It’s hard not to envy Ankit Chona when he tells you that he has a new flavour of ice cream after lunch nearly every day. “Believe me, it’s not such a great idea,” laughs the 29-year-old CEO of the Havmor Group, pointing to his waistline. His favourite? Pista malai. Ankit, who spoons his house brand as well as competition with the same keen taste for business, has reason to be serious about ice cream sampling. The Havmor Group clocked revenues of Rs.230 crore in FY12, of which as much as Rs.190 crore came from its ice cream business; the remaining Rs.40 crore is attributed to the restaurants vertical, which looks set to remain subservient to the ice cream’s popularity.
Chona is the third-generation heir of a serendipitous enterprise that began in a little shop in pre-Independence Karachi back in 1944 (it’s still chugging away but under a different owner now). Satish Chona, Ankit’s grandfather, held a day job as a ground engineer with the British Overseas Airways Corporation (BOAC). He started selling ice creams with an entrepreneurial spirit that was to follow him post-Partition to Indore, before finally taking root in a trolley parked on Ahmedabad’s Relief Road.
That modest beginning could not have foretold such a cool future. Jawaharlal Nehru is said to have been served Havmor ice cream on a trip to Ahmedabad in the 1950s. And, “Much before Amitabh Bachchan became a superstar, he came to this city to inaugurate a photo studio,” smiles 58-year-old Pradeep, Ankit’s father, and director of Havmor Ice Cream, who was a starry-eyed teen at this eventful time. “We served him a special flavour called madhu malti, which had strands of real saffron and plenty of cashew nuts,” he remembers fondly.
Six decades after the food legend was first launched on Indian soil, Ankit speaks of growing the ice cream business to Rs.500 crore over the next three years, which will mean having a significant presence in key markets other than Gujarat, where Havmor claims to have a 36% market share. “In volume terms, we have been growing at 35% each year and we are on track to reach a turnover of Rs.260 crore for the current financial year,” he explains, when asked how he plans on reaching the Rs.500-crore milestone in just three years. “That translates to a growth of 37% and we have been growing like this for about seven years.”
Havmor’s repertoire features over 160 flavours, including Lonavali, rich Pista malai and exotic Swiss cake, though vanilla, strawberry and chocolate remain the most popular. “We come out with three new flavours every three months,” says Pradeep. The brand gets noticed when it creates a novelty flavour — as it did when the company was asked to come up with something unique for Shilpa Shetty’s wedding reception in Mumbai in November 2009. “We served paan ice cream in the shape of a betelleaf,” Pradeep says with the same pride he evokes to recall the mango barfi Bill Clinton enjoyed on his trip to India.
Such marquee moments notwithstanding, Havmor’s strong backbone is found in the over-13,000 retail outlets it has all over Gujarat. In the last three years, the brand has moved into neighbouring states — Maharashtra, Rajasthan and, most recently, Madhya Pradesh. “Across these states, we are present in over 21,000 outlets in addition to the 13,000 in Gujarat,” elaborates Ankit.
He is, however, quick to add that entering a new market isn’t easy. “We have to contend with the cost of logistics and ensure a high level of loyalty from distributors,” he says. “That is in addition to the rising cost of milk.” Raw material cost accounts for 57% of the total expenditure.
All of this means margins are wafer-thin for most players in the industry. Havmor registered a margin of 5% for FY12 while its key rival, Vadilal, had to settle for only 1.94%. “Cooperatives like Amul don’t look at margins since their objective is to offer the best milk prices to farmers (15-20% more than farmers in the rest of the country),” points out RS Sodhi, managing director of Gujarat Co-operative Milk Marketing Federation (GCMMF), which markets Amul’s products.
But, he accepts, “This is a very price-sensitive category and it’s a tough job to balance costs and margins. The fact is that ice cream cannot be significantly more expensive than milk.” Sodhi, who says Amul has over a 40% share of the national market, notes that ice cream brands in each state remain feisty competitors even for a brand of Amul’s stature.
Ice creams and more
Havmor’s impressive growth numbers are because of its effective distribution strategy. Over the past two years, that is, from FY10 to FY12, it has doubled its distributors from 66 to 150 across the four western states. Havmor is also able to reach out to its customers directly through its parlours and eateries. Ice cream aside, the Havmor Havfunn parlours sell beverages like milkshakes and cold coffee, and fast foods like chana puri, pav bhaji and pizzas.
While 40 are company-owned, another 70 are run by franchisees. Franchisees pay Havmor a 6% royalty for the eateries and buy ice cream at cost from the company. Where an ice cream parlour costs Rs.7.5-10 lakh to set up, and breaks even in one or two years, a Havfunn eatery costs Rs.35-40 lakh, breaks even in two or three years and has margins similar to that of the ice cream business because of marketing expenses.
For Havmor, the advantage in opting for franchisees is about the intangibles: it gets someone with local knowledge, does not have to incur real estate costs and is able to expand faster than if it were to go it alone.
In addition, the group runs 10 full-service restaurants, which it plans to expand to 20 by 2015. The eateries brought in Rs.40 crore in FY12 but, for Havmor, ice cream is the main course, and eateries just an appetiser. Which is why it’s investing in its ice cream manufacturing plants at Naroda, 8 km from Ahmedabad.
The combined capacity is 150,000 litres of ice cream a day and the plants currently run at full capacity through the summer and festival season. So far, the company has pumped in about Rs.35 crore in the plants; now, says Pradeep, Havmor will invest another Rs.30 crore for the second phase of the new plant, which will be ready by Summer 2014.
An April 2012 Assocham report pegs the Indian ice cream industry at Rs.3,000 crore, of which 60% is controlled by the organised sector. The industry, it says, has been growing at 15% each year. The Chonas have their eye on this opportunity and their reason for sticking around in western India is not hard to comprehend: Assocham says that 35% of all the ice cream sold in India is consumed in this region. “Every 10 days, there is a new investor keen on putting in money [into Havmor],” says Pradeep, but without excitement. “So far, the share holding has remained with the family and I don’t see that changing.” Not even when they go national? Let’s see.