Summer Ready: Ice Cream Makers Expand Capacity To Whip Up Growth

Ice cream chains are gearing up for a few busy months ahead, with the demand for frozen treats seeing a jump as temperatures continue to rise.

Brands like Amul, Mother Dairy and Baskin Robbins have put expansion plans in place, in anticipation of the summer rush. New store openings, increased capacities and enhanced sales strategies are on the agenda.

Amul—the largest player—is growing at 25-30%, according to Jayen Mehta, managing director of the Gujarat Cooperative Milk Marketing Federation Ltd., that markets Amul.

"As the mercury has been rapidly rising over the past week, we are expecting 2024-25 to be a year of bumper growth," he said, projecting 45-50% increase in sales over the previous year. This significant increase is partly attributed to a lower base of the previous year, which saw sales taking a hit due to unseasonal rains.

Amul invested Rs 1,000 crore for expanding its manufacturing capacities through a mix of greenfield projects and enhancement of existing facilities. "This year, production has commenced at six new plants located in Ujjain, Taloja-Mumbai, Varanasi, Kutch, Surendranagar, and Pune. With these additions, our total number of ice cream plants now stand at 25," said Mehta.

Amul is also expanding its fairly new retail format—Ice Lounge—focused entirely on premium ice cream. Currently, it has 15 such stores, with another 10 planned to be launched during the summer. "The plan is to have 100 concepts (Ice Lounge stores) by the end of the current year," Mehta said.

Even though ice cream consumption has been low in India as compared with the global average, the $5.3-billion market is expected to grow 10.9% annually till 2028, according to data by Statista.

"Summer is the most anticipated season for our business," said Manish Bandlish, managing director, Mother Dairy Fruit and Vegetable Pvt. "We have invested up to Rs 50 crore in augmenting capacities to ensure product availability across our markets of operations. With the Indian Meteorological Department’s prediction of above-normal temperatures and a hot summer this year, we expect the demand towards our dairy products strengthening by 25–30% over the previous year," he said.

According to these companies, the seasonal variation between hot and cold months have been reducing although the summer months still dominate, accounting for 60% of sales. Moreover, out-of-home consumption is key for ice cream sales besides demand from hotels, restaurants, and the catering segment. However, the industry is also seeing a significant boost in in-house consumption and overall revenue due to quick commerce channels.

Quick commerce contributes to 10% of ice-cream sales for Hindustan Unilever Ltd., known for brands such as Kwality Walls, Magnum, and Cornetto.

The market is highly fragmented with a few large players — Amul, Kwality Walls, Vadilal, and even Havmor competing for retail space on a national level — and many smaller brands holding onto their turfs. The regional brands collectively control half of the market, indicating that consolidation is inevitable.

The rise of protein-rich, low-calorie ice cream brands is putting the traditional companies under pressure as a growing number of private label brands are capitalizing on the increasing demand for healthier alternatives.

HUL is currently evaluating the future of its nearly three-decade-old ice cream business as part of a global restructuring. There could be three possible outcomes: retain the business; demerge; or sell the business altogether which contributes less than 3% to its profits.

"We are in closed period," HUL said, in reply to NDTV Profit's queries for this story.

American ice cream chain Baskin Robbins is gearing up to launch its 1,000th outlet, having built a strong presence in the last 30 years. "This summer, we target to outpace market growth," said Mohit Khattar, chief executive officer of Graviss Foods Pvt., which markets Baskin Robbins in India.

Khattar's confidence stems from the stability in milk prices, upbeat consumer sentiment and IMD's forecast of a sweltering summer.

Over the past two years, the ice cream industry has struggled to keep pace with input costs. Prices of milk and cream products rose every month. To offset the pressure on margin, the companies resorted to hiking prices, which led to a decrease in demand.

However, this year, the situation is under control.

The companies are stocking up on their ice cream flavours, toppings, and cones to meet the demand. Many are also introducing new menu items and promotions to entice customers to visit. Amul, for instance, launched 10 new ice cream products, while Mother Dairy has unveiled 20 so far.