Industry Analysis

Ice cream Industry

Submitted To: Prof Bala Bhaskaran

Submitted By: Bhumin Shukla Deepika Agarwal Kunal Jana Nikita Jain Nirali Doshi Rushabh Nanavati Stavan Shah

Industry: Ice cream Industry Company: Havmor

Table 1: Rivalry amongst Competitors Parameters Low No. of competitors Industry growth Fixed cost Differentiation Switching cost Openness of terms of sales moderate Attractiveness High Havmor claims to have 36% market share Growing at 35% each year Fixed cost is almost 30% of MRP Variety of ice creams Product quality over shadows switching cost Remarks

high moderate high moderate

high

2|Page

Table 2: Barriers to Entry Parameters Low Brand identity High Attractiveness High People prefer established brand for food product like ice cream. Difficult to get access to distribution channel for perishable product like ice cream. Capital intensive to establish plant. Remarks

Access to channels of distribution Capital requirement Access to technology S Access to raw material

High

High High

low

Raw materials are easily available.

The overall threat of a new entrant is very low in this sector. There are various parameters which hampers the entry of a new player in the market. The reasons would be, as ice cream being a food product people would always prefer relying on the existing brand rather than going for a new brand and havmor is an established brand since a long time so it has an advantage here. So there arises difficultly for new entrants to have product differentiation because customers are already familiar with the established company like havmor, therefore new entrants have to spend a lot on branding and customer knowledge. The other reason that adds difficulty for a new entrant is the distribution channel. As ice cream being a perishable product it really needs a strong distribution channel in order to avoid heavy losses. High capital is required to enter into mobile industry which needs large investment on technology, distribution, service outlets and plant. Thus we can say that havmor is enjoying good profits and have a good scope of the same.

3|Page

Table 3: Barriers to exit Parameters Low Asset specialization Cost of exit Government restrictions Moderate High Moderate Loss in market share Ltd Company Attractiveness High Remarks

The Barriers for exiting the market are quite moderate. The Cost of exit is high as there is loss of market share and also the company may have to incur losses while closing up, or it may have to suffer a lot of dead stock. Also the government restrictions can be a little high as maximum of the companies are public limited companies. Table 4: Threat of Substitutes Parameters Low Availability of close substitutes Substitutes pricevalue Profitability of the producers of substitutes moderate Attractiveness High No perfect substitute available Remarks

High

Moderate to high

The threat for substitutes is also moderate, substitutes for ice cream can be Frozen Yoghurt, Ice cream shakes etc. But all of these are priced quite high and thus they dont affect the ice cream industry much. Also the profitability for the substitutes is moderate to high as they have not captured a huge market and thus the threat is moderate the industry is moderately attractive.

4|Page

Table 5: Bargaining Power of Buyers Parameters Low Number of buyers Availability of substitutes Buyers threat of backward integration Industrys threat of forward integration Contribution to quality Contribution to cost Buyers profitability Very high Low Moderate To sustain in market, quality maintenance is of utmost importance Buyers do not generally affect prices No monetary gain. Low High Medium Attractiveness High Very high customer base A moderate range of substitutes like yogurt, etc. Milk production is comparatively difficult compared to milk procurement Remarks

The customers of ice cream industry possess a good bargaining power as they are in a position to play one vendor against the other. They can easily switch to another producer if they do not get the desired product and hence quality maintenance and variety is the essence of gaining leadership in the market. It is not ideal for the producers to produce milk as procurement is comparatively cheaper. There is also a scope for the company to indulge into substitute products as it is a growing market still untapped.

5|Page

Table 6: Bargaining Power of Suppliers

Parameters Low Number of suppliers Availability of substitutes Contribution to quality Contribution to cost Industrys importance to supplier Moderate

Attractiveness High

Remarks

The ingredients provided by each supplier are not unique. There is no substitute for the product supplied High investment Cost of raw material in increasing day by day. Increase in suppliers network.

Low

High High High

The suppliers of ice cream industry possess a good bargaining power as there are not many suppliers present in the market. The manufacture does not have more options of supplier. Options regarding substitutes are also very less. Some other reasons why suppliers of ice cream industry possess a good bargaining power are the cost of material is rising day by day. Scarcity of raw material is also one of the reasons for suppliers possessing a good bargaining power.

6|Page

Table 7: Overall assessment

Parameters Low Barriers to entry Rivalry among competitors Barriers to exit Power of buyers Power of suppliers Threat of substitutes Overall attractiveness Low M to H M to H M to H High Moderate

Attractiveness High

Remarks

Low no of barriers Competition is Moderate to High Not many barriers to leave market

The power of suppliers is quite high The competition from substitutes is low

In the end we would like to summarize by saying that the ice cream industry is a moderately attractive industry as: The Barriers to entry are low and thus new players can enter the market easily. Also all the companies (vadilal, kwality walls or havmor) are at the same level and thus they dont give each other competition, the prices are almost equally priced. The buyers do have the power of changing their tastes and preferences but the control of the buyers over the market is not much and very few of the decisions are affected by the customers, and thus the market is moderately attractive. The control of the suppliers is high here as the no of suppliers are quite low and thus they control the supply for the raw materials. And as the quality of the raw materials is very important, they enjoy a good control over the market and thus this makes the market a bit unattractive. The no of suppliers are quite low and the substitutes are also have a high price value and thus as the control of the substitutes is quite low, the market is quite attractive.

7|Page