Cost analysis of Amul ice cream and future of ice cream market in India

We take this opportunity to thank Prof Jayesh Jain for giving us an insight, his valuable advice , timely suggestions and constant support throughout the project. We would also like to thank Mr.Raj Raut who is into the ice-cream business for the valuable information that he shared with us ,which proved to be very helpful while preparing the project.

Abstract

This project report is prepared to study the cost analysis of Amul ice cream and to formulate the cost sheet to find the per unit cost of a single Amul ice cream cup of 100 gm(fruit and nut). Our colleagues uncle also helped us in finding the various cost involved in manufacturing ice cream and we also got information from www. amulicecream. in.

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Overview of ice-cream inductry

History

The ice cream industry is mainly governed by the prevention of food and adulteration act (PFA)-1954 in India. The ice cream market growth picked up after de-reservation of the sector in 1997. History of Indian ice-cream industry is very old started in un-organized sector and mainly the popular product was kulfi.

New technologies and freezers are the main force behind the development. Future is bright for ice-cream industry in India.

Production area

In rural areas, kulfis / ice creams made by small / cottage industry are popular. The market for organized sector is restricted to large metropolitan cities.In small towns and villages, there are thousands of small players who produce ice- creams / kulfis in their home backyard and cater to the local market. Almost 40% of the ice creams sold in the country are consumed in the western region with Mumbai being the main market, followed by 30% in the north and 20% in the south.

Industry Snapshot

• Market Size - 1200 Crores
• Ice Cream market is growing at 26%

Major players

• Amul - Market Leader with share of 36%
• HLL - Kwality Walls - 2nd biggest player
• Mother Diary
• Arun - Chennai Based Hatsun Agro Product Few Brand

Target Consumers

• Youth Centric - Chillz
• Kids - Moo
• Teenagers - Cornetto

Health Conscious

Amul Sugarfree & Pro-Life Future of Ice Cream Market in India:

Ice Cream market will expand with increase in number of malls. Also companies like - HLL has been increasing their ice cream outlets - Swirl. Few years ago consumers use to go out for walk after dinner and use to buy ice creams from hawkers. But now consumer who often visit malls for entertainment prefers to buy ice creams during different times of the day as it is visible upfront and feel like spending Rs. 50 for that tasty chocolate swirl with cake and nuts. As marketers are understanding the different needs of consumers, be it health conscious people- (Amul sugar free and pro-life ice-cream) , kids, youngsters, etc, and are coming up with products specific for them. with portfolio of flavors, consumer today has plethora of options at hand to choose from and therefore high probability of buying one more scoop of ice cream.

Also with increasing wallet size and innovative modern retail formats, it has definitely given a Philip to the ice cream industry in India. About the company Amul Gujarat Cooperative Milk Marketing Federation:- Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest food products marketing organization. It is a state level apex body of milk cooperatives in Gujarat which aims to provide remunerative returns to the farmers and also serve the interest of consumers by providing quality products which are good value for money. And of a proven model for dairy development. Various products under the brand name Amul: Amul products have been in use in millions of homes since 1946.

• Amul Butter,
• Amul Milk Powder,
• Amul Ghee,
• Amul Cheese,
• Amul Chocolates,
• Amul Shrikhand,
• Amul Ice creams,
• Nutramul, Amul Milk
• Amulya have made Amul a leading food brand in India.

Some facts about the Amul ice cream:

• Amul Ice Cream was launched on 10th March, 1996 in Gujarat.
• The portfolio consisted of impulse products like sticks, cones, cups as well as take home packs and institutional/catering packs. In 1997, Amul ice creams entered Mumbai followed by Chennai in 1998 and Kolkata and Delhi in 2002. Nationally it was rolled out across the country in 1999.
• Has combated competition like Walls, Mother Dairy and achieved the No 1 position in the country.

This position was achieved in 2001 and it has continued to remain at the top.Today the market share of Amul ice cream is 38% share against the 9% market share of HLL, thus making it 4 times larger than its closest competitor.

• Amul’s entry into ice creams is regarded as successful due to the large market share it was able to capture within a short period of time – due to price differential, quality of products and of course the brand name.

