ARUN ICE CREAM On June 301997 even as he signed the annual accounts of astu! Mil" #ood li!

ited fo$ the %ea$ to Ma$ch 1997& It 'as clea$ to R ( Chand$a!ogan& the chai$!an and !anaging )i$ecto$ that his co!*an% 'as in the !iddle of st$ategic c$oss $oads+ ,he dile!!a $elated to the st$ategic di$ection the Chennai -head - .ua$te$ed !a"e$s of A$un Ice C$ea! had to ta"e/ this in *a$ticula$ involved .uestion of !a$"et e0*ansion fo$ Ice c$ea! 1e%ond south India 2is3a3vis dive$sification in to *$oducts that could leve$age on the co!*anies cu$$ent st$ength+ Recent %ea$s had 1een !o!entous fo$ A$un as co!*an% it self had co!e to "no'n e*on%!ous 'ith its "e% 1$and+ Ea$l% 1994 sa' atsun !il" food 5i!ited 6 M#57 ta"en *u1lic+8ith the Indian 9toc" !a$"et in the g$i* of 1ea$ish *hase+ atsun:s initial *u1lic offe$ing 6I;O7 1a$el% !anaged to sail th$ough+ <ut the g$eate$ visi1ilit% and e!e$gence of a *o'e$ful sta"eholde$ in the fo$! of *u1lic investo$s !eant the tacitu$n !anage!ent of atsun had to *la% a co!*letel% unfa!ilia$ $ole in !anaging e0*ectations+ 8ith ice c$ea! sales inc$easing 1% a health% =1 >& the ?ust co!*leted fiscal& the fi$st %ea$ afte$ the I;O& Chand$a!ogan $eflected& 'as *$o1a1l% satisfacto$% in this $es*ect+ ,his& he felt& ho'eve$ onl% unde$sco$ed the u$genc% to develo* a sound sho$t3te$! st$ateg% to consolidate ARUN 1$and of ice c$ea! in the fast3changing co!*etitive scena$io and thus esta1lish a solid *latfo$! to launch agg$essive g$o'th initiatives and attain a c$itical !ass and scale 1% the %ea$ @000+ Arun ice cream: early history and strategy: Chand$a!ogan& son of a vegeta1le 'holesale$ f$o! south Indian state of ,a!il Nadu& set u* A$un Ice C$ea! in 1970 in !ad$as6no' $e3na!ed as Chennai7& essentiall% !otivated 1% the u$ge to Ado so!ethingB+ Afte$ his college studies 'e$e discontinued at the *$e3 unive$sit% stage &chand$a!ogan agoniCed ove$ seve$al 'ee"s a1out sta$ting so!e 1usiness 'ithout 1eing .uite a1le to na$$o' do'n to an% s*ecific line &!ainl% 1ecause of heav% invest!ents entailed+ 8hile d$iven 1% an u$ge to succeed as a 1usiness!an& he did not .uite "no' ho' to go a1out setting u* a 1usiness+ It 'as his !ate$nal uncle 'ho suggested the 1usiness of ice c$ea!+ Investing Rs 1D000 as his o'n ca*ital and $aising anothe$ Rs @1000 1% 'a% of a 1an" loan+ e set u* a s!all ice cand% unit in $ented *$e!ises ad?acent to his uncle:s $etail te0tile outlet+f$! a .uic" su$ve% a$ound the !ad$as !a$"et it a**ea$ed to Chad$a!ogan that the$e 'e$e a1out 3D0 s!all ti!e ice cand% !anufactu$e$s li"e hi! co!*eting in the lo' end of the !a$"et+ ,hese 'e$e offe$ings no co!*etition to the u*3 !a$"et seg!ent do!inated 1% the leading 1$ands )asa*$a"ash+ Jo% and E'alit%+ 5i"e the Aothe$ in the c$o'dB+ Chand$a!ogan 'as also selling his A$un ice candies fo$ 10 *aise and 1D *aise a *iece *$edo!inantl% th$ough st$eet -vendo$s+ ,han"s to *$o!inent location in a 1us% localit%+ A$un also .uic"l% 1egan att$acting 'al" in custo!e$+ ,he fact that one could get f$esh ice candies $ight ac$oss the facto$ies counte$s 'as a !a?o$ selling *oint in *$o!oting facto$ies sells+ In the ve$% fi$st %ea$ of o*e$ation& Chand$a!ogan $ecalls& A$un cloc"ed a tu$nove$ of a1out Rs+1& D0&000 and *$ofit of Rs+ =0&000+ Ove$ the counte$ sells *$o1a1l% accounted fo$ nea$l% half of the 1usiness+ E!1oldened 1% this ea$l% success& Chand$a!ogan 'ent fo$ a th$eefold of e0*ansion in second %ea$ of o*e$ation+ Even in the ve$% fi$st su!!e$ season& t%*icall% the

*ea" !onths fo$ ice c$ea!s and cand% sales& Chand$a!ogan found that his *$oduction ca*acit% 'as si!*l% inade.uate to !eet the *ea" de!and+ ,his an ea$l% $esolves to !ove a'a% f$o! the la$ge *ac" of s!all ti!e& faceless co!*etito$s influence his decision to e0*and+ As the e0isting location 'as found c$a!*ed& he decided to $elocate the *lant in a !o$e s*acious locale in the outs"i$t of the cit%+ As it tu$ned out& Chand$a!ogan found selling the hugel% e0*anded volu!es *a$ticula$l% du$ing off seasons& .uite tough+ ,he so!e'hat in cons*icuous location of the ne' facto$% in $athe$ lo' t$affic a$ea 'as also found to 1e ina**$o*$iate fo$ the ac$oss counte$ sales that d$o**ed *$eci*itousl%+ ,hough Chand$a!ogan .uic"l% $esu!ed ove$3 the counte$ sales at the old *$e!ises 61% sou$cing f$o! the ne' facto$%7& it neve$ $egained the old volu!es+ ,he e0*anded facilities also !eant highe$ ca*acit%3$elated fi0ed cost+ 8ith sha$*l% inc$eased costs and sales not "ee*ing *ace& A$un fell into the $ed+ Chand$a!ogan financed the losses th$ough additional 1o$$o'ings *a$tl% f$o! his uncle+ Even as he 'as going th$ough a !a?o$ u* heaving+ As the in*ut cost 'as $ising sha$*l%& ice cand% !anufactu$e$ decided to inc$ease the $etail *$ice f$o! 10 *aisa to 1D *aise a *iece& leading to $evolt and 1o%cott 1% ice candies vendo$s+ 8ith !anufactu$es such as A$un stic"ing to thei$ decision& vendo$s slo'l% 1egan $etu$ning to the fold+ 8ith so!e'hat stagnating volu!es and lo' *$ofita1ilit%& Chand$a!ogan felt 1usiness outloo" 'as one of the sa!e une0citing e0istence+ As he thought to !ove u*3!a$"et into ice c$ea!s and inc$ease volu!es th$ough 1ul" institutional sales& a leading g$ou* of hotels in Mad$as e0*$essed inte$est to sou$ce its ice c$ea! $e.ui$e!ents+ o'eve$& the otel g$ou* insisted that A$un Inc$eases the *$oduct Fualit% and su**lied ho!ogeniCed ice c$ea! and also inc$ease the $ange of *$oduct offe$ing and flavo$s+ ,his 'ould involve ac.ui$ing ce$tain ne' e.ui*!ents fo$ ho!ogenisation costing Rs+ 7D00 and $ec$uiting a .ualified and e0*e$ienced *e$son to ove$ see the *$oduction& at a sala$% highe$ than 'hat the 1usiness could have *$o1a1l% than affo$ded+ ,hough his fello' ice c$ea! !anufactu$e$:s caution and his o'n ea$lie$ e0*e$ience and& the cu$$ent of his finanaces suggested othe$'ise & Chand$a!ogan dicided to ta"e the $is"+ 8ith vastl% i!*$oved .ualit% and a la$ge nu!1e$ of flavo$s in his offe$ings & A$un 'as a1le to 1$ea" tough the hotel !a$"et+ 8hile this did hel* his confidence& it did little to i!*$ove the finances& 'hich continued to suffe$ se$ious *$ofita1ilit% and li.uidit% *$o1le!s+ Chand$a!ogan soon $ealiCed that hotels& 'hile *$oviding sta1les volu!es& 'e$e none the less *$one to !a"ing heav% de!ands on thei$ su**lie$s and also ve$% slo' in $eleasing the *a%!ent fo$ the su**lies !ade+ As the t%*ical hotel custo!e$ 'as not that 1$and sensitive& hotels the!selves vie'ed ice c$ea!li"e an% othe$ *$ovision in thei$ 'ee"l% sho**ing list and 'e$e not sh% of using thei$ su1stantial clout vis3G3vis thei$ s!all ti!e su**lie$s+ In the ne0t t'o %ea$s o$ so even as the ice c$ea! 1usiness 'as 1eginning to 1$ea" even& Chand$a!ogan 'as sea$ching fo$ a 'inning fo$!ula fo$ stee$ing A$un a'a% f$o! othe$ A!e3tooB outfits+ aving lea$nt eve$%thing on the ha$d 'a% Aon the ?o1B th$ough the t$ail and e$$o$& Chand$a!ogan 'as also 1eginning to feel the acute need of so!e "ind of fo$!al t$aining and st$uctu$ed in*uts on the va$ious as*ects of !anage!ent+ e en$olled 'ith )ava$:s college & an institution fo$ offe$ing s*ecialiCed sho$t du$ation *$og$a!!es fo$ 'o$"ing e0ecutives& and too" cou$ses in !a$"eting and *e$sonnel !anage!ent+

