Arun Ice Cream Case Analysis

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Competition- The major players in dairy products like Kwality, Dasprakas, Aawin were targeting urban markets which give chance to Arun Icecream to cater needs of upcountry markets where was competition was low

Per capita consumption of milk products –The per capita consumption of milk product was increasing.

Resources:

Tamil Naidu is rich in natural resources like milk production, live cattle.

Milk production-It is ranked 10th in the list of top 10 highest milk producing states in India. The total milk production in the state had increased from 551 Metric Tones (MT) in 1956 to 1023 MT in 1966. It increased further to 2347 MT 1982 and to 4088MT by 1997 which shows seven-fold increase within a period of four decades making it attractive for the diversification of Arun Ice-cream.

Live cattle- Live Stock in Tamil Naidu shows considerable figures. As per 1992 livestock census, the cross bred cattle are predominant that is 800 thousand and buffaloes are very common that is 1552 thousand in Tamil Nadu. The milk production is around 3867 tons in 1997 and the per capita availability of milk is 174 gms. In total cattle population Tamil Naidu stands among top 15 states.

Labour market-Tamil Nadu is known for its generally good industrial relations and its educated, hardworking and disciplined labour force. Less than 1% of man-days are lost from strikes, and industrial violence is almost unknown. Also, the quality of education is rightly a matter of pride in Tamil Nadu.

Access to finance-Tamil Naidu has comparatively more access to capital as compared to other states of India.

Supporting and Complementary Industry:

Complimentary industry

Talking about production of dairy products such as curd, butter, buttermilk, paneer etc. the complimentary industry are sugar industry, transportation and distribution, and dairy farmer service.

Sugar Industry

There had been steady growth in the number of co-operative sugar factories in Tamilnadu. Since 1992, there were 15 co-operative factories showing the growth of 24% till1997. This shows easy availability of sugar in the state.

Salt Industry

The availability of salt is easy because of its location in coastal region in making the milk by-products would be easy. Tamil Nadu being the hub of salt production after Gujarat, salt is available at competitive prices.

Dairy farm service:

There had been evidence of increasing milk production trend in Tamil Nadu and this became possible because of cattle breeding taken care of by dairy services after the act such as Theprevention of cruelty to animals rules, 1978 (Registration of cattle premises).

Transportation & Distribution:

Tamil Nadu is served by an extensive road network, providing links between urban centers, agricultural market-places and rural areas. The road network increased by about 4.39 times (i.e.) from 32,307 Kms to 1, 50,647 Kms.in the same period. Tamil Nadu has a well-developed rail network as part of Southern Railway which connects the state with most major cities in India.

All the above conditions will have a favorable impact if Arun ice cream goes for product diversification in Tamil Nadu.

Political and Legal factors:

Delicensing in dairy sector in (1991) results in ease of doing business for Arun as he wants to diversify.

Section 44 of NDDB (national dairy development board) gives exemption from income tax act (1987). This is positive thing for Arun ice cream.

The LPG in 1991 opened the entry of international food giants and other domestic big players with huge pocket in SSI.

State schemes like Tamil nadu small industries development corporation LTD. (1970) will help Arun ice cream to grow and develop.

Above analysis clearly supports the fact that Arun Ice cream should go for diversification in Tamil Nadu with the milk products like butter, milk powder, paneer, butter milk, flavored milk, lassi, yogurt segment targeting upcountry market where they already have a brand image.

Vehicle

Leveraging its strengths of wide distribution of franchise, warm and symbiotic relationship with franchise, Arun ice cream will reach its target market through franchise already in Tamil Naidu. Through franchise which exclusively sold ice creams, diversified products like curd, paneer, cheese will also be sold through its outlets.

Differentiator

Arun Ice-cream should differentiate itself in terms of low pricing. The company’s reduced overall distribution cost by its single tier distribution strategy by reducing slight margin of franchisee and the economies of scale benefits by the product diversification can be passed on to customers. It can further differentiate by aggressively investing in building brand image through promotions, campaigns similarly it has done previously for ice cream promotions.

Staging

Arun Ice cream’s staging and sequencing of moves would be firstly entering Tamil Nadu as the company will be able to take the advantage of its geographical location Salem Plant which is in the milk belt region of Tamil Nadu plus having the benefit of its already existing brand image. With the success of its diversified product in Tamil Nadu it should expand in those states where it is already having its presence so that it can leverage its wide franchisee network. Then will further expand to the nearby states of south India that is Maharashtra, Orissa and Goa.

Economic Logic:

By providing products at lower price to customers as compared to its competitors by taking the advantage of economies of scale Arun Ice cream can easily increase its customer base which will lead to the maximization of profits.

Bibliography

http://www.yourarticlelibrary.com/india-2/state-wise-distribution-of-livestock-in-india/21067/

http://www.nddb.coop/sites/default/files/NDDB_Dairy_Diggest_Tamil_Nadu-12-12-2014_v2[1].pdf