Unilever Bangladesh

“Evaluation of Entry into Ice cream Business for Unilever Bangladesh Limited” Submitted to Sharmin Shabnam Rahman Lecturer BRAC Business School BRAC University Submitted by Md. Robin Miah Id# 06204032 BRAC University Date: 02-09-2010 September 2, 2010 SHARMIN SHABNAM RAHMAN Lecture BRAC Business School BRAC University

Subject: Submission of Internship Report Dear Madam, This is to inform you that I am submitting the internship project report titled “Evaluation of Entry into Ice cream Business for Unilever Bangladesh Limited” upon completion of my formal internship attachment period from May 06, 2010 to July 06, 2010 with Unilever Bangladesh Limited. I would like to thank you and show my gratitude for your support and guidance that you provided me during the preparation of this report. Without your help it would have been impossible for me to prepare this report.

I would like also show my gratitude to my Company supervisor MD. Risalat Siddique, Brand Manager, UBL for his support during my internship period. I have tried to discuss all the relevant points of a feasibility study while keeping consistency with Unilever Bangladesh Limited’s information confidentiality policy. I would be glad to clarify any discrepancy that may arise or any clarification that you may require regarding my project and report. Sincerely, ________________________ MD. ROBIN MIAH ID#06204032 BRAC University ACKNOWLEDGEMENT

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I would like to show my sincere gratitude to Sharmin Shabnam Rahman, lecturer, BRAC University, and my Academic Internship Supervisor; for her constant supervision and guidance have been of extreme help to me. I am also thankful for all the times I consulted her and she answered with the utmost patience and perseverance. I am thankful to Mr. Tanzeen Ferdous, Senior Brand Manager, Brands & Development, Unilever Bangladesh Limited, for entrusting me with such an important project and allowing me scope to work independently, providing all required supports.

I am also grateful to Mr. Muhammad Risalat Siddique, Brand Manager, Unilever Bangladesh Limited and my Company Internship Supervisor, for his relentless support during each stage of research and work. He supervised and corrected me during the entire research process. Last but no the least, I would like to thank Mr. Hamdan Kabeer, Brand Manager for Lipton, Unilever Bangladesh Limited for helping me in developing the construct of this report and providing me detail regarding Operating Methods for Foods of Unilever PLC. Evaluation of Entry into Ice cream Business for

Bangladesh Limited I Executive Summary Unilever Bangladesh Limited (UBL) is a household name virtually for every Bangladeshi national. Being a multi-national, no other company has achieved this level of success. It is regarded as one of the most reputed multi-cultural companies of the world. With its history of over 70 years globally, UBL, an operating and Brand building company of Unilever Group has predominantly served the Bangladeshi market with mainly Home and Personal Care (HPC) FMCG products for last 47 years with limited presence in the food business with Lipton tea.

With dominant brands in HPC like Lux, Lifebuoy, Wheel and Pond’s, growing brands like Sunsilk, Clear and rising stars like Rexona and Dove’, the company now wants to check its possibilities in the foods category which globally is the largest business of Unilever (54% of total portfolio). With this intention in mind, the authorities of UBL in Brands & Development Department assigned the project “Evaluation of Entry into Ice cream Business for Unilever Bangladesh Limited”. This research was designated to be mainly qualitative in nature and to build on earlier researches done by UBL.

To assess the feasibility of entering into ice cream business, I combined primary sources like consumer and trade visits, and secondary sources like earlier research reports to understand market construct, market characteristics, and target consumer groups of the ice cream industry. Based on the collected data, and then assessed the entry prospect for UBL in this industry. Ice cream industry of Bangladesh is estimated to have a size of BDT 220 Crore where BDT 131 Crore belongs to branded segment (BDT 121 Crore Common Format Ice cream that is distributed through retail and BDT 9. Crore in the boutique segment) and BDT 79 Crore is in the unbranded low qualitylow price segment. The industry is currently growing at a rate of 19%. The research excluded unbranded segment from discussion as global quality mandate of Unilever prohibits UBL from competing in that market. Branded common format is dominated by Igloo with more than 51% share with followers like Kwality and Polar where Milk Vita and Savoy are minnows. Boutique segment is competed by Club Gelato (20% share), MovenPick, Andrsen’s (3 outlets) and Gelateria Igloo (3 outlets).

These three have around 17% share. The market is characterised by low competitive rivalry where Dhaka still contributes to more than 61% of total country’s sales. This is due to issues regarding electricity and requirement of cold distribution chain by the industry. There are still huge untapped areas of the country. However, the industry is extremely capital intensive and there are lots of entry barriers. Only manufacturers with large capital can invest and thus there has been no big player in the common format segment since Kwlaity (1999).

Products or of quite high quality in the Bangladeshi market but price is still out of reach of rural and lower SEC people who belong to low disposable monthly income group. Distribution is mainly done through refrigerated trucks alongside use of carts in the country. Boutique format players serve at their premises, ice cream and other dessert items to offset seasonality of ice cream sales. Promotion in the common format is mainly in newspapers and billboards along with trade based consumer promotions and trader schemes.

Consumers of ice cream are mainly Urban kids in the age group of 5-14 who mainly consume normal sticks, cups, cones innovative fillers and water ice creams; there is urban youth in the age group of 15-24 who consume premium and extrusion sticks and cones and urban mothers in the age group of 25-35 who are the decision makers for kids and family ice cream purchases. The consumers can be Evaluation of Entry into Ice cream Business for Bangladesh Limited II segmented based on their desired satisfactions from ice cream occasion, portrayed personality traits of ice cream bands and the occasions when they consume ice cream.

Analysis shows there is scope for market development and penetration in the country. There is also scope for ice creams that are health conscious and nutritional in the industry. Looking at the scenario of the Bangladeshi market, UBL is suggested to enter the industry in a grand way with tentative initial investment of BDT 45 Crore in manufacturing facility, cold distribution channel development and placing branded freezers at retail outlets. Expected brand is Wall’s, the regional ice cream brand of Unilever. Company is also suggested to enter in the boutique segment with Ben&Jerry’s the premium boutique brand of Unilever.