Market for ice cream in the madras city and Aruns search for a niche Sea$ching fo$ a suita1le slot to *osition A$un in an inte$estingl% *$ice sensitive co!!odities !a$"et 'ith an highl% f$ag!ented co!*etition fo$ ?oc"e%ing eve$% little co!*etitive s*ace& Chand$a!ogan found little $oo!+ Nea$l% 9D> of *$i!a$% 1ul" *u$chases of ice c$ea! in Mad$as is a$ound the ti!e 'e$e accounted fo$ the follo'ing th$ee catego$ies+ (ene$al *$ovision and de*a$t!ental sto$es 'ith dee* f$eeCe$s otels and $estau$ants 9ocial events& !ostl% 'edding *a$ties

,%*icall% the ice c$ea! !a?o$s6such as )asa*$a"ash& Jo% and E'alit%7 invested in dee* f$eeCe$s H su**lied the! to gene$al sto$es H also to lesse$ e0tent hotels H $est$aints the$e1% esta1lishing so!e "ind of Icold chains: as dedicated $etail outlets fo$ thei$ 1$ands+6Often these gene$al sto$es stoc"ed a va$iet% of othe$ ite!s 1esides the ice c$ea! of the s*ecific *$inci*als in the f$eeCe$s7+ A'a$e of his o'n li!itations& Chand$a!ogan 'as not .uite su$e a1out the feasi1ilit% and a**$o*$iateness of this *$oven Acold chainB !odel fo$ A$un+ At the sa!e ti!e he 'as also conscious of the fact that these t'o - the so3called Adee* f$eeCe$B seg!ents 3 $e*$esented *otentiall% the la$gest and the !ost sta1le !a$"et fo$ his *$oduct+ Ice c$ea! su**lies to social events li"e 'eddings& 'hile .uite luc$ative& 'e$e e0t$e!el% seasonal and i!*osed heav% de!and on A$un:s li!ited logistics !anage!ent+ Mo$eove$ this seg!ent 'as highl% 1$and3conscious and Arun 1h$and 'as vi$tuall% un"no'n at the ti!e+ 6'hile the 1$and na!e AA$unB 'as used al!ost ince*tion& Chand$a!ogan ad!itted that not !uch thin"ing had *$o1a1l% gone into the 1$and na!e decision+7 5eft 'ith li!ited o*tions& Chand$a!ogan continued his sea$ch fo$ a niche fo$ A$un and felt that t'o othe$ seg!ents accounting fo$ ?ust a1out five *e$cent of the Mad$as ice c$ea! !a$"et *ossi1l% gave hi! so!e ho*e+ ,hese 'e$e educational institutions and su**lies to shi*s calling at the Mad$as *o$t+ Run 1% !ess sec$eta$ies 'ho the!selves 'e$e college canteen and the hostel !ess seg!ent 'as vi$tuall% igno$ed 1% the leading ice c$ea! !anufactu$e$s such as )asa*$a"ash and Jo%+ Chand$a!ogan in his late teen instantl% st$uc" $a**o$t 'ith the "e% decision -!a"e$s of college canteens+ Jet it $e.ui$ed seve$al visits and g$eat *e$seve$ance 1efo$e he could 1ag o$de$s fo$ su**lies to a la$ge and *$estigious institution li"e the Indian Institute of ,echnolog%& Mad$as+ e also felt that college students 'e$e !o$e than 'illing to e0*e$i!ent 'ith a ne' 1$and o$ ne' flavo$s+ 9ensing a co!*etitive vacuu!& he ste**ed in 'ith vastl% i!*$oved se$vice and delive$ies the% 'e$e unaccusto!ed to and steadil% ca*tu$ed 1ul" of this seg!ent+ 9i!ila$l% 9hi* - Chandle$s& 'ho *$ocu$ed and su**lied *$ovisions to shi*s that called at the Mad$as *o$t& 'e$e *a$ticula$ a1out delive$% of ice c$ea! ?ust in ti!e fo$ on'a$d t$ansshi*!ent to shi*s+ Chand$a!ogan felt this seg!ent& 'hile fastidious a1out .ualit%& 'as not that 1$and d$iven+ Most leading ice c$ea! !anufactu$e$ 'e$e unsu$*$isingl% une0cited a1out these su**lies in vie' of the s!all volu!es and the e$$atic delive$% $e.ui$e!ents+ Chand$a!ogan 1egan !eeting these agents 'ho 'e$e *$ocu$ing and

