It's never too cold for ice cream

Last Updated 21 January 2018, 17:51 IST

A very popular song of the 1920s – "I Scream, You Scream, We All Scream for Ice Cream" – epitomised the excitement and glee among young and old alike, at the very mention of the sweet, milky, chilled delight.

And, if one could grab a scoop every day, it would truly be a dear Dairy Day! It is this growing, craving demand and opportunity that is getting Bengaluru's very own ice cream maker – Dairy Classic Ice Creams – to plan its way through a challenging, yet opportune and rewarding market such as India.

Beginning with a scoop

In December 2002, a very passionate
M N Jaganath, getting wind of a burgeoning demand for ice creams, joined hands with A Balaraju and rented a small place at Doddakallasandra, Bengaluru, and set up an ice cream unit.

Both boasted robust MNC foundations, with Jaganath having acumen in sales, finance and marketing, while Balaraju had technical experience in the food industry, including the ice cream space.

"Gradually, we got together with other key employees, who became shareholders, but with specific responsibilities. With the help of angel investors, unsecured loans, equity and other resources, we were able to invest close to Rs 1 crore during inception," Jaganath, who is also a Director of Dairy Classic Ice Creams, told  DH.

"We just took the plunge, and within a few months saw success, as acceptance for our brand, product, and packaging grew. Within the first 3-4 months of launch itself, we went on sale at most departmental stores and supermarkets. Repeat sales were growing, and we wanted to expand," says Jaganath, informing that within just the second year of operations, the young company had crossed Rs 1 crore in turnover.

The company, which retails ice creams under the popular Dairy Day brand, operated at that premises until 2006. Those days, a few brands such as Kwality Walls, Vadilal, Amul, Arun, and Joy held sway, but opportunities were aplenty. Having worked across the Southern states as part of his previous job, helped Jaganath expand his young company's network. The same year, Dairy Classic Ice Creams moved to its own place.

Market melt

Gradually, the company grew from a tiny entrepreneurial venture, to a sizeable ice cream enterprise, all along trying to break the puzzles that the Indian market threw at it.

While India has seen its fair share of ice cream demand, the market is still nascent at Rs 10,000 crore, which includes both organised and unorganised players at a 35:65 ratio.

India has amongst the lowest annual per capita consumption of ice creams globally at 300 ml. This compares to a measly amount, when compared with the US at 22 litres, or even China at 8 litres.

Balaraju lists certain critical factors. "Power shortage and outage is beyond our control. 'No electricity' impacts temperature maintenance of ice cream freezers. Also, lack of efficient cold chain systems in Tier-II cities, and even refrigerated trucks for transportation have posed a challenge," he says.

However, over the past five years, India's ice cream sales volume has increased at a CAGR of nearly 13%, the fastest in the world, and is expected to nearly double from 334.4 million litres in 2016, to 657.2 million litres by 2021. And the market is likely to be worth over $1.6 billion by then, according to market research firm Mintel's Ice Cream Global Annual Review 2017.

Meanwhile, in a bid to safely foray in this market, Dairy Classic Ice Creams has successfully been able to use different conventional methods such as insulated boxes with chill pads and eutectic freezers, which initially enabled it to make a mark in Tier-II cities, before actually tapping Bengaluru.

Another challenge that the Indian market is prone to, is battling low off-season sales, due to misconceptions surrounding consumption of ice creams during cold and wet seasons.

"During winters, ice cream, with its rich source of protein and fats drawn from milk, offers energy and nourishment that could keep one warm," informs Balaraju, adding that the company has also worked towards sensitising dealer-partners about de-icing techniques to maintain the freshness and quality of their products.  

With urbanisation, better per-capita income, and cold chain infrastructure development, the Indian market is improving. Even eating habits around ice creams are on the up.

Breaking the industry ice

The industry across the globe has three generic ice cream flavours, namely vanilla, chocolate and strawberry, with vanilla contributing for maximum consumption; then follow the other flavours. All these are sold as variants  â€“ cups, sticks, and take-home packs, among others.

Dairy Classic Ice Creams began selling Dairy Day with 3-4 variants in each category – cups, tubs, take-home packs, sticks, cones, and so on.

"Those days, we had 20 SKUs, while today we have 150 SKUs, with around 30 flavours. Within that we create different shapes, formats, packs, and combinations. Around 10-12 new SKUs may be rolled out every year," says Jaganath.

But what's different, one might ask. "While differentiators in terms of flavours may not be much, the strength of ingredients, taste, quality, packaging, and pricing, have been the turning point of our business. Our proposition is value for money and mass (in the Rs 5-Rs 50 range)," he says.

Unique flavours such as black currant, and offering traditionally prepared 'Matka Kulfi', packed with a stainless steel spoon, '2-in-1' slices, and a 'No Sugar Added' range, have been runaway successes.

So while Amul and Kwality Walls reign supreme as national players, Dairy Day has been able to hold some fort in its regional playground of Karnataka and Tamil Nadu, achieving Rs 30 crore in its tenth year of operation, in a largely capital-intensive industry.

From the beginning, the company has operated via retail sales, selling through general trade, modern trade, and a little bit through ecommerce. Today, it partners with 25,000 retailers.

"Designing our expansion plan according to our borrowing power is what dictated growth along our ten-year journey," Jaganath says.

In 2013, the company set up a new plant of around 65,000 sq feet, over 1 lakh sq feet of land, at Harohalli, Kanakpura, investing
Rs 30 crore through a mix of finance and own funds, which helped it to achieve Rs 100 crore turnover in 2015-16. "We were on fast-track mode. We had production capacity and selling ability. With more scope, we had to add more infrastructure in order to cater to our expansion plans, and also to grow inside of the factory and outside – for instance, we provide retailers with reefer freezers," he says.

In October 2016, the company went for private equity funding, with Motilal Oswal Private Equity investing around Rs  110 crore, and holding a minority stake. With that investment, Dairy Classic Ice Creams added another 30,000 sq feet facility at Harohalli in April 2017, taking its total capacity to 1,25,000 litres a day.

Cream of the industry

Keeping quality high with value, and the drive to grow has kept Dairy Classic Ice Creams refreshed on its march. Even in terms of sourcing, it has taken a practical approach, assured of quality. For instance, it sources milk from the Karnataka Milk Federation (KMF) and a private company in Bengaluru. In a few months, it plans to set up two centres for milk collection directly from farmers. Also, it uses purees and pulps of seasoned fruits, directly sourced from known companies in those businesses.

"We take care of the total knowledge of ice cream manufacturing – from formulation of a product's specifications and requirement of the best machinery, to buying the latest technologies and updating each day's requirement – on our own," Balaraju says.

Today, the company's turnover stands at Rs 150 crore, growing at 40% CAGR. It is aiming at Rs 500 crore in turnover by 2021. Meanwhile, it also plans to tap all the South Indian states, with some share of Maharasthra too, with a focus on over 50,000 outlets. Dairy Classic Ice Creams is enjoying its success slowly, yet enthusiastically, just like a child would his or her ice cream.    

(Published 21 January 2018, 11:30 IST)

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