Products should be differentiated and nutritional with the price range at par or higher than common format players and lower than the boutique format. Extensive promotion would be required and thus presence in television as ice cream is a brand that requires continuous innovation and hype around the brand. Expected outcome of the entry is to have sales of BDT 11 Crore with a market share of 10% in the first year. However, for the first three years company would have negative net profit and is expected to make a net profit of BDT 2. Crore with a gross slaes of BDT 38 Crore in the fifth year of business. Thus, Unilever can benefit from entering in this industry if they enter in a grand way. Obviously company has to balance the investment issues for the industry and also acquire necessary resource for ice cream as traditionally UBL is an HPC company. If they can address these issues tactfully they can do well leveraging their existing brand image. Evaluation of Entry into Ice cream Business for Bangladesh Limited III Table of Contents Topic Detail 1. 0 Introduction 1. 1 Background of the Report 1. Objectives 1. 3 Scope 1. 4 Methodology 1. 4. 1 Primary Research 1. 4. 2 Secondary Research 1. 5 Limitation 2. 0 Background of the Organization 2. 1 Global Unilever Group 2. 1. 1 Home and Personal Care Divisions 2. 1. 2 Foods Division 2. 2 History of Unilever 2. 2. 1 Soap and Margarine Origins 2. 2. 2 Surviving the Great Depression 2. 2. 3 Post-war Era: Adapting to New Markets and Technology 2. 2. 4 Restructuring and Major Acquisitions 2. 2. 5 Twenty First Century Unilever 2. 2. 6 Unilever of Today 2. 3 Unilever Bangladesh Limited (UBL) 2. 3. 1 Manufacturing Facilities 2. . 2 Employees 2. 3. 3 Product Categories and Brands 2. 3. 4 Brand Launches by Year 2. 3. 5 Corporate Mission 2. 3. 6 Corporate Social Responsibility 2. 3. 7 Corporate Governance 2. 3. 8 Organizational Structure 2. 3. 9 Brands and Development Department 3. 0 Global Ice cream Industry 3. 1 Overview 3. 2 Unilever Ice cream Business 3. 3 Regional Ice cream Business and Unilever 3. 3. 1 Ice cream Consumption 3. 3. 2 India Ice cream Business and Unilever 4. 0 Bangladesh Ice cream Industry 4. 1 Industry Construct 4. 1. 1 Branded Market 4. 1. 2 Unbranded Market 4. Historical Progress of the Industry 5. 0 Market & Competition Analysis 5. 1 Market Description 5. 1. 1 Market Characteristics of the Common Format Segment A. Market size B. Competitive rivalry in the Market C. Market Sales and Growth Rate D. Market Share and Size of the rivals E. Geographic Sales Orientation F. Seasonality of Sales G. Distribution/ Servicing System H. Technology and Innovation Pg. No 1 1 2 2 2 3 4 5 5 5 6 6 6 7 7 7 7 8 8 9 9 9 10 11 11 11 12 12 15 15 15 16 16 16 17 17 17 18 18 20 20 20 20 20 22 22 23 23 24 26 Evaluation of Entry into Ice cream Business for

Bangladesh Limited IV I. Production Capacity J. Products and Pricing K. Firms as Price Setters L. Promotion M. Players in the Common Format Segment 5. 1. 2 Market Characteristics of the Boutique Segment A. Detail of Operation B. Players in the Boutique Segment 5. 2 Price Comparison of Common and Boutique Segments 6. 0 Consumer Analysis 6. 1 Target Group of Ice cream 6. 1. 1 Geographic Group 6. 1. 2 Target Age Group 6. 1. 3 Target SEC and DMFI Group 6. 2 Ice cream in Consumer Lifestyle 6. 3 Highlights of Purchase Habit of Ice cream 6. 3. 1 Common Habits across Target Groups 6. . 2 Habits of Kids 6. 3. 3 Habits of Youth 6. 3. 4 Habits of Mothers 6. 4 Barriers to Ice cream Consumption 6. 4. 1 Emotional Barriers 6. 4. 2 Functional Barriers 6. 5 Research Findings 6. 5. 1 Relevant Occasions in Daily Lives of Consumers 6. 5. 2 Frequency of Ice cream Consumption 6. 5. 3 Market Character: Relevant Occasions vs. Frequency of Consumption 6. 5. 4 Consumer Satisfaction from Ice cream Occasions 26 27 28 28 30 35 36 37 41 42 42 42 42 43 43 44 44 45 45 45 45 45 45 46 46 47 48 50 7. 0 Industry Attractiveness and Entry Prospects 7. Driving Forces of Growth 7. 1. 2 Trade and Infrastructural Level 7. 1. 3 Consumer Level 7. 2 Prospects of Entry 8. 0 Entry Strategy for Unilever 8. 1 Suggested Entry Areas for UBL 8. 2 Products 8. 3 Placement 8. 4 Price 8. 5 Promotion 8. 6 Scope of Opportunity 8. 6. 1 Geographic Contribution 8. 6. 2 UBL objectives 8. 7 Critical Success Factors 9. 0 Business Projection 9. 1 Basic Assumptions 10. 0 Conclusion References 52 52 52 52 53 54 54 54 55 55 55 55 56 56 56 57 57 58 List of Tables Evaluation of Entry into Ice cream Business for Bangladesh Limited V

Detail Table 1: Detail of Trade Visit Table 2: Detail of Consumer Research Table 3: Third-Party Factories of UBL Table 4: UBL Categories and Brands Table 5: History of Brand Launch Table 6: Unilever’s Global Ice cream Business Table 7: Per Capita Ice cream Consumption of Countries Table 8: Glimpse of India Ice cream Business Table 9: Market Sales and Growth Rate of Branded Common Format Market Table 10: Volume Based Market Size Table 11: Market Share of Competitors Table 12: Seasonality of Ice cream Sales Table 13: Distribution Method of Market Players Table 14: Production Capacity of Current Market Players Table 15: Ice cream Serve types Table 16: Rank of SKUs Table 17: Rank of Flavours Table 18: Volume Share of Different Serve Types Table 19: Products of Igloo Table 20: Igloo Facilities and Logistics Table 21: Strengths and Weaknesses of Competition Table 22: Players and Shares in Boutique Segment Table 23: Detail of Club Gelato Table 24: Detail of MovenPick of Switzerland Table 25: Detail of Andersen’s of Denmark Table 26: Detail of Gelateria Igloo Table 27: Comparative Price Analysis Table 28: Relevant Occasions in Consumers’ Lives Table 29: % of Variance Explained by Consumer Clusters Table 30: Requirements & Product Attributes Desired by Consumer Clusters Table 31: Value and Volume Based Scope of Opportunity for UBL Table 32: Assumptions for Business Projection Page No. 2 3 9 10 10 15 16 16 22 22 23 24 24 26 27 27 27 27 30 32 35 36 38 39 40 41 41 46 55 50 55 58 Evaluation of Entry into Ice cream Business for Bangladesh Limited VI List of Figures Detail Figure 1: Unilever’s Business Areas and Sales Contribution Figure 2: Unilever’s Governing Structure Figure 3: Departments and Leadership Team of UBL Figure 4: Organogram for Brands and Development Department Figure 5: Unilever Ice cream Portfolio Figure 6: Market Construct of Bangladesh Ice ream Industry Figure 7: Geographic Sales Orientation Figure 8: Serve Types and Pricing Figure 9: Igloo Supply Chain Figure 10: Distribution Process of Igloo Figure 11: Target Group wise Consumption Pattern Figure 12: Ice cream in Consumer Life style Figure 13: Frequency of Occurrence of Occasions Figure 14: Frequency of Ice cream Consumption Figure 15: Relevance of Occasion-Frequency of Consumption Mapping Figure 16: Required Market Strategy for Bangladesh Page No. 5 12 12 14 15 17 23 28 31 31 42 43 47 48 49 49 Evaluation of Entry into Ice cream Business for Bangladesh Limited VII Evaluation of Entry into Ice cream Business for Bangladesh Limited VIII 1. 0 INTRODUCTION

This section presents the background of the report, “Evaluation of Entry into Ice cream Business for Unilever Bangladesh Limited” and outlines its objectives, scope, methodology of project completion and report preparation used in its formation, and limitations of the report. 1. 1 Background of the Report This project was assigned as part of the Internship Program of Institute of BRAC University upon completion of four year BBA graduation program. In accordance with the specifications of the Program, the author has completed the 12-week period of the internship at an organization, Unilever Bangladesh Limited (UBL). The project was completed and report was prepared under kind supervision of Academic supervisor, Sharmin Shabnam Rahman, Lecturer, BRAC University and Official supervisor, Muhammad Risalat Siddique, Brand Manager, UBL.

