Amul fires the first salvo in the ice-cream price war. Wall's is girding its loins.
As the climbing mercury sends tempers zooming this summer, the biggest marketing battle seems to be taking shape in the unlikeliest of places: the cool, cool ice-cream sector. And Kwality Wall's, which dominates the Rs 450-crore market with a 55 per cent share, is sweating profusely under the collar.
For, pitted against the multinational giant is the nation's largest cooperative and owner of one of the biggest brands, Amul. The Anand-based Rs 2,500-crore cooperative that sits pretty on the Indian butter market with an 85 per cent share is zeroing in on the ice-cream market with very-competitively priced products targeted to shake and rattle India's largest corporate entity and owner of the Kwality Wall's brand, Hindustan Lever Ltd (hll).
Amul, whose products are marketed by Mother Dairy and launched recently in the northern region, plans to carry the ongoing battle right into the Bangalore-based headquarters of the ice-cream and frozen dessert division of hll. The cooperative's latest salvo is an ice candy, Fundoo, which it is positioning directly against Max Uno, the Kwality Wall's brand which was launched late last year. The twin-flavoured Amul candy is priced at one rupee, same as that for Max Uno, but offers three times the volume - 45 ml against Max Uno's 15 ml.
That is not all. Amul plans to follow this up with other weapons in its arsenal - a whole range of new, milk-based ice-creams for the lucrative and fast-moving western and northern markets - Vanilla (Rs 10 for a 100-ml cup), Strawberry (Rs 12/125 ml in the shape of a strawberry to attract children), Sundae (Rs 15/125 ml) and Mango (Rs 14/125 ml in a small plastic container shaped as a mango). All these cheaper than Kwality Wall's Max range.
Verghese Kurien, chairman of the Anand-based National Cooperative Dairy Federation of India (ncdfi), who initiated this current marketing drive of Amul, admits that the advertising and marketing budget will be increased to counter the current Kwality blitzkrieg on the electronic and print media. "The idea is to provide good quality products at competitive prices.... The multinational corporations must know that we are also in the business and can be high-profile despite being a cooperative. After all, we spend about Rs 25 crore a year on advertising alone," Kurien told Outlook.
Not without reason. The ice-cream market, for long a regional players' pocketborough with western India accounting for nearly 40 per cent of national sales (Gujarat tops the list), followed by south India (30 per cent), north India (22 per cent) and east India (8 per cent), has finally begun to rev up like never before. With it, the war for a larger share of the high-potential market. What marks out the present battle, though, is the fact that it's not the mnc giant but the cooperative player which has seized the initiative and fired the first salvo.
Amul has prepared well. Last month, the cooperative slashed prices of its Tricone range by Rs 5 to make it a Rs 10 pack, a move which forced Kwality Wall's also to cut the prices of its premium Cornetto brands. The 33 per cent price cut has helped Amul to triple production of this variety and earn huge margins on bulk sales. "The scheme had to be eventually stopped because Amul had exhausted all cone biscuit capacity in the country and was, at one point of time, contemplating importing cones from neighbouring Nepal or Bangladesh," says a source. The cooperative's management finally decided on backward integration, setting up its own cone biscuit plant. The Tricone move was followed up by a Rs 3 cut on Frostick.
Defending the frequent price cuts, Kurien says that as a marketing gimmick, it's extremely popular in India. Quips R.S. Khanna, assistant general manager: "So why blame us for triggering a price war? We are not the only one slashing prices. But yes, we will continue to flood the market with a series of milk-based products throughout the year because studies have shown ice-cream consumption is a year-long activity." Adds he: "Thanks to such competitive pricing, we have been able to narrow the gap (between Amul and Kwality Wall's) considerably."
hll couldn't agree more. Amul's first move was to tell the world that its ice-creams were milk-based and the ones from Kwality were made of vegetable fat. But the move didn't cut much ice because vegetable fat-based products constitute only 5 per cent of Kwality Wall's output. But now, with Amul's competitive pricing making an impact, is hll planning a counter-strategy? You bet. Listen to hll spokesman and senior general manager Irfan Khan: "We love competition. Let them reduce prices and increase the size of their ice-creams. It will still be difficult to counter our overwhelming presence."
So, what's the answer from Kwality Wall's? For one, highly-placed hll sources told Outlook, it has already started testing a few markets (Mumbai, Ahmedabad and Delhi) by reducing the price of Max Uno to 75 paise and calling it Max Pop. This is being done subtly so as to check whether the consumer actually sticks to Max Pop or whether he shifts to Fundoo because of its larger quantity. The scheme is on for a month which, hll insiders claim, will be enough for the company to gauge the trend.
For another, Kwality Wall's will focus more on health and hygiene in all its new ranges - Max Joos (fruit juice with vitamin C), Max Vitaminer (acts as a self vitamin-check), Bikki Max (ice-cream sandwiched between two nutritious glucose biscuits) and Max Rose (ice-cream with rose milk). Says hll executive director (ice-cream) Jeetu H. Mehta: "Kwality Wall's has taken the approach of widening the market by tackling the issue of health head-on. The Max brand is positioned as wholesome offerings made with wholesome ingredients, for instance, Real orange juice (from Dabur). All Max ice-creams and ice candies, including Max Pop, are fortified with vitamin A and C."
Why the sudden focus on health? Insiders claim the move follows studies done on routine market research reports which showed that consumers cut back on ice-cream consumption for fear of an adverse impact on health. Mehta says he is also not worried about Amul's latest move in the cone market. "Rs 4 off on Cornetto in select cities was not a reaction to any competition from inferior cones. We have successfully used consumer promotion to generate market excitement and this was one of them. There are a number of players who supply cheaper cones, none comparable with Kwality Wall's Cornetto, which is the only cone available in the unique Ole flavour that has its roots in Indian mithai," says Mehta.
For the Indian consumer, of course, the battle between Amul and Kwality is all about her heart. And in the process, if it protects her pocket too, why complain?