su**l%ing *$ovisions to va$ious shi**ing lines& unde$stood thei$ $e.ui$e!ents as to *ac"ing and delive$% and .uic"l% ca*tu$ed !ost of this !a$"et as 'ell+ <% 197=& Chand$a!ogan $ecalls that& A$un had *$o1a1l% ca*tu$ed 9D> of the college canteen and shi*3 chandle$s seg!ents+ o'eve$& 9D> of the total Mad$as !a$"et& $e*$esented 1% the othe$ th$ee seg!ents& 'as still outside the $each of A$un+ aving fi$!l% esta1lished in the cit% college ca!*uses+ Chand$a!ogan to%ed 'ith the idea of $e*licating the a**$oach in the college canteens in the inte$io$ dist$icts of ,a!il Nadu+ Ice c$ea!s of the ti!e *$acticall% igno$ed the dist$ict to'ns 1ecause of shee$ logistics *$o1le!s+ 9ince the student co!!unit% in the dist$ict3level colleges included in thei$ !indset fo$!e$ students of Mad$as colleges& 1$and $ecognition fo$ A$un 'as !ade $elativel% easie$+ Chand$a!ogan 1egan su**l%ing ice3c$ea! to a fe' colleges in nea$1% dist$icts& *ac"ed in d$% ice containe$s& e!*lo%ing sales *e$son fo$ the *u$*ose+ 2e$% soon A$un had vi$tuall% 100> of the s!all& 1ut g$o'ing u*count$% college !a$"et+ 8ith a$un:s volu!es *ic"ing u* in the follo'ing !onths chand$a!ogan 'as a1le to *a% off all his outstanding loans & and the 1usiness $egained a se!1lance a se!1lance of financial fle0i1ilit% + )es*ite this chand$a!ogan still did not feel financiall% st$ong enough to ente$ the dee* f$eeCe$ 1ased gene$al sto$e seg!ents in !ad$as cit%+ 8hile in this ea$l% da%s &he did *$ovide so!e adve$tise!ent su**o$t to 1uild and enhance the 1$and i!age of a$un & ve$% fe' en.ui$es fo$ agenc% o$ f$anchisee inte$est follo'ed+ As he continued to sa% clea$ of the to* th$ee seg!ents in the !ad$as !a$"et& it 'as evident to chand$a!ogan that the 1usiness 'as *$o1a1l% ente$ing a *hase of stagnation+ 9o he 1egan loo"ing out fo$ ne' !a$"ets in 'hich he could co!*ete effectivel% and g$o'+ Breaking into upcountry market As chand$a!ogan sa'& the g$eatest g$o'th *otential 'as seen in the u*count$% !ofussil to'ns that 'e$e co!*letel% igno$ed 1% the ice c$ea! !a?o$s+ 8hile this !a$"et 'as vi$gin& the cost and logistic of se$vicing the! f$o! a cent$al facto$% in !ad$as 'e$e indeed daunting+ If he could co!e u* 'ith the '$ite !a$"eting and dist$i1ution fo$!ula& chand$a!ogan felt the$e 'as a good chance of his st$i"ing it 1ig& *a$ticula$l% 1ecause of the a1sence of an% se$ious co!*etition+ aving !ade in$oads into u*count$% college canteens and hostels& Chand$a!ogan 1egan loo"ing at the feasi1ilit% of su**l%ing ice c$ea!s to the 'edding events and othe$ i!*o$tant social events in u* count$% to'ns+ 8hile ice c$ea! 'as a standa$d fa$e fo$ such events in Mad$as& this conce*t 'as vi$tuall% un"no'n outside the cit%+ 9o he 'ent a$ound fo$ canvassing the o$de$s fo$ *e$sistant offe$s and othe$ social events in u* !a$"et households outside Mad$as cit%+ ,h$ough *e$sistant effo$ts & A$un 'as a1le to achive so!e !easu$e of success+ 8hile these initiatives did hel* in enhancing 1$and a'a$eness and additional sales& Chand$a!ogan $ealiCed that these 'ould not 1e ade.uate to give hi! sta1le volu!e and a c$itical !ass+ And to achieve this& it 'as i!*o$tant that so!eho' he got so!e "ind of !ass !a$"eting + A$ound this ti!e the$e 'e$e a fe' en.ui$ies indicating inte$est in stoc"ing and $etailing A$un ice c$ea! in so!e a$eas of

Mada$s cit% *$ovided chand$a!ogan su**lied the dee* f$eeCe$s+ Chand$a!ogan fi$!l% 1ut *olitel% tu$n do'n the offe$s+ Initiall%& Chand$a!ogan identified a fe' to'ns li"e ;ondiche$$%& Maddu$ai& Ea!1a"ona! and 9iva"asi in ,a!il Nadu fo$ initial fo$a%& *a$ticula$l% 1ecause good .ualit% ice c$ea! 'as not availa1le in these *laces+ 6At 1est a fe' hotels and $estau$ants 'e$e se$ving Aho!e !adeB& un1$anded& *lain3vanilla ice c$ea! to thei$ dine$s+7 Chand$a!ogan adve$tised th$ough 1anne$s and hoa$dings in these selected to'ns that ice c$ea! f$o! Mad$as 'ould 1e su**lied on ce$tain *$e3announced da%s and that those inte$ested could 1oo" thei$ o$de$s 'ith A$un agents eithe$ in *e$son o$ 1% *hone+ Using local tele*hone di$ecto$ies to o1tain add$esses/ he also had !aile$s *osted to *otential u* !a$"et custo!e$s& $efe$$ing to the! as e!inent *e$sons figu$ing in the list of 2I;s+ ,%*icall%& Chand$a!ogan had A$un ice c$ea! su**lied th$ough the agents 'ithin fou$ to five da%s of the A1oo"ingB+ AIce c$ea! su**lied f$o! Mad$asB 'as the "e% selling *oint+ Maile$s to add$esses outside the s*ecified localit% 'e$e $ate at that ti!e+ As long igno$ed s!all to'n consu!e$s felt $ecogniCed& the$e 'as t$e!endous $es*onse to this Atest !a$"etingB fo$a%s+ Even as Chand$a!ogan 'as 1eginning to feel confident to thin" in te$!s of $egula$ dist$i1ution a$$ange!ents in te$!s of *lace af ad hoc Aice c$ea!s da%sB& the novelt% facto$ 'as 1eginning to 'ea$ off and consu!e$ $es*onse sta$ted declining+ e also felt that Afi0ed3 da%B selling *$o1a1l% left out a l$ge nu!1e$ of *otential custo!e$s f$o! *laces contiguous to these to'ns as 'ell as 'al"3in custo!e$s indulging in i!*ulse *u$chase+ ,he 1$ea"3th$ough ca!e 1% chance+ As Chand$a!ogan said& A*eo*le see adve$tise!entsK 1ut the% seldo! $ead it ca$efull%B+ On the a**ointed da%s 'hen ice3c$ea! 'as to 1e su**lied as announced in adve$tise!ent !aile$s and hoa$ding& even those 'ho had not 1oo"ed ice3c$ea!s& ca!e to the *$e!ises of the agent 'hose add$ess a**ea$ed in the adve$tise!ents fo$ 1u%ing ice c$ea!+ 9i!ila$l% !an% *otential custo!e$s also tu$ned u* on othe$ da%s+ E0cited 1% the consu!e$ $es*onse and seeing that on seve$al occasions& 'al"3in consu!e$s had to 1e tu$ned 1ac"& an agent Eana"a$a? f$o! the te!*le3to'n of Madu$ai offe$ed to invest in his o'n dee*3f$eeCe$ and sought long3te$! dist$i1ution a$$ange!ents+ ,his agent *$ovided facilities to *eo*le to Asit and eatB ice3c$ea!+ A novel !ethod of $etailing ice c$ea! th$ough Asit3and3eat *a$lou$B thus 'as 1o$n in 19L1+ ,hough Eana"a$a? suggested that *$ice of A$un ice c$ea! 1e "e*t lo' "ee*ing in vie' of the *$ice3sensitivit% of the local !a$"et& Chand$a!ogan 'as not in favou$ of doing so as he felt that Arun 'as not the sa!e as un1$anded& lo'3*$iced ice c$ea! se$ved in local $estau$ants+ Chand$a!ogan su**o$ted this agent th$ough ?oint *$o!otions and $egula$ adve$tise!ent ca!*aigns+ Even as this fi$st A$un Af$anchiseeB 1egan tasting success 'ith steadil%3g$o'ing de!and& othe$ s!all to'n agents also felt e!1oldened to invest in thei$ o'n f$eeCe$s+ A =003lit$e f$eeCe$ of $e*uted 1$and t%*icall% cost a1out Rs+1@000 to 13000 a$ound the ti!e+ As chand$a!ogan $ecalls & he Aaccidentl% hit the $ight 1uttonB+B,his 's nota c$edit o$iented !a$"etB& and he did not have ade.uate $ecou$ces to invest in his o'n f$eeCe$ and su**l% the! to $etail outlets+ As he tu$ned out& Bthe$e 'as no invest!ent& no c$edit& 1ut