The project, on which this report is based, was assigned as a job responsibility of me my self. 1. 2 Objectives Broad Objective: Main objective of the project was to evaluate feasibility of entering into ice cream business for UBL. To achieve this broad objective, some specific objectives were accomplished. These are outlined below. Specific Objective: Identify current global ice cream business situation and view of Unilever towards Asian region. Identify ice cream industry construct of Bangladesh and its parameters and characteristics. Analyze sales, financing, marketing, and supply chain issues of branded ice cream segment. Analyze current market players of the branded segment.

Analyze consumers of Ice cream in detail. Assess industry attractiveness and entry prospects for UBL. Suggest entry strategy for UBL. Estimate tentative five year business projection for UBL in ice cream business. Evaluation of Entry into Ice cream Business for Bangladesh Limited 1 1. 3 Scope Scope of research for the project has been limited to Dhaka and outskirts of Dhaka only. As of current market situation, ice cream is primarily an urban product (due to electricity issues of the country) and Dhaka contributes more than 50% of the market and all the major marketing activities are concentrated in Dhaka and thus this scope does not limit overall understanding of the market.

The report puts emphasis on branded ice cream segment and takes a cursory glimpse of the unorganized unbranded segment. While carrying out the competitor analysis, all the existent branded segment players and only the major players in the premium boutique segment have been analyzed. Special emphasis has been placed on market leaders and their marketing strategies while formulating the entry strategy for UBL. 1. 4 Methodology Both primary and secondary research sources were used to complete the analysis. Primary research was mainly qualitative and was used to understand the ice cream industry first-hand and validate the information collected from secondary sources. Details of both methodologies are provided below. 1. 4. 1 Primary Research: Trade Visit:

During market visit, a total of 60 shops were visited with formal questionnaires in different areas of Dhaka city. Areas were selected based on SEC orientation of different areas. The areas were: Table 1: Detail of Trade Visit Zone Gulshan, Dhanmondi, Uttara Kamalapur, Mirpur, Mohammadpur, Lalmatia Malibagh, Rampura, Khilgaon, Shantinagar Azimpur, Lalbag, New Market, Dhaka University, Sadarghat Major SEC Orientation SEC A++ SEC A SEC A & B SEC B & C Channels Visited (All Zones) 1. Urban General Stores (UGS) 2. Urban Neighbourhood Grocer (UNG) 3. Premium General Store (PGS)/ SMMT 4. Modern Trade (MT) 5. Confectionary/ Bakery 6. Fast Food shops 10 (6 Igloo and 4 Kwality) cart sellers were interviewed to understand cart distribution and selling method. highest performing boutique players (Club Gelato, MovenPick of Switzerland, Andersen’s of Denmark and Gelateria Igloo) were formally interviewed to understand the boutique segment. Evaluation of Entry into Ice cream Business for Bangladesh Limited 2 Consumer Visit: To understand consumer perception about ice cream and current industry, focus target groups of ice cream were identified and group discussions were conducted with them. The groups were: Urban kids in the age group of 5-14: Informal discussions with 10 kids regarding their perception of ice cream and how their parents influence their ice cream consumption. Urban youth in the age group of 15-24 Two group discussions were conducted students of IBA and NSU, each consisting of 10 members.

Urban mothers in the age group of 25-35 Two group discussions were conducted with mothers at Green Herald Int’l School and Rifles Public School. 1. 4. 2 Secondary Research: Secondary research sources provided useful insight into background and upcoming issues of global and Bangladesh ice cream industry. These were used as information source and then cross validated against each other and using primary research. Internal sources: Unilever’s internal sources that contributed to the research were: Unilever global web archive. Unilever Ice cream Academy web site. Unilever Pakistan Ltd, Consumer & Market Insight (CMI) Division. Unilever Bangladesh Ltd archive. External sources: External sources that contributed were: AC Nielsen, Bangladesh.

Market Research Information from India. Market Intelligence from Bangladesh. Company web sites of competitors. Earlier reports on the Ice cream industry of Bangladesh. The Internet. 1. 5 Limitation This study had few limitations that restricted the research analysis. They are outlined below. By policy, UBL does not disclose any financial, research, production or sales data to any entity outside the company. Because of this policy, it has not been possible to include the data and Evaluation of Entry into Ice cream Business for Bangladesh Limited 3 other information used to estimate different financials and work out the entry strategy for UBL in this report.

This is especially true in case of the business projection section, where information on the exact size of the target group, market share for the initial years, distributor and trade margins, supply chain costs, etc. have been omitted. Much of the data provided has been modified to maintain confidentiality. First of all, convenience sampling was used for research and this warranted for some biasness in input from traders and consumers of qualitative study. All the market competitors are private companies and thus amount of available public information is few. Also, no research or advertising agency formally tracks the industry. In many cases recent concrete data was not available and estimations had to be made. Research was conducted only in Dhaka even though ice cream consumption habits and distribution issues (e. g. lectricity) in other areas of the country can vary in future with proper expansion of the ice cream industry beyond capital and metro cities. Evaluation of Entry into Ice cream Business for Bangladesh Limited 4 2. 0 BACKGROUND OF THE ORGANIZATION 2. 1 Global Unilever Group Unilever is one of the world’s leading suppliers of fast-moving-consumer-goods (FMCG), with 400 brands pning 14 categories of Home, Personal Care and Foods products. In fact, 150 million times a day people use Unilever products at key moments of their day. Unilever employs more than 206,000 people in 150 countries and had worldwide revenue of just over US$47 billion or BDT 3290 billion in 2009. Unilever has two parent companies - Unilever NV and Unilever PLC. Unilever N.

