entrant can easily capture market share within Dhaka using carts even if they do not

want nation wide cold chain distribution.

The production process is very complex and capital requirements are also high. So before going

into production any company should know about their capabilities and weaknesses and then start

the business or else they might suffer huge loss at a certain level.

Unilever can acquire the required resource and use existing multi-national multi-cultural expertise

to enter the market in a grand way.

With high probability of entry from DANONE with more products like the ISIS diabetic ice cream,

Unilever should consider entering in this industry as soon as possible.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 53

8.0 ENTRY STRATEGY FOR UNILEVER

While describing the suggested entry strategy for UBL, certain issues have been kept confidential and

some issues have been touched but not explained to keep consistency with UBL confidentiality policy.

8.1 Suggested Entry Areas for UBL

Boutique segment of the Bangladesh ice cream is only 5% of the branded market. UBL needs to

pursue a larger scope to make the entry viable.

UBL cannot fight with unbranded segment as global product quality mandate of Unilever does not

allow UBL to fight in low price-low quality segment.

Recommend entry should be in the common format segment with both single and multiple

servings and in the boutique segment with a different brand name (if possible BEN & JERRY’S).

UBL should build up state-of-art modern factory for manufacturing and establish cold chain

facilities initially focusing on metro cities.

Investment issues are required to be addressed for building factory and cold chain and capital

requirement needs to be identified for that purpose4.

UBL may have boutiques for driving image/ selective top-end offering.

Kiosks can be setup near universities and shopping malls.

Boutiques should be concentrated in Dhaka and Chittagong.

Ice cream for boutiques and kiosks would be produced in factory as institutional packs of 9-10

litres.

8.2 Products

As a Brand Building country in global Unilever operating framework UBL is entitled only to bring

products developed by the Brand Development countries.

Unilever should focus on serving products that have nutritional benefits (already available

globally) along with usual satisfactions of sensual pleasure, functional attributes etc.

Current existent players especially Igloo and Kwality have extensively copied global and

regionally available Unilever products e.g. Cornelli is same as Wall’s Cornetto, Vinetta is similar to

Vienetta, Mega is similar to Magnum etc. UBL needs to differentiate these to consumers on the

“taste the original” platform where global quality is focused regarding the products.

UBL should also bring regionally famous brands like Moo or Max to create image differentiation.

Magnum or Moo should be used as premium end ice cream to generate more profit margin.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 54

8.3 Placement

Distribution focus should be in Dhaka for entry as Dhaka contributes more than 60% of total ice

cream sales in the country.

Company may use carts as distribution method. They serve as good source of visibility and

availability. It would help in increasing impulse purchase.

At least 1500 outlets in Dhaka and Chittagong needs to be actively served using dedicated

branded refrigerators to generate sales.

50 carts should operate in Dhaka and Chittagong.

8.4 Price

UBL products should be priced at par with Igloo pricing for the common format ice creams.

UBL can bring in premium single-serve SKUS for the higher economic classes in the price

range of BDT 60-80.

Smaller SKUs (small lolly stick) can be introduced in the price range of BDT 10-15.

In the boutique segment UBL should price products above the semi-premium segment (Gelateria

Igloo, Sub Zero or Andersen’s) but lower than that of Club Gelato or MövenPick.

8.5 Promotion

UBL would require strong marketing campaign (As high as 50% of sales) to have a grand entry in

the market.

Presence in the television media would be of utmost importance. More than 50% of

promotional expense should be made here initially. Gradually it can be reduced.

Newspaper would serve as the second most important option.

Billboards should also be used.

Activations (similar to Lux Channel i Super Star or Igloo Festival) should be done to generate

trial.