Icecream range

• Royal Treat Range - (Butterscotch, Rajbhog, Malai Kulfi
• Nut-o-Mania Range (Kaju Draksh, Kesar Pista Royale, Fruit Bonanza, Roasted Almond)
• Royal Treat Range - (Butterscotch, Rajbhog, Malai Kulfi)
• Nut-o-Mania Range - (Kaju Draksh, Kesar Pista Royale, Fruit Bonanza, Roasted Almond)
• Nature's Treat - (Alphanso Mango, Fresh Litchi, Shahi Anjir, Fresh Strawberry, Black Currant, Santra Mantra, Fresh Pineapple)
• Sundae Range- (Mango, Black Currant, Sundae Magic, Double Sundae)
• Assorted Treat - (Choco bar, Dollies, Frostik, Ice Candies, Tricone, Choco crunch, Megabite, Cassatta)
• Utterly Delicious - (Vanilla, Strawberry, Chocolate, Chocochips, Cake Magic)

The raw materials are purchased every month and costs involved for carriage are Rs 1840.

Indirect Costs

• Factory Overheads

The Factory Overheads includes the indirect labour, factory rent, insurance and depreciation on machinery, power, factory supervisor’s salary ,packing material, ware house expenses and other factory expenses.

Indirect labour

This includes 3 sweepers whose average salaries are Rs. 1000 each.

Insurance

The total insurance amount is Rs 15000.

• Break up of the total insurance amount for Machinery - 1200000 Land - 500000(1000 sq. ft. Rs. 500 per sq. ft. )
• Depreciation on machinery: There are 6 machines in the factory ,one machine is used for making ice creams which is Boiler and other are Refrigerators . The cost of Boiler is Rs 300000 and Refrigerators are worth of Rs. 900000. The depreciation method followed is SLM 7%.
• Power & Fuel: The monthly average cost of power consumption of the factory is Rs 42375.
• Supervisor’s salary : The factory has 2 supervisors and salary of each supervisor is Rs 2500.
• Cost of maintenance : oiling and cleaning of machinery and other miscellaneous expences for maintainance.
• Office and administration overheads: Office and administration overheads include office rent, salary to staff, office and general expenses, printing and stationary, telephone expenses, electricity and lightings
• Office rent: The per sq. ft rate of the Office is Rs 18. The area of the factory is 300 sq. ft.
• Salary to staff: the office staff has three employees. A peon, clerk and an Accountant and the salaries are Rs 800, Rs 2200 and Rs 4000 respectively. • Office and general expenses: This comprise refreshments(tea and snacks).
• Telephone Expenses: Calls made by the staff members.
• Electricity and lightings: It consists of office lighting and air conditioning expenses.

Sales and distribution overheads

Sales Commission: As a part of encouragement for sales people ,they are given commission of 2. 5 % of the total sales done by them.

• Discount allowed : To attract retailer to buy the product they are offered a discount of 5% on the selling price.
• Salary of salesmen : The company has 5 sales persons and they are paid a salary of Rs 3500 each per month.
• Carriage outward: To carry the finished goods to the whole sellers , the transportations charge per unit/product is set as Re 1. 24. Assumptions :
• The company produces only one product
• All raw materials consumed in production of ice cream
• The production and sales units are same.
• In Valuation of plant, the rate per square feet has been assumed at Rs. 00.
• We gave a discount to retailer on 450000 units on bulk purchase.

Swot analysis

Strengths

• The amul ice-creams brand is one of the the top 3 brands . As it’s an Indian brand its popular as a family brand. Its available in all metropolitan cities and is in the reach of middleclass &above middleclass . Its available in many flavours and most of these are Indian flavours –liked by Indians. They are available in various sizes. They are available in reasonable prices.
• They have launched brands such as sugar free probiotic ice-creams. There are many premium varieties. It’s got good food energy value i. e calories per 100ml-196. 7.

Weaknesses

• The durability of amul ice-creams is not really good, it melts very soon. It does not have many outlet centers.
• Not a famous brand among youngsters who are the main customers of ice-cream.

Opportinitues

They can come up with new flavours which would be able to attract the youth .They should not restrict themselves to departmental stores infact come with new luxury brands which can be available in hotels and they should come up with their own ice-cream parlours. They should focus more on their advertising and marketing strategies. They should use a strategy similar to what they used in case of butter (Utly butterly girl ). They should come up with offers for purchase of ice-cream in whole market .Offers should run all throughout the year; not only in winters. There should emphasis for special occasions.

Threats

The biggest threat for amul ice-cream industry would be its competitors. Its ranked 3rd in the Indian market . It faces tough competition from the unorganized sector as well. A slight change in the price of the ice-cream would shift its customers to another brand. Foreign players like Baskin- Robbins entering Indian market with new premium brands at feasible prices.

References

1. www.amulicecream. in
2. www. google. com. in
3. Annual report of Amul Cost accounting and financial management-Ravi kishore –edition 5

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