V is a public limited company registered in the Netherlands and Unilever PLC is a public limited company registered in England and Wales. The two parent companies, NV and PLC, together with their group companies, operate as a single economic entity (the Unilever Group, also referred to as Unilever) with the same board of directors. Unilever's corporate centres are in London and Rotterdam. Unilever’s brand portfolio includes worldwide favourites: Lipton, Knorr, Dove, Axe and Vaseline. Their portfolio is diverse in response to the varying needs of their customers across the globe. Unilever offers world-class brands, many of which are customized for local markets. Unilever invests €1 billion or BDT 94. billion every year in cutting edge research and development and has five laboratories around the world that explore new thinking and techniques to help develop their products. The following figure shows the portfolio of categories Unilever operates in: Figure 1: Unilever’s Business Areas and Sales Contribution The following are some recent highlights from Unilever’s three global divisions - Foods, Home Care and Personal Care: 2. 1. 1 Home and Personal Care Divisions: Lux became the first mass-marketed soap when it launched in 1924. Today it achieves annual global sales of over €1 billion Evaluation of Entry into Ice cream Business for Bangladesh Limited 5

Unilever’s oral care brands Mentadent, Pepsodent and Signal have teamed up with the world's largest dental federation, the FDI, representing 750 000 dentists around the world First launched in France in 1983,Unilever’s leading male grooming brand, Axe, now gives men the edge in the mating game in over 60 countries Hindustan Lever has launched a Surf Excel Quick Wash, with a low foaming formulation, reducing the amount of water needed for rinsing by up to two buckets per wash Recent breakthroughs at Rexona include Rexona Crystal, a deodorant that eliminates unsightly white deposits on dark garments. 2. 1. 2 Foods Division: Unilever is the world's leading ice cream producer, with brands such as Algida and Wall's in Europe, and Ben & Jerry's in the United States.

Unilever is the largest seller of packet tea in the world through the Lipton brand. The acquisition of Bestfoods in 2000 brought Unilever leadership in the culinary category. Knorr is now their biggest brand, with €2. 3 billion sales in over 100 countries and a product range covering soups, bouillons, sauces, noodles and complete meals. Becel/Flora pro. activ products have been recognized as the most significant advancement in the dietary management of cholesterol in 40 years. 2. 2 History of Unilever 2. 2. 1 Soap and Margarine Origins: The Anglo-Dutch Group, Unilever, was created in 1930 when the British soap-maker Lever Brothers merged with the Dutch margarine producer, Margarine Unie.

At the time, an international merger was an unusual move. However, the owners of the two companies could see that bringing together complementary businesses with strong global networks would create new opportunities. The companies were competing for the same raw materials, both were involved in large-scale marketing of household products and both used similar distribution channels. Lever Brothers was founded in 1885 by William Hesketh Lever with his brother James. The company produced Sunlight, the world's first packaged, branded laundry soap. Sunlight was a revolutionary product that helped popularize cleanliness and hygiene in Victorian England.

Its purpose was 'to make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal attractiveness, that life may be more enjoyable and rewarding for the people who use our products. ' In 1930, Lever chose Margarine Unie as a merger partner. Margarine Unie, a Dutch company had grown through mergers with other margarine companies in the 1920s. The logic for the Anglo-Dutch merger was clear: animal fats were the raw materials for both margarine and soap. Evaluation of Entry into Ice cream Business for Bangladesh Limited 6 2. 2. 2 Surviving the Great Depression: The Great Depression struck not long after the new company was formed. As prices and profits around the world threatened to collapse, Unilever had to act quickly to build up an efficient system of control.

But it was not until the end of World War II that Unilever began to recognize the important relationship between marketing and research. In the meantime, Unilever expanded its U. S. operations through two important acquisitions: Thomas J. Lipton Company, manufacturer of tea and the Pepsodent brand of toothpaste. 2. 2. 3 Post-war Era: Adapting to New Markets and Technology: Unilever's greatest achievements between 1945 and 1965 were its adaptation to new markets and technology. Unilever's strategy was to acquire companies in new areas, particularly food and chemical manufacturers. Among the post-war acquisitions were U. K. frozen foods maker Birds Eye (1957) and U. S. ice cream novelty maker Good Humour (1961).

The advent of the European Economic Community, or Common Market, also created new opportunities for Unilever. 2. 2. 4 Restructuring and Major Acquisitions In the 1980s Unilever undertook a massive restructuring. The company sold most of its service and ancillary businesses, such as transport, packaging, advertising, and other services that were readily available on the market, and went on a buying spree, snapping up some 80 companies between 1984 and 1988. Specifically, Unilever's core businesses were detergents, foods, toiletries, and specialty chemicals. 2. 2. 5 Twenty First Century Unilever: Unilever's fastest growing market in the early 1990s was in Asia.

Asian sales of personal products, detergent, and packaged foods were growing more than twice as fast as sales in the United States and Europe. Unilever continued to make acquisitions in the mid-1990s, completing more than 100 purchases between 1992 and 1996, more than half of which were in foods. In 1993 Unilever gained the number one position in the U. S. ice cream market through the completion of two acquisitions. One the largest acquisitions of this period was the 1996 takeover of Chicago-based Helene Curtis Industries Inc. , manufacturer and marketer of personal care products, primarily shampoo and conditioners, hand and body lotions, and deodorants and antiperspirants.

Unilever ended the 20th century with the launch of Path to Growth, a five-year strategic plan that included a focus on top brands within core market sectors and an emphasis on growth within developing countries. In the face of considerable competitive pressures in various markets around the world – particularly from Procter & Gamble, the company announced that it would eliminate about 1,200 of its brands to focus on around 400 regionally or globally powerful brands. Evaluation of Entry into Ice cream Business for Bangladesh Limited 7 2. 2. 6 Unilever of Today: Unilever is truly a ‘multi-local’ multinational with operating companies and factories on every continent. They have a portfolio of brands that are popular across the globe - as well as regional products and local varieties of famous-name goods.

This diversity comes from two of their key strengths: Strong roots in local markets and first-hand knowledge of local cultures World-class business expertise applied internationally to serve consumers everywhere Unilever recently completed the five-year Vitality company initiative in which it began to converge the marketing of disparate arms of their business, including personal care, dieting, and consumables into an umbrella function. More than ever, Unilever brands are helping people 'feel good, look good and get more out of life' – a sentiment close to William Lever's heart over a hundred years ago. 2. 3 Unilever Bangladesh Limited (UBL) Lever Brothers Bangladesh established its manufacturing facility in 1964 at Kalurghat in Chittagong. Productions started off with Lux and Lifebuoy soap. After meeting the local demand, the surplus production was shipped to Pakistan.

It was after independence that Lever Brothers Bangladesh Ltd was constituted with Unilever owning 60. 75% shares and the Government of Bangladesh owning the remaining 39. 25% shares. In 2004, Lever Brothers was renamed Unilever Bangladesh Limited in order to align their corporate identity and logo with the global Unilever. By tapping into the vast know-how base of the parent company - Unilever, Lever Brothers was able to make their products available to the consumers at an affordable price. In the last decade, Unilever has consistently been achieving double-digit growth in Bangladesh, with an annual turnover reaching at BDT 1 billion in 2006.

Unilever procures 40% of its inputs from local sources and spends about BDT 150 crores annually in Bangladesh for promotional activities, including advertisements, for its products. Its current offices are located in: Factory: Unilever Bangladesh Limited 51 Kalurghat Heavy Industrial Area P. O. Box # 125 Chittagong – 4000 Bangladesh Unilever Bangladesh Limited ZN Tower Plot No. 2, SW (1) Road No. 8 Gulshan – 1 Dhaka – 1212 Bangladesh Corporate Office: Evaluation of Entry into Ice cream Business for Bangladesh Limited 8 2. 3. 1 Manufacturing Facilities: The company has a Soap Manufacturing factory and a Personal Products Factory located in Chittagong.