also no co!*etition I the !a$"etB +And he 'as i!*le!enting the f$anchise conce*t 'ithout even "no'ing the te$!+ #$o! 19L1 he 1egan $e*licating the !odel 1% o*ening & on an ave$age& t'o such f$anchisee $un *a$lo$s eve$% !onth+ 8ith ove$ 700 outlets In ,a!il naidu& Ea$nata"a& Ee$ala& and Andh$a ;$adesh 1% ea$l% 1999& Chand$a!ogan 1elieved that A$un f$anchisee net'o$" is one of the 1iggest in 9outh India+ In a**ointing his #$anchises& Chand$a!ogan t%*icall% loo"ed at the *e$sonal *$ofile and 1usiness 1ac"g$ound of the *otential candidates+ ,%*icall%& he 'ould not offe$ A$un f$anchise to 1ig ti!e& successful t$ade$s o$ 1usiness!en+ e also avoided as fa$ as *ossi1le& elde$l% *e$sons o$ highl% educated individuals fo$ dist$i1uto$shi*+ On the othe$ hand & he 'ould *$efe$ so!e one 'ho 'as in his !id o$ late t'enties& *$efe$a1l% co!*leted his schooling& 'ith ave$age fa!il% inco!e and had *$o1a1l% failed in his ea$l% 1usiness endeavo$s+ 2e$% often& f$iends and $elatives of e0isting f$anchisees a**$oached hi! 'ith $e.uests fo$ f$anchise $ights to o*en *a$lou$s in ne' locations+ ,his !ade Chand$a!ogan:s tas" easie$+ Once a**ointed& the f$anchisee 'as assu$ed of ce$tain e0clusiveness and Aa$eaB *$otection in that anothe$ A$un f$anchisee 'as not a**ointed 'ithin a 1+D3 @ "ilo!ete$ $adius+ ,hese f$anchised outlets 'e$e e0clusive A sit3and3eatB ice c$ea! *a$lou$s 'ith good a!1ience and located in cit% cent$e o$ !ain $oads+ Unli"e the gene$al sto$es f$eeCe$ outlets of othe$ ice c$ea! 1$ands+ A$un:s outlets did not stoc" othe$ ite!s li"e 1utte$ and chocolates+ Ove$ the %ea$s Chand$a!ogan fine tuned the *a$lou$ and f$anchisee conce*ts+ Chand$a!ogan had deli1e$atel% decided on the st$ateg% on the st$ateg% of *a$lou$s selling A$un Ice C$ea! e0clusivel%+ On its *a$t& the co!*an% 'ould ensu$e that it dist$i1uted its *$oduct onl% th$ough its f$anchisees: and not th$ough an% othe$ channels e0ce*t di$ect delive$ies th$ough custo!e$s against s*ecific o$de$s fo$ *a$ties etc+ ,he conce*t of e0clusive *a$lou$s& Chand$a!ogan felt& ena1led f$anchisee to focus on selling A$un $ange of ice c$ea! and give 1ette$ custo!e$ se$vice+ <% 19LD& A$un e!e$ged as the la$gest ice c$ea! !anufactu$e$ in ,a!il Nadu in te$!s of volu!es+ A$un:s tu$nove$& 'hich 'as a1out 1D0&000 in 1970 and had 1a$el% inched =@D&000 1% 19L1& had $isen to a1out Rs+ @L !illion 1% 1990+ Even as A$un 1eca!e the la$gest ice c$ea! 1$and in ,a!il Nadu 1% 19LD than"s to its success in the u*count$% dist$icts& A$un still did not have significant *$esence in Mad$as cit%+ Chand$a!ogan no' 1egan agg$essivel% attac"ing the Mad$as cit% !a$"et initiall% 1% esta1lishing the no' successful Asit3and3eatB *a$lou$s in Mad$as su1u$1s and outs"i$ts and onl% the$eafte$& he !oved into the cit%+ Mad$as s to su1u$1s and outs"i$ts and onl% the$eafte$& he !oved into the cit%+ In ,he ne0t 1L to @= !onths& A$un achieved its 1$and leade$shi* in Mad$as cit% as 'ell+ 8hile he continued 'ith the st$ateg% of not cultivating the hotel seg!ent& the 'edding *a$t% seg!ent ca!e Aauto!aticall%B to A$un no'+ It 'as esti!ated that A$un had a !a$"et sha$e of a$ound 40> in ,a!il Nadu 1% 1999 and a1out 34> in the fou$ 9outh Indian states+ Chand$a!ogan esti!ates that *$o1a1l% a1out 1@0 f$anchisees ca!e to his fold as f$iendsM$elatives of e0isting A$un agents+ One f$anchisee& (aneshan& 'as $es*onsi1le in int$oducing as !an% as 30 othe$ agents+ A$un f$anchisee fa!il%& Chand$a!ogan felt& 'as an e0t$e!el% lo%al lot& as !ost of the! g$e' 'ith A$un+ ,he$e 'as a st$ong s%!1iotic $elationshi* 1et'een the co!*an% and its f$anchisees+ At a !o$e *e$sonal level& !an% of

the! en?o%ed ve$% 'a$! $elationshi* 'ith Chand$a!ogan+ And seve$al of the! had na!ed thei$ sons and g$andsons as A$unN Chand$a!ogan 'as clea$ that in an% 1usiness decision he too"& he 'ould not igno$e the collective inte$ests of his e0tended fa!il% of f$anchisees+ MANUFACTU !N" #$% AT!#NS & '#"!ST!CS 8hile the seventies 'e$e a *e$iod of Alea$ningB& the eighties tu$ned out to 1e one of Aea$ningB fo$ chand$a!ogan+ e also $ealiCed that in the 1usiness of ice3c$ea! & efficient !anage!ent of in'a$d H out'a$d logistics 'as e0t$e!el% i!*o$tant + ,he !ost challenging as*ect 'as *$ocu$e!ent of !il"& a "e% in*ut in ice3c$ea! !anufactu$e$ in cost efficient !anne$+ ,he *$o1le! a$ose 1ecause of the seasonal de!and su**l% i!1alance in $es*ect of the *$oduct H its e0t$e!el% sho$t shelf life + 9u!!e$ !onths of !a$ch th$ough June& though *ea" season fo$ ice3c$ea! sales& also ha**en to 1e the lean season fo$ !il" su**lies in southe$n India+ 9i!ila$l% the flush season fo$ !il" coincide 'ith the *e$iod of lo' icec$ea! sales+ #$o! the fai$l% ea$l% da%s& Chand$a!ogan decided *$ocu$e !il" di$ectl% f$o! dai$% fa$!e$s and fo$ this *u$*ose set u* collection cent$es in !a?o$ !il" *$oducing villages close to his icec$ea! *lant +,he !il" *$ocu$ed at these collection cent$es could 1e 1ought to the A$un facto$% 'ithin @ o$ 3 hou$s of collection +he offe$ed gua$anteed *$ocu$e!ent of ce$tain !ini!u! .uantit% of !il" 1ased on his lean season $e.ui$e!ents +#o$ his additional $e.ui$e!ents of !il" in the *ea" icec$ea! season&he offe$ed to *a% a highe$ *$ice+ ,%*icall% the *a%!ents to the dai$% fa$!e$s fo$ the !il" *u$chases 'e$e !ade once eve$% th$ee da%s at the collection cent$es+ Acco$ding to the chand$a!ogan & A$uns icec$ea! sales had on an ave$age &e0hi1ited the "ind of seasonal *atte$n as given in ta1le 1 + he sou$ced othe$ in*uts H ing$edients such as suga$ & f$uits & *ac"ing !ate$ial&e+t+c+ f$o! leading 'holesale$sM!anufactu$e$s #o$ out'a$d t$ans*o$t of ice c$ea! to va$ious TAB'% : ( f$anchisees located in diffe$ent to'ns& he $ecognised that the lo' volu!es to va$ious Months $ercentage of annual destinations did not ?ustif% the use of sales e0*ensive $ef$ige$ated t$ans*o$t that had to April ) *une +,$etu$n e!*t% 'ith no co!*ati1le load+ 9o he *uly ) Septem.er //t%*icall% too" advantage of the $egula$ *assenge$ t$ain se$vices of the Indian #cto.er ) 0ecem.er (1/2Rail'a%s fo$ dis*atch of ice c$ea! to va$ious *anuary ) March destinations+ #o$ this *u$*ose& ice c$ea! ca$tons 'e$e tightl% *ac"ed in s!all 'ooden 1o0es 6@:0 @:0@:7 'ith the$!ocole lining and filled 'ith d$% ice 6solid ca$1on dio0ide7 to *$event !elting+ <eing a highl% *e$isha1le *$oduct& ice c$ea! 'as acco$ded high *$io$it% 1% the $ail'a%s fo$ t$ans*o$tation+ ,he f$anchisees 'ould have the A1o0esB collected at thei$ $es*ective destinations+ ,he% also $etu$ned the e!*t% containe$s 1% $etu$n t$ains+ And it 'as not until 199D that he *u$chased $ef$ige$ated vehicles fo$ delive$% of ice c$ea!+ Chand$a!ogan also felt that in the long $un t$ans*o$ting ice c$ea! to long distances 1% t$ain o$ 1% $ef$ige$ated vehicles !ight not 1e a via1le st$ateg%+ e also $econed that a @D0 to 300E+M+ $adius 'as *$o1a1l% the o*ti!al a$ea that could 1e cost3effectivel% se$viced

