Perfectly paired: India and ice cream - Industry Overview

Market liberalization has come to the land of the Taj Mahal. For U.S. ice cream exporters, this means import bans have been lifted and restrictive local production policies are gone. And for Indian consumers, one of life's simple pleasures - enjoying ice cream - just became a lot easier.

U.S. exporters should note that ice cream products have a long way to go in this country just shy of a billion population.With a yearly per capita consumption at 0.12 liters, far less than neighboring Pakistan and Sri Lanka, the expected rise in consumption could provide a vast market for prospective exporters. Contrast with U.S. per capita consumption of 23.3 liters in 1997.

Though still limited mostly to urban areas during the summer, the ice cream market is already showing signs of diversification:

* With a 30-percent market share, vanilla is still the preferred flavor, but strawberry, chocolate and butterscotch are available.

* Manufacturers are catering to the low-end market with cheaper sherbets.

* Importers catering to high-end consumers are selling U.S. ice cream to hotels, supermarkets and upscale shopping outlets.

Distribution Limited by Storage

Ice cream distribution in India usually involves a distributor, wholesaler and retailer. Because of chinks in the cold storage chain, most brands have small regional operations with production facilities located near major markets.

National brands may opt for cold-storage facilities in major consumption centers or acquire smaller production facilities close to the retail outlets.

Retailers, numbering around 70,000, operate through fixed outlets or mobile push carts, tricycles or three-wheelers.

Following the government's "dereserving"[1] of ice cream products in 1996 and 1997, the industry saw big changes.

The domestic dairy cooperative sector entered the market in late 1996, launching a price war that caused many small and medium-sized businesses to leave the market or merge with large-scale producers. These larger companies expanded their distribution networks and broadened offerings.

Recently, multinational brands, most notably Wells' Blue Bunny, hopped into the market. Baskin-Robbins and Walls/Qwality established joint venture relationships with Indian companies.

Though the 51-percent tariff on imports limits demand, there are plenty of consumers with a hankering for premium brands willing to pay the difference. However, U.S. ice creams must compete with manufacturers from Australia, New Zealand and Europe, all with relative freight advantages.

Smaller's Better for Packaging

The frozen treats usually are packaged and sold three ways:

* Cups holding 100 to 150 ml.

* Bars, sticks and cones

* Family packs of 1 liter in wax- coated paper or plastic cartons.

Several laws apply to ice cream sales. (See food laws listed in "A New Trade Era Dawns for India" AgExporter, November 1997.)

To call a product "ice cream," two basic requirements must be met: The treat must be at least 10-percent milk fat and use sugar as the sweetener. Though there is a potential market for fat-free and sugar-free ice creams, the country's food laws don't permit them yet.

High tariffs and inefficient distribution systems will continue to bottleneck the import market for the short term, but an increasingly affluent younger generation wants to try new tastes. Manufacturers should keep an eye out for market changes and opportunities as India's consumers demand diversity in their food choices.

This article was based on a report prepared by the Office of Agricultural Affairs in New Delhi, India. Tel.: (91-11) 611-3033; Fax: (91-11) 419-0047; E-mail: AgNewDelhi@fas.usda.gov

1 Prior to 1996, ice cream production was reserved as a "small-scale" industry with an investment limit of $700,000.

COPYRIGHT 1999 U.S. Department of Agriculture
COPYRIGHT 2004 Gale Group