The factory has to adhere strictly to four important policies: Quality Policy Occupational Health and Safety Policy Environmental Policy Quality & Consumer Safety Policy Total Productive Maintenance Policy Besides these, there is a tea packaging operation in Chittagong and four manufacturing units in Dhaka, which are owned and run by third parties exclusively dedicated to Unilever Bangladesh. The following are the details of these third party operations: Third-Party Factory ARC Surfactants 91, Tongi Industrial Area, Gazipur Progati Soap Factory Tongi Industrial Area, Gazipur SMAH Limited 96, Tongi Industrial Area, Gazipur SMAH Limited 115-116, BSIC Industrial Estate, Konabari, Gazipur Table 3: Third-Party Factories of UBL

Brand Wheel Washing Powder , Surf Excel Lifebuoy Soap – 70gm Wheel Washing Powder Pond’s Talcum Powder 2. 3. 2 Employees: Unilever operations in Bangladesh provide employment to over 10,000 people directly and through its dedicated suppliers, distributors and service providers. Ninety-nine percent of UBL employees are locals. 2. 3. 3 Product Categories and Brands: In Bangladesh, Unilever offers consumer brands which ps across three categories which are as follow: Home care, which in turn is divided into: Fabric cleaning Household care Personal care, which in turn is divided into: Skin Cleansing Skin Care Oral Care Hair Care Foods Evaluation of Entry into Ice cream Business for Bangladesh Limited 9

There are currently 14 brands across the above-mentioned categories: Category Skin Cleansing Skin Care Oral Care Hair Care Fabric Cleaning Household Care Foods Brands Lux, Lifebuoy and Dove Fair and Lovely , Rexona and Ponds’ Pepsodent and Close Up Sunsilk, Dove and Clear Wheel, Surf Excel Vim Lipton Taaza Table 4: UBL Categories and Brands Leveraging their global network and combining it with local consumer insight, Unilever Bangladesh has introduced relevant innovative products throughout the years. This has led to the development of products in categories such as Detergent powders, Dish wash Bar, Face wash and Deodorants, thus enriching the lives of Bangladeshis.

The following table illustrates the way UBL has continuously introduced new brands and even more so in the last decade. 2. 3. 4 Brand Launches by Year: Year 1964 1964 1972 1982 1987 1987 1989 1988 1990 1991 1991 1992 1993 1997 2002 2002 2003 2003 Lifebuoy Lux Wheel Laundry Soap Sunsilk Close Up Vim Clear Fair & Lovely Lipton Yellow Label Ponds' Pepsodent Taaza Surf Excel Wheel Washing Powder Clinic Rexona Vim Bar Pepsodent Tooth Powder Table 5: History of Brand Launch Brands 2. 3. 5 Corporate Mission: Evaluation of Entry into Ice cream Business for Bangladesh Limited 10 Unilever states its mission as follows: “Our mission is to add Vitality to life.

We meet everyday needs for nutrition, hygiene and personal care with brands that help people look good, feel good and get more out of life. ” Its goals are: To manufacture high-standard products Promoting products to the highest extent Producing large volume to achieve production cost economies Enabling quality products to be sold out at obtainable prices 2. 3. 6 Corporate Social Responsibility: Unilever Bangladesh supports community development through various initiatives. The Fair and Lovely Foundation undertakes various projects throughout the country to empower women with access to information and resources in the areas of Education, Career and Enterprise. Workshops for rural women teaching them business and vocational skills like pickle making , poultry farming, etc. ave been held and Projects on IT education for women will also be implemented through this Foundation Unilever Bangladesh has sponsored the modernization of existing surgical facilities and the setting up of a modern operation theatre and intensive care unit at the Maa Shishu O General hospital in Chittagong, which significantly enhanced access to modern health care for the underprivileged people of the city Unilever is the main sponsor of the Lifebuoy Friendship Hospital bringing health care to thousands of underprivileged riverine population in the country UBL also sponsors students from various education institutes in Chittagong as well as members of the British Council Library and provided scholarships to meritorious students. 2. 3. 7 Corporate Governance: Unilever's highest executive body is called the Unilever Executive (UEX). It is led by the Group Chief Executive (GCE), Patrick Cescau. The UEX define the top level organisation structure and manage tradeoffs within the corporate portfolio.

They are accountable for all aspects of company operations, managing business performance and overall profit responsibility for the Group. The Unilever Executive is also responsible for defining and shaping the culture, leadership capabilities and behaviour needed to deliver Unilever’s corporate strategy. They have responsibility for all internal communications and some aspects of external communications (customers, suppliers, professional bodies, media and investor relations). They are responsible for managing corporate risk and reputation. Evaluation of Entry into Ice cream Business for Bangladesh Limited 11 Figure 2: Unilever’s Governing Structure

The Category Presidents for Foods and Home and Personal Care are responsible for Category strategies, brand development and innovation. The Regional Presidents are responsible for managing the business, deploying brands and innovations effectively and winning with customers. They are supported by the Finance and HR functions. 2. 3. 8 Organizational Structure: Unilever Bangladesh is headed by a Chief Executive Officer, Mr. Rakesh Mohan, in Bangladesh. There are five departments headed by five individual directors. Presently the company has the following departments at its corporate headquarters: CEO & Chairman Rakesh Mohan Brands & Development K. S. M. Minhaz Supply Chain Imran Momin Finance IT & Legal Mahatabuddin Ahmed

Customer Development Mizanur Rashid Human Resources Jerry Jose Figure 3: Departments and Leadership Team of UBL 2. 3. 9 Brands and Development Department: This department has five parts working together. These are: Brands Development Consumer and Market Insight (CMI) Media Activation Evaluation of Entry into Ice cream Business for Bangladesh Limited 12 This department is responsible for nurturing a brand towards market leadership and offering consumers with innovation and novelty in brands. With a deep consumer insight, the Brand Managers look after the brands on a daily basis: planning and organizing activities that boost their image and increase their exposure.

The Brands Team has been expanded to Brands and Development, thus providing the opportunity of increased coordination between the Marketing and Development Team and to ensure a successful innovation process at Unilever. The Development team is responsible for developing cost-effective formulations and packaging for the products and developing and improving the processes involved in their manufacture. However, Bangladesh still remains a Brand-Building country while Development generally takes place at regional level. Brand Developing countries are responsible for the brand category strategy, identifying new consumer and technology opportunities, product formulation and packaging design and communication strategy.

The critical role of Brand Building is to lead the specific country category and brand operations team to create, execute and evaluate the insight-led Category Building Plan and Brand Marketing Plans created by Brand Development. Development at local levels takes place in the form of packaging innovations and minor product modifications to fit local consumer needs and production methods. Marketing information is crucial for UBL and the company decisions are based to a large extent on the accuracy and timeliness of such information. Consumer and Market Insight (CMI) team ensure that data are collected cost effectively to provide consumer information to aid the company to attain a competitive advantage.