1% a cent$al ice c$ea! *lant+ As the Mad$as ice c$ea! *lant 'as $unning out of ca*acit% than"s to A$un:s $a*id e0*ansion in the eighties& Chand$a!ogan felt a co!*elling need to set u* anothe$ *lant 1oth to !eet the g$o'ing de!and and also to i!*$ove the ove$all logistics In 1991 he set u* a s*an"ing ne' ice c$ea! *lant at 9ale!& so!e 3@0 "ilo!et$es south 'est of Mad$as and also close to 1oth Ee$ela and Ea$nata"a 1o$de$s+ Mo$eove$ the ne' *lant 'as located in the hea$t of ,a!il Nadu:s !il" 1elt 'hich facilitated *$ocu$e!ent of high .ualit% !il" at co!*etitive *$ices+ 9ee e0hi1it 1 fo$ a !a* of south India+ ,he 9ale! *lant involving an invest!ent of Rs+ @@ !illion 'as const$ucted in $eco$d ti!e of a1out 3 !onths& $ight in ti!e fo$ the su!!e$ season+ ,he *lant ca*acit% at 1oth Mad$as H 9ale! 'e$e designed fo$ *ea" seasonal *$oduction& du$ing off3season the *lant utiliCation 'as onl% *a$tial and all annual !aintenance and $eva!* 'e$e t%*icall% scheduled du$ing this *e$iod+ 8hile on an ave$age 7 to 10 ne' flavou$s 'e$e int$oduced eve$% %ea$& an e.ual nu!1e$ 'e$e *$o1a1l% *hased out+ Chand$a!ohan figu$ed that a1out 30 to 3D flavou$s 'e$e on offe$ at an% given ti!e+ A *$ocess diag$a! in $es*ect of ice c$ea! !anufactu$e is given in e0hi1it @+ In o$de$ to confo$! to the *$evailing $egulations $est$icting !anufactu$ing of icec$ea! onl% in the 99I secto$ e0*lained else'he$e in the case& the 9ale! *lant 'as set u* as an 99I unit unde$ a ne' *$o*$ieta$% conce$n& Atlantic #oods+ In the follo'ing %ea$s ice c$ea! *$oduction in the 9ale! facto$% !o$e than !et the g$o'ing de!ands *laced on it+ Chand$a!ohan then tu$ned his attention to the !ad$as *lant that $e.ui$ed !a?o$ invest!ents and u*g$adation+ Rathe$ than atte!*ting a *iece!eal $eva!* and !ode$niCation of the decades - old *ant& he decided to set u* a totall% ne' auto!atic facilit% and fo$ this *u$*ose he ac.ui$ed a ne' five - ac$e *lot in the $ed hills a$ea in the outs"i$ts of the cit%+ ,his *lant 'ith a ca*acit% of 1D000 lit$es of ice c$ea! !i0 a da% and costing a1out Rs+ =D !illion 6inclusive of the cost of land7 1eca!e o*e$ational in Jul% 199D+ In vie' of the invest!ent $est$ictions on individual 99I unit& the ne' Mad$as *ant 'as set u* unde$ a se*a$ate fi$!& atsun Mil" *$oducts+ A$ound this ti!e Chand$a!ohan found it necessa$% to $e3va!* and dist$i1ution logistics+ Recent and continuing inc$ease in the nu!1e$ of f$anchisees on the one hand as 'ell as in the va$iet% of ice c$ea! flavou$s on the othe$& he felt& 'as 1eginning to ta"e a heav% toll on the facto$ies+ E thought of $elieving facto$ies of the $es*onsi1ilit% of !anaging the di$ect dist$i1ution of the ice c$ea! to the va$ious destinations on a dail% 1asis+ As a fi$st ste* he set u* a de*ot in !adhu$ai in 199D 'ith ade.uate cold sto$age facilities and the $e.ui$ed ad!inist$ative *e$sonnel to handle the ice c$ea! dist$i1ution to the f$anchisees located in the southe$n dist$icts of ,a!il Nadu+ ,he de*ot 'ould 1e $es*onsi1le fo$ sou$cing f$o! A$un facto$ies& invento$% an% cold sto$age !anage!ent& o$de$ ta"ing as 'ell as collections+ 8ith the $e.ui$e!ents of !il" steadil% going u* in "ee*ing 'ith $ising ic$ea! sales& Chand$a!ohan 'as 1eco!ing inc$easingl% conce$ned a1out !anaging the e0*ectations of the dai$% fa!e$s *a$ticula$l% du$ing the lean season fo$ ice c$ea!+ 8hile he needed inc$easingl% la$ge .uantit% of !il" du$ing the *ea" su!!e$ !onths& failu$e to !aintain !il" *$ocu$e!ent at a $easona1l% high 1ase du$ing off season could lead to the fa$!e$s to fa$!e$s sna**ing the lin"s 'ith a"$uti+ And !oving a'a% to othe$ !o$e de*enda1le custo!e$s+

8ith the $e.ui$e!ents of !il" steadil% going u* in "ee*ing 'ith the $ising ice c$ea! sales& Chand$a!ogan 'as 1eco!ing inc$easingl% conce$ned a1out !anaging the e0*ectations of the dai$% fa$!e$s *a$ticula$l% du$ing the lean season fo$ ice c$ea!+ 8hile he needed inc$easingl% la$ge .uantit% of !il" du$ing the *ea" su!!e$ !onths& failu$e to !aintain !il" *$ocu$e!ent at a $easona1l% high 1ase du$ing off3season could lead to the fa$!e$s sna**ing the lin"s 'ith A$un and !oving a'a% to othe$ !o$e Ade*enda1leB custo!e$s+ Brand and promotion strategy #$o! ve$% ea$l% da%s Chand$a!ogan 'as "een to 1uild and *$ese$ve a distinct 1$and identit% AA$unB fo$ his ice c$ea!+ Al!ost since ince*tion& he 'as s*ending fai$l% la$ge su!s of !one% fo$ *$o!otion and adve$tise!ent+ 8hethe$ it 'as a Mad$as cit% college ca!*us o$ an u*count$% high3t$affic ?unction& the 1$and AA$unB 'as heavil% *$o!oted though colou$ful 1anne$s& *oste$s o$ fl%e$s+ In the ea$l% %ea$s& the !ain adve$tise!ent !edia 'e$e ne's*a*e$ and !agaCines+ 8hen colou$ television $eceived a 1ig 1oost in !id eighties& Chand$a!ogan i!!ediatel% too" to the *o*ula$ visual !ediu! fo$ adve$tising+ As the tu$n ove$ 'ent u* sha$*l% follo'ing the success of f$anchise st$ateg%& Chand$a!ogan ste**ed u* 1$and focused adve$tise!ent and 1egan investing in technolog%+ ,he fact that he did not have to invest in 'o$"ing ca*ital and in dee* f$eeCe$s !eant that his li.uidit% $e!ained uni!*ai$ed+ ,his gave hi! conside$a1le f$eedo! to invest in 1$and 1uilding+ <% 1991& acco$ding to Chand$a!ogan& A$un:s adve$tise!ent s*ending 'as *$o1a1l% highe$ than the total tu$nove$ of )asa*$a"ash+ #$o! 19L7 Chand$a!ogan 1egan ca$$%ing out focused sales *$o!otion activities+ ,he fi$st such *$o!otion 'as Aeat all %ou canB Ice c$ea! !ela conducted in Mad$as cit%+ Unde$ this sche!e& fo$ a fo$ a fi0ed ent$% fee of sa%& Rs L & the *a$tici*ants a$e allo'ed to eat an% a!ount of icec$ea! on dis*la% and one 'ho consu!es the !a0i!u! .uantit% 'as decla$ed the 'inne$+ ,he s*ecific *u$*ose of this sales *$o!otion ca!*aign 'as to encou$age consu!e$s to t$% out highe$ end& e0*ensive flavo$s& 'hich& in no$!al cou$se the% a$e $eluctant to e0*e$i!ent 'ith+6consu!e$s no$!all% consu!es vanilla flavo$& the chea*est 7 All togethe$& a1out =@00 *eo*le *a$tici*ated in ca!*aign that *$o1a1l% cost a1out Rs+ @&70&000+ 9i!ila$ ca!*aigns 'e$e late$ $e*eated in cities li"e he%d$a1ad+ Anothe$ successful sche!e 'as A slo' s*eed d$iving co!*etitionB+ #$o! 1993 on'a$ds& A$un also 1egan conducting Aslo' - s*eedB d$iving co!*etition fo$ t'o 'heele$s li"e !oto$ c%cles and scoote$s+ An intending *a$tici*ant t%*icall% is $e.ui$ed to *u$chase ice c$ea! 'o$th& sa%& Rs+ 1DM3 as Aent$% feesB+ Counducting in association 'ith the local t$affic *olice in cities li"e Mad$as and <anglo$e& such co!*etition tu$ned out to 1e 1ig hit 'ith so!e 3=00 *e$sons *a$tici*ating in one such event+ ,he o1?ective of such ca!*aigns 'as to encou$age custo!e$ t$ial of high end flavou$s that ho*efull% 'ould lead to g$eate$ flo' of t'o3'heele$ t$affic to A$un:s *a$lo$s+ Anothe$ !ode of *$o!otion 'as the A;hone and ave an Ice C$ea!B 6)ial3a3Nu!1e$7 ca!*aign+ It 'as 'idel% adve$tised that an% one dialing u* ce$tain tele*hone nu!1e$s

