Baskin-Robbins in search of distribution flavour

The stores are going to get a happier look, but sustaining a business on parlours alone is a tough proposition in India

Premium ice-cream retailer Baskin-Robbins is giving its stores a face lift to increase footfalls. This is in line with the global repositioning exercise ‘We make people happy’ which will slowly trickle into India. Stores will now don a happier look where walls and display windows will be adorned with graphics and messages that showcase happy moments. The staid menu displays are being replaced with back lit menus to make the store environment livelier.

“The changes at the 400 stores (franchise owned) in 100 cities is already underway and will take place in a phased manner. All investments will be borne by the company,” says Ashwin Uppal, general manager (marketing), South Asia.

 

To engage further with consumers, Baskin-Robbins will invest significantly on the digital platform. The India website will see a makeover. Also in the pipeline is a loyalty program which will be test marketed in select cities.

The ice-cream market in India, however, is a tough one to crack. The biggest challenge is changing the way Indians consume ice-cream. Even though parlours as a segment is fast growing, on Tuesday, 60 percent of volume sales in the Rs 1500 crore (organised) market happens through impulse purchases (smaller packs sold in vending carts). The take home segment (larger packs sold through modern trade and general trade) account for 35 per cent of sales.

Thus, 95 percent of the market has been lapped up by brands like Amul (35-40 percent share), Kwality Walls (17 per cent ), Vadilal (15 per cent) and Mother Dairy (8 per cent). The parlour segment is only 5 percent of the market.

The other issue is that the tiny segment is extremely fragmented. Competition is stiff from local chains like Naturals (Mumbai), Nirula’s (Delhi) and Mama Mia (Kolkata )as well as super premium players like Haagen Dazs, Movenpick as well as. homespun players. “Our 200 Happinezz parlours contribute to 8 per cent of turnover and we are looking to increase presence by 50 more every year,” says Vadilal Managing Director Rajesh Gandhi. Amul too plans to increase the spread of its Scooping parlours from the existing 375 locations.

Homespun brands are also bringing in premium offerings, once the forte of Baskin-Robbins . “Premium flavours, though a small contributor to net sales are the image drivers for the brand,” says Debashis Das, general manager (marketing), Mother Dairy. Mother Dairy, introduced the Western classics range last year targeted at affluent consumers. Amul too launched the Exotica range a few months ago , while Vadilal launched the ‘Gourmet’ this year.

However, industry observers argue that sustaining the ice-cream business on parlours alone is a tough proposition in India. Competition apart, there are challenges galore. For one, Baskin-Robbins has to deal with high overhead and logistics cost (distributes from a single location in Pune). Second, low volumes means the company cannot benefit from economies of scale. All these costs transfer to the end consumer.

The ice-cream segment in India, mind you is a price sensitive one. Thus, it might do well for Baskin-Robbins to come up with trial offers (example: 50 percent off on a particular flavour) to drive volumes, points out an industry observer. Baskin-Robbins, on its part is taking a few steps. For example, the ‘flavour of the month’ is now available at a cheaper price point. Also, an entry level range called the ‘classic range’ has been introduced.

On Tuesday, parlours constitute close to half of Baskin-Robbins’ turnover in India, with the balance coming from modern trade (15 percent), food services (20-25 percent) and export to South Asian countries (10 percent). It is also eyeing the corporate channel (ice-cream sold through vending machines).