This helps to achieve a proactive understanding of the Bangladeshi consumer. The CMI team carries out various market and consumer research through external research agencies such as Sirius and AC Nielson and also coordinates with regional CMI team to gather category research done globally. Brand activation is the core marketing process through which a brand is brought to life through a variety of brand experiences. The activation team builds a brand by creating a physical or emotional space in the consumers’ lives that enables the brand to interact in a meaningful way. These activation programs drive purchase and preference by building consistent, long term relationships with consumers.

The responsibility of the media team is to buy media space, settle the different media packages for each brand and coordinate various partnerships and events with media partners. The Organogram on the following page depicts the different positions in Brands, Development, Media, Activation and CMI. Evaluation of Entry into Ice cream Business for Bangladesh Limited 13 Chairman & Managing Director Brands & Development Director Product Group Manager Fair & Lovely Marketing Manager Colour, Oral & Pond’s Product Group Manager Pepsodent Product Group Manager Hair Care Marketing Manager Skin cleansing, fabric Wash & Household & Head of CMI Company Activation Manager & Senior Brand Manager – Tea Senior Brand Manager Wheel Company Development Manager Senior Brand Manager Pond’s Co.

Media Manager/ Product Group Manager Lux Activation Planning & Media Operations Manager Packaging Development Manager Product Development Manager Senior Brand Manager Lifebuoy Company CMI Manager * Company Media Manager reports to BDD for media related issues while has a double reporting line to MM for Lux related issues Figure 4: Organogram for Brands and Development Department Evaluation of Entry into Ice cream Business for Bangladesh Limited 14 3. 0 GLOBAL ICE CREAM INDUSTRY 3. 1 Overview Global Ice cream industry is estimated at 43 Billion Euros 1 ($54 Billion) at the end of 2009. Unilever business is currently at 4. 7 billion Euros ($6. 04 Billion). Nestle’ outpaced Unilever with recent acquisition of U. S.

Company Dreyer's Grand Ice Cream Holdings Inc and became world’s largest ice cream manufacturer with 28% market share compared to that of 17. 6% Unilever share. 3. 2 Unilever Ice cream Business Unilever Ice cream business under the umbrella name of “Heart” brand (also known as Wall’s, Algida, Ola etc in different countries) has been one of the most successful businesses in the food category. As of 2009, Unilever ice cream sales stands as following. Region Europe North America Asia Latin America Total (Mln. Euros) 2007 2315 1,269 444 408 4,412 2008 2,392 1,283 506 430 4,611 2009 2,455 1,298 576 452 4,781 Table 6: Unilever’s Global Ice cream Business

Current market standing based on Underlying Sales Growth (USG) and Market share for Unilever in Asia is excellent and market is currently growing at a very high rate compared other three regions. Market is not saturated and many untapped countries like Bangladesh can provide more growth from this region. Unilever Portfolio under “Heart” or “Wall’s” brand looks as follows: Magnum Magnum Cornetto Carte d'Or Carte d'Or Breyers Solero Light CarbSmart Figure 5: Unilever Ice cream Portfolio Ben&Jerry’s Among these Magnum is Premium Extrusion stick, Cornetto is Cone, Solero is fruit based and Ben&Jerry’s is super premium ice cream that is sold through dedicated boutiques. Others are filled SKUs. In recent times there have been additions of sub-brands like Frusi and Moos. 1 Source: Reuters (Global AC Nielsen study)

Evaluation of Entry into Ice cream Business for Bangladesh Limited 15 3. 3 Regional Ice cream Business and Unilever 3. 3. 1 Ice cream Consumption: World ice cream consumption data shows scopes and opportunities for Unilever in this category. Per capita consumption (PCC) of ice cream in the South Asian region is pretty low with 0. 1 litres per year. Bangladesh PCC is also estimated to be similar where people consume ice cream less than once a month as can be seen from the following chart 2 . Country Per Capita Consumption Volume Value (ltrs/yr) (Euros/yr) 18. 0 2. 4 2. 4 1. 6 1. 5 1. 0 0. 8 0. 4 0. 2 0. 1 48. 0 11. 0 11. 9 3. 0 1. 8 1. 1 1. 5 0. 4 0. 4 0. 1

Consumption Pattern > 8 times / month Australia Hong Kong Singapore Malaysia Thailand China Philippines Pakistan Indonesia India 2 -3 times / month < 1 once / month Table 7: Per Capita Ice cream Consumption of Countries This represents the challenge for the category in this region to be: “To Grow the Category & Increase Market Share”. 3. 3. 2 India Ice cream Business and Unilever: Overall Ice cream industry in India is as follows: Detail Value (Cr BDT) Volume (‘000 Ltrs) CAGR (Volume) CAGR (Value) Gross Profit Total Market 1687 75407 11% 13. 52% 49. 9% Impulse 56% 54. 5% 10. 43% 13. 19% 48. 20% Take Home 34% 40. 2% 11. 33% 13. 91% 51% Artisan 10% 5. 3% 12. 63% 14. 02% 55%

Table 8: Glimpse of India Ice cream Business This market data has been considered to understand a similar but evolved market. In the Indian market, Kwality Wall’s (a merger between Unilever and Kwality) with its mother brand and two sub brands Cornetto and Max has 16. 19% market share in the market. However recent strategic change towards focused distribution and marketing approach in six major cities (Mumbai, Delhi, Calcutta, Chennai, Hyderabad and Bangalore) that contribute to two thirds of total Unilever sales has provided Unilever recent success in the category in India. 2 Source: Unilever Pakistan Ltd. CMI Evaluation of Entry into Ice cream Business for Bangladesh Limited 16 4. BANGLADESH ICE CREAM INDUSTRY 4. 1 Industry Construct The ice cream industry of Bangladesh is a growing one. With an estimated market size of BDT 220 Cr in 2009, the market can be subdivided broadly into branded and unbranded categories. Total Market [BDT 220 Cr] Branded [BDT 131 Cr] Unbranded [BDT 79 Cr] Common [BDT 121 Cr] Boutique [BDT 9. 8 Cr] Around 20,000 local manufacturers Figure 6: Market Construct of Bangladesh Ice cream Industry 4. 1. 1 Branded Market: The branded market segment is around BDT 131 Cr with players in both common/ conventional ice cream format (BDT 121 Cr) and boutique format which is still very small in size (BDT 9. 8 Cr). Common Format:

Common format ice creams are generally produced and packed in factory. These are distributed and sold through retail channels/ carts to the shoppers. Products can be single serving like stick and cones or multiple serving like containers. Moreover, single serving can either be water based where only water and flavours are mixed or cream based where milk cream and flavours are mixed. Branded common format ice cream industry has only five players in the market. They are Igloo, Polar, Kwality, Savoy and Milk Vita. Igloo is currently the market leader. Polar stayed market leader for 10 years (’86-‘96) in their initial days and Kwality challenged and took Polar’s second position in recent times.