du$ing s*ecified ti!e slots on a given da% 'ould 'in Rs+ 100 'o$th A$un ice c$ea! fo$ f$ee+ )u$ing 199339= the A)ial3a3Nu!1e$B ca!*aign 'as conducted n @0 to'ns att$acting *a$tici*ation 1% ove$ 1@&000 calle$s costing an esti!ated at Rs+ 1+40 !illions+ Often such ca!*aigns 'e$e also launched at the ti!e of ente$ing a ne' !a$"et o$ int$oducing ne' flavou$s+ 9ales *$o!otion ca!*aigns si!ila$ to these 'e$e conducted $egula$l% in diffe$ent *laces+ 9uch *$o!otional ca!*aigns 'e$e $outinel% *lanned as "e% ele!ent of the ove$all !a$"eting *lan+ A$un also encou$aged its *a$lou$s to co!e 'ith local initiatives such as the Aho!e3delive$% sche!eB etc+
Approach to pricing and franchisee management

Typically Chandramogan followed a cost-plus approach for setting retail price of ice cream. Franchisee were given margins @20% to 2 % of ma!imum retail price"#$%&' depending factors such as on their location and the cost (orne (y them"such as relating to ordering' return of empty containers etc&. This left him with ) % to * % of the #$% towards manufacturing and other e!penses as well as profits. Chandramogan estimated that for other ice cream manufactures' this margin was pro(a(ly in the region + % of the #$%. ,nli-e the reported two-tier distri(ution structure of some of the other leading ice cream players such as .adilal ' a mar-et leader in western /ndia ' Chandramogan decide to follow a single-tier distri(ution strategy' directly supplying ice cream to the point of the retail customer sales. Companies li-e .adilal were (elieved to have very large num(er of distri(ution outlets. 0hile the turnovers of these companies were 0 1 )0% higher than Arun' their profita(ility was (elieved to significantly lower which pro(a(ly impaired their a(ility to continuously support their (rands. Their three-tier distri(ution structure' Chandramogan (elieved' added su(stantially to their overall cost of distri(ution in areas such s pac-aging' transportation "in refrigerated environment& and distri(ution margins. According to his estimates' the overall distri(ution of Arun was a(out 2-3% of sales "mainly outward freight&' compared to *-4% for of leading ice cream manufactures. This also gave him room for manoeuvre. /n the case of other leading ice cream' retailer pro(a(ly en5oyed a margin of a(out 62% to 6 % of #$%.

A$un:s facto$% too" o$de$s f$o! f$anchisees 1% *hone+ ,he nu!1e$ of such calls du$ing *ea" seasonal !onths could 1e as high as L00 a da%+ U*count$% f$anchisees 'e$e t%*icall% e0*ected to !a"e advance *a%!ent 1% de!and d$aft to A$un against 'hich f$esh dis*atches 'ould 1e !ade+ As $ega$ds the f$anchisees 1ased in !ad$as cit%& A$un:s f$anchisee cont$ol de*a$t!ent 'ould 1an" the che.ue collected in advance& no soone$ ice c$ea! su**lie$s 'e$e !ade+ Chand$a!ogan st$ongl% discou$aged sale of ice c$ea! e0ce*t in *$e3*ac"aged facto$% *ac"s 'ith MR; !a$"ed the$eon !ade availa1le in diffe$ent .uantitiesMsiCes+ #$anchisees 'e$e $e.ui$ed to dis*la% *$o!inentl% in the *a$lo$s the *$ice list issued 1% A$un+ Chandes!ogan figu$es that so!e 40 to 70 f$anchise a$$ange!ents !ight have 1een te$!inated fo$ violation of MR; guidelines o$ of *a%!ent te$!s+