8.6 Scope of Opportunity

Table 30: Value and Volume Based Scope of Opportunity for UBL

Value

(BDT Cr) Volume (Tons)

Market 131 7835Common 121 7600Boutique 9.8 235

Evaluation of Entry into Ice cream Business for Bangladesh Limited 55

8.6.1 Geographic Contribution: Dhaka (61%)

Chittagong (19%)

Sylhet (10%)

8.6.2 UBL objectives: Common Format Ice Creams:

Target: 10% Market share in 1st year operation

Value: BDT 11 Cr

Production capacity required: 2.1 Tons/ day

Freezer Placement: 1500 freezers

Cart operation: At least 50 carts

Boutiques:

Target: Further develop the market

Focus: Dhaka, Chittagong and Sylhet Metro

Franchise: At least 20 franchisee operations nation wide in divisional towns

Pricing: Below imported parlours; above common formats with around BDT 400 per Litre.

8.7 Critical Success Factors

UBL is considered as a high profile company in Bangladesh and thus they cannot operate in the

market only with common products like choc-bars and cups. They must have premium products

(these require extrusion line) also to carry their brand image. Otherwise UBL would not be able to

charge usual premium over competition products.

Launch of ice cream would require huge promotional and activation support in order to gain

customers from Igloo. People want novelty regarding ice cream and UBL have to let them know

about their products and create hype.

Cart should be used as a source of distribution. Recent successes of Unilever companies like

Indonesia shows that carts can generate more sales and can be used as source of visibility in the

minds of both retail traders and consumers. Carts can also provide incremental sales to the

company.

UBL have to create a strong cold chain for ice cream (initially in Dhaka and Chittagong) to ensure

quality products for consumers.

UBL have to build capacity very rapidly to meet consumer demand if the launch is successful.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 56

9.0 BUSINESS PROJECTION

9.1 Basic Assumptions

Business projection for ice cream business was made based on a conservative approach. UBL would

require spending significantly on production capacity and factory dedicated to ice cream. Thus, to

analyse business possibilities of ice cream certain assumptions were made and collected data were

used. These are:

Production equipments and cabinets would cost approximately BDT 55 crores.

Production equipments : 45%

Packaging Equipments : 15%

Storage Facility : 20%

Branded Freezers : 10%

Distribution Investment : 10% (Distributors would also invest themselves)

Ice cream factory with a floor size of 20000 sqft would cost BDT 25 crores.

Objective is to capture 10% market share in Dhaka and Chittagong in the first year.

Business would grow by 50% in year 2 and 3; 30% in year 4 and 25% in year 5.

Weighted price per litre is BDT 170 according to volume share of single serve ice cream, multiple

serve ice cream and boutique ice cream.

Other financial assumptions were also made. List of them are provided below but amount has

been removed for confidentiality issues.

Assumptions

Trade Margin Distributor's Margin Duty/VAT Rate Trade Terms Expense % of NPS Trade Terms Expense % of NSV Advertising &Promotion % of NPSIndirects (Salaries, Wages etc) % Trading Tax %

Table 31: Assumptions for Business Projection

Evaluation of Entry into Ice cream Business for Bangladesh Limited 57

10.0 CONCLUSION

Ice cream has good prospect in Bangladesh. It is still a growing market with opportunities for big new

entrants. With the barriers of entry, UBL needs to consider its priorities. UBL being an HPC company

traditionally needs to acquire expertise in cold chain distribution and has to invest a lot of money to rip

the benefits of the industry. However, to initiate company can take regional support and acquire

resource expertise. The company should enter the business as soon as possible since there is

potential threat from DANONE to introduce more ice creams after ISIS diabetic ice cream and also

with potential of the industry arch rival Nestle’ might consider entering into the industry too.

Evaluation of Entry into Ice cream Business for Bangladesh Limited 58

References

Web References:

1. www.unilever.com 2. www.unilever.com.bd 3. www.hll.com 4. www.unilever.com.pk 5. www.thedailystar.com - Life Style Magazine, 6. www.reuters.co.uk

Evaluation of Entry into Ice cream Business for Bangladesh Limited 59