However, Igloo bounced back every time they faced challenge. Milk Vita came in the market with proper dairy ice cream but failed to create an impact as their core business is not ice cream. Boutique Format: Boutique format ice creams are sold through dedicated outlets where there is seating facility for consumers. They can see the products/ flavours open in freezers and can choose directly. Also consumers can decide what type of packing to use e. g. cup, cones or containers and based on the consumers decision product is either served for consumption at the premises or take away. Evaluation of Entry into Ice cream Business for Bangladesh Limited 17

Boutique format has seen an upsurge from year 2000 with introduction of premium, franchise and imported ice creams. This segment is driven by Dhaka and Chittagong based players. Club Gelato, MovenPick, Andersen’s, Gelateria Igloo, Baskin31Robbins and Sub Zero are the major players in the segment. Among these, Gelateria Igloo and Sub Zero are run by common format players Igloo and Kwality respectively. 4. 1. 2 Unbranded Market: The unbranded market basically is constituted with around 20,000 local small producers that do not use any brand leverage and compete in the market based on significant lower price in the range of BDT 1-5. Market size of this segment is significantly high with BDT 79 Cr.

These producers are mainly rural and suburb based where concentration of SEC C and lower SECs are high. They mainly produce water ice cream sticks or in colloquial terms “Baarfi”. These are made with saccharine and colours. They also produce small amount of milk based kulfi. These ice creams are very unhygienic and of low quality. 4. 2 Historical Progress of the Industry Before 1964: Ice cream market dominated by unorganized unbranded approach. 1964: Igloo started large scale organized approach under K Rahman & Co. Ltd. 1965: Igloo opened up the first ice-cream parlour in Dhaka. 1971: Igloo was nationalized by the government of Bangladesh after liberation. 972: In June Igloo was handed over to Bangladesh Sugar & Food Industries Corporation. 1983: Abdul Monem Ltd. acquired Igloo under privatization policy. 1986: Polar started operation; introduced food grade plastic based packaging. They immediately became market leader with extensive campaign. 1988: Dolce Vita Gelato, one of the dedicated boutique operator brought premium ice cream. Early 1990s: Rainbow and Snow White started extensive operation in the boutique segment. Late 1990s: American Soft Ice cream started promoting the soft ice cream format. 1995: Savoy was introduced but failed due to product quality though in suburban areas they grabbed share with low price. 996: In September, Igloo organized a massive marketing campaign Introduced the first straight line extrusion ice-cream in the market They initiated a massive campaign and became market leader after 10 years 1997: In February, Igloo took a devastating decision to increase price for the cup line Igloo not only incurred substantial financial loss but also lost the hard earned market share. The question of sustaining became a central issue. In summer, Price of 11 items were revised and communicated as special discount. This instantly pushed them to the number one position. Evaluation of Entry into Ice cream Business for Bangladesh Limited 18 1999: Kwality ice-cream entered the market 2000: Entry of the premium outique operators like Club Gelato, MovenPick and Baskin31Robbins. 2002: Kwality launched an extensive campaign and started to capture the ice-cream outlets of the city by providing freezers. 2004: Kwality’s number of freezers exceeded Polar’s and moved to second position. 2005 onwards: Igloo leads the market and there is immense competition among Polar and Kwality for the coveted 2nd spot. Historical progress of this industry is of great importance. Bangladesh ice cream industry has traditionally been exposed to high quality products for a long time. Igloo initiated the progress of boutique segment (1965) but it lost its way over time. The segment picked up once again in the recent years.

Also high quality products and innovations in the common format segment have created an appreciation for continuous innovation and better products in the minds of the consumers. Consumers in Bangladesh see ice cream as a fun product which requires novelty and quality coupled with continuous hype around the brand. This is why we see Kwality and Polar could create early impacts with their entry into the industry as they came up with innovations in product or packaging and arranged massive marketing campaigns during their launches. Igloo had to minimize their effects with similar campaigns to hold on to their position. Evaluation of Entry into Ice cream Business for Bangladesh Limited 19 5. 0 MARKET & COMPETITION ANALYSIS 5. Market Description Bangladesh ice-cream industry is growing. With increasing market demand, size of the industry is growing but due to entry barriers of lengthy and complex production process and high investment few companies enter this business. Although local companies in the branded segment have captured most of the market share, small unbranded local companies own a huge market to themselves. Where branded ice cream consumers look for innovation and quality, unbranded users outside metro cities are currently inclined towards low price low quality products. This creates an opportunity for further market development on the hygiene and health platform.

On the other hand, the boutique industry is doing quite well with their approach towards ice cream as a dessert item along with service of other snacks like cakes and coffee at their premises which help them reduce seasonality effects of ice cream. With a complicated scenario in the market, to analyze the industry condition and understand the competitive realities, details of market characteristics and players of both common and boutique segments are explained in following sections. However, unbranded segment is excluded from discussion as Unilever’s portfolio does not match the characteristics and price level of this category. 5. 1. 1 Market Characteristics of the Common Format Segment: A. Market size: Due to promotion, innovation and exposure to different cultures the consumption of ice cream has increased.

As a result the total market size is expanding. At present the local companies in the common format segment have a huge market of about BDT 121 Cr. This market is 16 times larger than the boutique segment and nearly doubles the unbranded segment. Over the years, the size increase of the industry shows the prospect of converting unbranded unhygienic ice cream consumers into branded ice cream consumers. However, price level still remains a big problem for the branded category as petty unbranded ice cream companies with a price range of Tk. 1 to Tk. 5 have a total market size of BDT 79 Cr which shows a hint of high price sensitivity in lower SEC consumers.

Overall market size of 220 Cr indicates that most of the people in the country are exposed to ice cream or some kinds of derivatives of ice cream like “Baarfi”, however, they probably cannot afford higher priced icy fruit sticks (BDT 6-10) available in the branded segment. B. Competitive rivalry in the Market: Competition is not very intense among the existing five companies because the number of operators is very small considering the total population. Also, complexities of production and distribution process and other entry barriers are stopping new companies from entering the industry. Evaluation of Entry into Ice cream Business for Bangladesh Limited 20 Igloo is confident about its unbeatable first position, but there is competition among other companies such as Polar and Kwality for the 2nd position. However, in current market, no operator is showing much aggressive and visible activity towards growth.

It is expected that recent announcement regarding introduction of ISIS diabetic ice cream by Polar in partnership with DANONE would again create some hype in the market. Reasons behind existing level of rivalry among competitors can be attributed to following reasons: The ice cream industry has few sellers because there is economy of scale through large-scale production. The larger firms have a cost advantage over smaller firms; they can produce more cheaply- making it hard for small firms to survive. Market is bigger than capability of current players and can accommodate them without much trouble. This is because PCC of ice cream in the country is still pretty low.

This market has substantial amount of “barriers to entry”, making it difficult for a large number of competitors to enter the market. The cost of setting up a new plant in this industry is quite high. The cost of entry works as an entry barrier. To get people to try new product, the potential entrant will have to run a big competitive advertising or massive promotional campaign, which is expensive. The prevailing companies created barriers in entry for potential rivals by using extensive advertising and product differentiation earlier which has its effects till now. Another fact is that product awareness and brand loyalty to the existing firms make it expensive for potential rivals to enter.