Management and #rgani3ation Ove$ the %ea$s Chand$a!ogan has $ec$uited a g$ou* of seno$ !anage$s in va$ious functional *ositions+ e 'as of the vie' that fo$ a fledging& ent$e*$eneu$3!anaged o$ganiCation li"e A$un& the CEO had to 1e activel% involved in the ;e$sonnel and u!an Resou$ces Manage!ent function and !aintain a di$ect line of co!!unication 'ith the !anage$s+ One of his ea$liest $ec$uit!ent 'as 9han"a$& an e0*e$ienced ice3c$ea! technologist fo$ the *$oduction function at a ti!e 'hen A$un could 1a$el% affo$d hi!+ Anothe$ "e% e0ecutive du$ing A$un:s g$o'th *hase 'as Adina$a%an 'ho *la%ed a stella$ $ole in co!*leting the 9ale! *$o?ect in $eco$d ti!e+ <% !id3nineties a *$ofessional !anage!ent tea! 'as in *lace in "e% functional *ositions+ ,hese included R+Chand$a!ouli as #inancial Cont$olle$ and Co!*an% 9ec$eta$%& 2+Jaganathan an M<A as Ma$"eting Manage$ and ;$asanna"u!a$ Mehta as ead of ;$oduction+ 8hile the o$ganiCation 'as ade.uatel% staffed 'ith !ost e!*lo%ees g$o'ing 'ith the o$ganiCation& Chand$a!ogan $ecogniCed that in the co!ing %ea$s A$un 'ould definitel% need to st$engthen the senio$ and !iddle !anage!ent cad$es& *$efe$a1l% 'ith e0ecutives having e0*e$ience in la$ge& !o$e st$uctu$ed o$ganiCations such as !ulti3national co!*anies+ Chand$a!ogan 'as *$oud of the fact that e0ce*t fo$ a fe' da%s of st$i"eMloc"out in 199D& e!*lo%ee $elations $e!ained co$dial+ %merging Competiti4e Scenario ,he o$ganiCed seg!ent of ice c$ea! !a$"et in India had 1een histo$icall% cont$olled 1% st$ong $egional *la%e$s such as E'alit% in the No$th and the East+ E'alit% and 2adilal in the 8est and )asa*$a"ash& Jo% and late$ A$un in the 9outh+ #o$ eve$% 2adilal o$ A$un the$e 'e$e hund$eds of s!all ti!e ice c$ea! *$oduce$s in the uno$ganiCed secto$ selling ice c$ea! unde$ local 1$ands o$ *$ivate la1els+ Mo$eove$ !ost hotels and $estau$ants also !ade a li!ited $ange of ice c$ea! flavo$s in house fo$ thei$ ca*tive needs+ ,he fact that ice c$ea! !anufactu$e 'as $ese$ved fo$ the s!all scale indust$ies 699I7 secto$ !eant that even the 1iggest *la%e$s had to necessa$il% sou$ce thei$ ice c$ea! $e.ui$e!ents f$o! 99I units 'hich 'e$e often s*ecificall% set u* 1% the ice c$ea! co!*an% o'ne$s o$ thei$ fa!il% !e!1e$s+ ,he esta1lished 1$ands 1% and la$ge 'e$e initiall% confined to the !et$o*olitan cities in thei$ $egion and late$ e0*ended to se$vice othe$ *$inci*al to'ns in the $egion+ 2adilal& fo$ e0a!*le& had fai$l% 'ide *$esence in (u?a$at and 'as steadil% e0tending its $each to othe$ states in the 'est and even 1e%ond+ In the late eighties& the !ulti national co!*an%& Cad1u$% India ente$ed ice c$ea! !a$"et 'ith the 1$and A)ollo*sB+ Afte$ the initial su$ge of consu!e$ inte$est c$eated 1% its launch& )ollo*s see!ed to have failed to esta1lish itself in the !a$"et+ It also a**ea$ed that Cad1u$% itself 'as so!e'hat 'ave$ing its su**o$t to the 1$and+ ,he ice3c$ea! !a$"et in India 'as co!*letel% sha"en u* 1% the ent$% of the consu!e$ *$oduct giant Unileve$& th$ough one of its Indian su1sidia$ies+ <$oo"e <ond India 5i!ited 6<<I57+ <<I5& 'hich has 1een t$aditionall% a tea and coffee 1eve$age co!*an%& has identified ice c$ea! and othe$ food *$oducts as th$ust a$ea fo$ futu$e g$o'th+ It ente$ed *$ocessed3f$uit seg!ent 6such as ?a! and sauce7 1% ac.ui$ing the !a$"et leade$ "issan f$o! the U< ($ou*& the leading li.uo$ !anufactu$e$s+ <<I5 also ente$ed the f$oCen foods

seg!ent 1% esta1lishing a ne'& state3of3a$t *lant at Nashi" in 'este$n India and launched the 'ell3"no'n inte$national 1$and of Unileve$& 5alls+ As *a$t of India:s Econo!ic $efo$!s launched in 1991 seve$al of the e0tant $est$ictions $elating to ent$%& ca*acit%& out*ut and siCe in va$iet% of secto$s 'e$e 1eing *hased out o$ $ela0ed+ <<I5 and its leading sta1le3!ate industan 5eve$ 5i!ited 6 57 unde$too" a se$ies of t$ansactions to consolidate and st$engthen the Unileve$ g$ou*:s *$esence in seve$al *$oduct !a$"ets+ aving identified f$oCen desse$ts as g$o'th a$ea& <<I5 too" no ti!e in ac.ui$ing dollo*s f$o! Cad1u$% India and othe$ leading 1$ands of "'alit% and !il"food+ 8ith a leading inte$national 1$and such as 'alls and leading Indian 1$ands "'alit% in its *o$tfolio&<<I5 e!e$ged as a !a?o$ *la%e$ in the ice c$ea! Mf$oCen dese$t !a$"et ove$night+ 8ith ent$% of an inte$national food gaint 'ith dee* *oc"ets and t$e!endous sta%ing *o'e$ and one 'ho 'ould not 1e content 'ith !e$e $egional leade$shi* & the $ule of co!*etitive ga!e in the ice c$ea! !a$"et 'e$e 1eing co!*letel% $e3'$itten + In the #e1$ua$% 1997& the gove$n!ent of India announced de3$ese$vation of ice c$ea! !anufactu$e f$o! the list of *$oducts ea$!a$"ed fo$ e0clusive develo*!ent in the 99I secto$+ ,his !eant that the la$ge co!*anies li"e industan leve$ could $est$uctu$e the su**l% configu$ation of the 1usiness 1% setting u* 'o$ld3class ice3c$ea! !anufactu$ing facilities 'ith Unileve$:s technological su**o$t+ Even as A$un e!e$ged to the to* s*ot in the fou$ southe$n states& chand$a!ogan had to contend 'ith the ne' co!*etitive d%na!ics and $e3'o$" his o'n st$ateg%+ #6nership structure and finances 8hen Chand$a!ogan ente$ed the ice c$ea! 1usiness in 1970& it 'as th$ough a *a$tne$shi* fi$! st%led Chand$a!ohan H Co+ In Ma$ch 19L4& a *$ivate li!ited co!*an% 1% the na!e of atsun foods ;$ivate 5i!ited 6 #;57 'as inco$*o$ated in Mad$as+ On A*$il 30& 19L4& #;5 too" ove$ the 1usiness of Chand$a!ohan H Co+ as a going conce$n+ ,he o'ne$shi* of the 1$and na!e ARUN 'as also late$ t$ansfe$$ed to #;5 'he$e1%& the co!*an% 'as allo'ed to $egiste$ the 1$and na!e ARUN in its o'n na!e& su1?ect to a $o%alt% *a%!ent of 1> on the g$oss ice c$ea! sales+ In August& 199D the co!*an%:s na!e 'as changed to atsun Mil" #ood ;$ivate 5i!ited 6 M#;57 and 'as also conve$ted into a *u1lic li!ited co!*an%& atsun Mil" #ood 5i!ited 6 M#57 ve$% soon the$eafte$+ In Janua$% 1994 M#5 'as ta"en *u1lic th$ough an initial *u1lic offe$ing of 1+L0 !illion sha$es at an issue of Rs =DM3 *e$ sha$e+ #ollo'ing this I;O& 1% !a$ch 1994& M#5 *aid3u* ca*ital inc$eased to Rs 3L+= !illion f$o! unde$ Rs 0+D0 !illion and its net3'o$th including sha$e *$e!iu! account to Rs+ L=+0 !illion f$o! a1out Rs+ 11+0 !illion ?ust a %ea$ 1efo$e+ In vie' of the $ese$vation of ice c$ea! !anufactu$e in the 99I secto$ 'hich *$ecluded M#5 f$o! ca$$%ing out ice c$ea! *$oduction& M#5 'as conceived to 1e a !a$"eting co!*an%+ Actual ice c$ea! !anufactu$ing 'as continued to 1e ca$$ied out in the t'o closel%3held $egiste$ed s!all scale units Atlantic #oods in 9ale! and atsun #oods Co!*an% in Mad$as+ M#5 sou$ced its ice c$ea! $e.ui$e!ents f$o! these t'o 99I units ,he financial *e$fo$!ance of the icec$ea! 1usiness A$un ove$ the %ea$s $eflected the sha$* g$o'th in volu!es a$ising f$o! agg$essive f$anchise e0*ansion and st$ong

*$o!otion of the A$un 1$and+ #o$ e0a!*le& M#5:s s*ending on adve$tise!ent& *$o!otion and $elated ite!s a!ounted to Rs+ @1+7 !illion in the %ea$ to Ma$ch 1997& nea$l% 1@ > of its fiscal 1997 sales of Rs+ 1L=+1 !illion+ ,he s*ending in $u*ee te$!s $e*$esented a nea$ 100 > inc$ease ove$ the *$evious %ea$+ As can 1e seen f$o! E0hi1it 3 and =& 'ith a net 'o$th of ove$ Rs+ 100 !illion as of Ma$ch 1997& the co!*an%:s financial *osition had indeed 1een fu$the$ st$engthened+ 8hile this gave su1stantial st$ategic el1o'$oo! fo$ Chand$a!ogan& he 'as actuall% a'a$e of the fact the co!*etitive and $egulato$% scena$io had changed d$a!aticall% in $ecent !onths+ Strategic challenges and dilemmas ,he *$inci*le 'o$$%ing facto$ fo$ A$un !anage!ent 'as the d$a!atic develo*!ents in the !a$"et *lace that could se$iousl% unde$!ine A$un:s g$o'th *lans+ ,he agg$essive ent$% of the Unileve$ g$ou* 6th$ough <<I5 since !e$ged into 557 into the ice3 c$ea!Mf$oCen desse$t !a$"et th$ough a se$ies of ac.uisition of 'ell3"no'n $egional 1$ands& as noted ea$lie$& 'as indeed a *$egnant *ointe$ to the $e!aining inde*endent *la%e$s+ ,he eno$!ous a$$a% of *$oduct *o$tfolio and financial $esou$ces at its co!!and !eant 55 could su**o$t its Rs+ 1D00 !illion ice3c$ea!Mf$oCen desse$t 1usiness fo$ an% length of ti!e and agg$essivel% see" !a$"et sha$e even if this !eant ta"ing e%es off the 1usiness:s *$ofita1ilit% te!*o$a$il%+ And unli"e the $egional *la%e$s 'ho 'e$e ha**% not to distu$1 the $egional co!*etitive 1alance& 55 'ould not 1e content 'ith an%thing less than leade$shi* *osition in eve$% single !a$"et+ 55:s announced st$ategies fo$ its #$oCen )esse$t and Ice C$ea! *$oduct g$ou* ca$$ied in its $ecent annual $e*o$t 'e$e $inging o!inous 1ells fo$ the li"es of A$un+ Jou$ Co!*an%:s #$oCen ;$oducts 1usiness consolidated its leade$shi* in the Ice C$ea! !a$"et 'ith its national sha$e e0ceeding D0> des*ite st$ong lo'3*$iced consu!*tion in "e% !a$"ets+ Jou$ Co!*an%:s 1$ands have 1een consolidated unde$ the house na!e AE'alit% 8allsB+ E0tensive consu!e$ $esea$ch has *$ovided valua1le insights into the develo*!ent and a**lication of technologies in *$oduct fo$!ulation and $ef$ige$ated *$oduct handling& 'hich have 1egun to set ne' standa$ds in te$!s of delive$ed *$oduct .ualit%+ ,he standa$d Ice C$ea! *o$tfolio 'as consolidated unde$ the A)ai$% ClassicB 1$and& a ne' $eci*e having 1ette$ *$oduct sta1ilit% and innovative vi$gin 1oa$d food g$ade *ac"aging 'e$e esta1lished+ ,his is a significant !ove fo$ an indust$%& 'hich had hithe$to 1een using non3food g$ade $ec%cled *ac"aging ,he 1usiness st$engthened its effo$ts on 1$and 1uilding and innovation& 'hich a$e the "e% d$ive$s fo$ the ove$all develo*!ent of the Ice C$ea! catego$%+ ,he "e% 1$ad f$anchises in the i!*ulse seg!ent& ACo$nettoB and A#eastB& the co$ne$stone of Unileve$:s Ice C$ea! *$esence 'o$ld'ide& and AChoco1a$B 'e$e st$engthened 'ith a**$o*$iate adve$tising3 the fi$st individual 1$ands to 1e adve$tised in the Ice C$ea! catego$% in the count$%+ ,hese 1$ands have $egiste$ed significant g$o'th in all the !a$"ets+

A !a?o$ e0e$cise 'as unde$ta"en to u*g$ade the !anufactu$ing facilities of %ou$ Co!*an%:s Ice C$ea! sou$cing units+ ;$oducts& !a$"eted unde$ the E'alit%38alls 1$and na!e& confo$! full% to the st$ingent standa$ds s*ecified 1% the <u$eau of Indian 9tanda$ds and also to the !o$e e0acting Unileve$ no$!s on *$oduct safet% and h%giene+ ,his is a !a?o$ !ilestone and a "e% diffe$entiato$ fo$ the E'alit%38alls 1$andOOO+ #o$ Chand$a!ogan it 'as clea$ that he had to .uic"l% $e'o$" the co!*etitive st$ateg% fo$ A$un+ ,he "e% .uestion 'as 'hethe$ to agg$essivel% $einfo$ce A$un:s co!*etitive *$ofile and fu$the$ e0*and its f$anchisee net'o$" in the face of 55:s co!*etitive onslaught o$ *u$sue alte$native 1usiness o**o$tunities 'oven a$ound A$un:s li!ited st$engths and co!*etencies+ ,he latte$ st$ateg%& he thought& 'hile *$oviding an alte$native *latfo$! of g$o'th !ight also 1e necessa$% f$o! the *oint of his a1ilit% and the need to give continued su**o$t to the Ice C$ea! 1usiness+ e 'as ce$tainl% dete$!ined that unli"e seve$al othe$ Indian ent$e*$eneu$s in the #MC( secto$& he 'ould not sell3out to the MNCs+

%7hi.it 8 /

!ce Cream Manufacturing $rocess S%'%CT!#N #F !N" !0!%NTS

MA;!N" T9% M!:

$AST%U !S!N" T9% M!:

9#M#"%N!S!N" T9% M!:

C##'!N" & A"%!N" T9% M!: Addition of fla4ours & colours F %%<!N" T9% M!:

Addition of fruits & nuts $AC;A"!N" #F !C% C %AM

9A 0%N!N" & ST# A"% #F !C% C %AM

Notes #n !ce8cream Manufacturing $rocess

Selection of ingredients/ Mil" and !il" *$oducts& suga$ & sta1iliCe$& and e!ulsifie$ & f$uits & nuts & colo$ flavo$+ Figuring the mi7: A *$io$ "no'ledge and calculation of ice c$ea! is necessa$% unifo$! in *$o*e$l% 1alancing of !i0& esta1lishing and !aintaining unifo$! .ualit% fo$ confi$!ing to legal standa$ds+ Making the mi7: Mi0ing of ing$edients 6i+e++ li.uid and d$% ing$edients7 in a 1atch stea! ?ac"et vet+ $asteuri3ing of mi7: ,his *$ocess is $e.ui$ed to dest$o% all *athogenic and disease causing 1acte$ia fo$ safe gua$ding the health of the consu!e$+ ;asteu$iCation te!*e$atu$e -ti!e co!1ination/ 4L+Dc fo$ 30!ins + 9omogeni3ing the mi7: o!ogeniCation is to ensu$e a *e$!anent a!d unifo$! sus*ension of fat 1% $educing the siCe of fat glo1ules+ o!ogeniCation is ca$$ied out unde$ *$essu$iCed conditions as unde$/ (st stage/ @D00 ;9I at 40c /nd stage/D00 ;9I at 40c Cooling and aging of mi7: ,his *$ocess & 'ith a vie' to i!*$ove the 1od% & te0tu$e etc of ice3c$ea!& involves "ee*ing the !i0 at a lo' te!*e$atu$e 6 i+e++ 1elo' Ddeg$ee C7 fo$ *e$iod of 3 to = hou$s 1efo$e 1eing f$oCen+

;ey Financial And #ther !nformation = s> Million? (1@@8@1 (1@181A (11A81( (11(81/ (11/81+ (11+81, (11,812 SA'%S $rofit Before Ta7es Ad4t>& $rom e7p Share holders fund No> of franchises L+4 0+07 0+7 0+D @7+L 0+1 3+L 0+7 1D7 3L+= =+@ 3+4 3+@ 1L@ 34+7 0+@ D+4 @+9 @D0 =@+D @+3 4+1 4+D @77 DD+3 @+7 7+3 9+= 3DD 4D+4 3+7 4+D 11+1 =0= (1128 1B 13L+D 1L+1 11+1 L3+9 =D3 (11B81C 1L=+1 @1+3 @1+7 107+0 D@=