To further elaborate present competitive reality of the industry the five competitive forces are discussed below: The rivalry among the competing sellers is weak as market is yet to develop more. With various entry barriers not many new companies are attempting to enter this industry. As there are no direct substitute products to ice-cream, the companies don’t face any competition from other industries. As the number of suppliers is very low and, the companies especially Igloo as the best product enjoys high bargaining power or leverage over rivals. But some of the companies such as Savoy are concentrating on increasing profit margin of the retailers for securing a more prominent position in the market. Mainly consumers or buyers decide the pricing.

Keeping in mind the various buying power of people, the companies decide the price of each items. Price of the Items that have the most market demand is kept low so that they are in the reach of the general customers. By lowering the price some companies such as Savoy are trying to maintain a competitive edge. Evaluation of Entry into Ice cream Business for Bangladesh Limited 21 C. Market Sales and Growth Rate: Sales information of the five existing companies for the current years shows the following trend. Company Name Total Market Igloo Polar Kwality Savoy Milk Vita 2007 113. 07 57. 85 16. 8 30. 6 3. 88 3. 94 2008 121. 20 60. 86 18. 35 33. 5 4. 5 4. 34 2009 131. 22 64. 25 20. 19 37. 4 4. 58 4. 88 Table 9: Market Sales and Growth Rate of Branded Common Format Market Volume based market size shows the following scenario prevailing in the Bangladesh market in 2009. Company Name Total Market Igloo Polar Kwality Savoy Milk Vita Single Vol ('000 Ltrs) 3275. 9 1676. 0 486. 7 886. 5 112. 4 114. 1 Multi. Vol ('000 Ltrs) 4296. 7 2198. 3 638. 4 1162. 8 147. 4 149. 7 Total Vol ('000 Ltrs) 7573 3874 1125 2049 260 264 Table 10: Volume Based Market Size The total volume of the branded common format ice cream industry is 7500 Tons of which more than 50% belongs to Igloo, followed by Kwality with 27%.

D. Market Share and Size of the rivals: Market share data for all the local companies show a trend where Igloo is the biggest ice-cream company dominating with a huge market share. Although even 1-2 years ago there was intense competition between Kwality and Polar but now it seems that Kwality is 2nd largest ice-cream manufacturing company in Bangladesh. Polar is in the 3rd position with Savoy and Milk Vita trailing in the market. Market share percentage over the years is presented in the following table. Company Name Igloo Kwality Polar Milk Vita 2007 50% 25. 6% 17% 3. 4% 2008 50. 31% 26. 66% 16. 1% 3. 32% 2009 51. 16% 27. 06% 14. 85% 3. 48%

Evaluation of Entry into Ice cream Business for Bangladesh Limited 22 Savoy 3. 9% 3. 65% 3. 43% Table 11: Market Share of Competitors E. Geographic Sales Orientation: Ice cream still continues to be a city-oriented product and its demand is comparatively low in the rural areas. Reasons behind this are electricity problem outside urban areas and purchasing power of people. Geographic sales orientation of the common format ice cream industry is provided below. 4. 80% 2. 50% 6. 90% 5. 90% 18. 90% 61% Dhaka Chittagong Khulna Comilla Barisal Others Figure 7: Geographic Sales Orientation Dhaka still is the largest contributor in the ice cream segment.

Nevertheless, over the years this trend is shifting. Areas outside Dhaka are also growing making Dhaka’s share lower by small percentage. As urban markets are the major contributors, companies design their products keeping in mind the tastes and styles of the urban consumers. Compared to the other companies Igloo is the most expensive in the common format segment, so they target only city based customers who have the purchasing power. Although other companies such as Savoy are offering low priced product, even their main target is urban people due to nation wide electricity problem. F. Seasonality of Sales: Ice cream industries in warmer part of the world are highly seasonal.

Same is true with Bangladesh. According to secondary data sources sales seasonality looks as follows: Period Name Super-Peak Peak Off-Peak Super Off-Peak April, May, June Months Contribution 46% 36% 15% 3% March, July, August February, September, October, November December, January Table 12: Seasonality of Ice cream Sales This data was validated through interviews with retailers during market visit. According to them more than 75% sales of ice cream came in the hot months. Another insight that could be identified was Evaluation of Entry into Ice cream Business for Bangladesh Limited 23 various festivals and programmes provide scope for higher volume of ice cream sales.

According to companies where only 10-15% sales occurs in the winter season, same amount of sales occurs during festivals like the two Eids and Nobobarsha. G. Distribution/ Servicing System: Mainly common format ice-cream is distributed in two methods that are directly to retail shops and through hawkers with ice cream carts/ trolleys. The various channels of retail shops other than cart that serve as distribution outlets for Ice cream are: 7. Urban General Stores (UGS) 8. Urban Neighbourhood Grocer (UNG) 9. Premium General Store (PGS)/ SMMT 10. Confectionary/ Bakery 11. Modern Trade (MT) 12. Fast Food shops (Recently some fast food shops keep branded ice cream cabinets) Distribution details of all the companies are provided below.

However, detail of Milk Vita is not available as they are mainly milk producer and they have no dedicated ice cream cabinet for retail stores and currently they are not distributing ice cream in Dhaka city. Company Igloo Kwality Polar Savoy Milk-Vita Distribution Method Distributor/ Cart Distributor/ Cart Distributor/ Cart Company - Frequency 2 to 3 times a week 1 to 2 times a week 1 to 2 times a week 1 to 2 times a fortnight - No. of Cabinets 4000 1050 800 176 - No. of Carts 100 20 50 - Table 13: Distribution Method of Market Players Distribution Process: Distribution process through both methods is described below. Retail Distribution: The general distribution that is followed by companies is that distributor sends large refrigerated trucks dedicated to specific territories. These trucks are accompanied by small refrigerated vans.

Main road side shops are served directly from the large truck and shops that are inside small streets are served by the small vans. Order and delivery are done on the same day. The strategy followed is that of replenishment. If the branded freezer of the company is empty, they simply fill it up according to requirement of different SKUs as the delivery people see fit. However, shopkeepers have to buy full cartons (usually 24 pieces in a carton) of single serve ice cream; they cannot buy in pieces. Evaluation of Entry into Ice cream Business for Bangladesh Limited 24 Among the retail shops, there are about equal numbers of branded and unbranded freezers.

This is a normal scene in Dhaka where all shopkeepers require freezer to keep other cold products. However, basic distribution policy is that, if a shop has branded cabinet of a company, they cannot keep competitor ice cream in that cabinet. Thus, penetration can be made possible in shops where unbranded freezers are available. General branded freezer contract policy with Igloo and Polar is that traders have to pay BDT 5000 to take a freezer. Maintenance of branded freezers is responsibility of the company but electricity bill is paid by shopkeeper. However, Polar is not currently giving any new freezer. Kwality gave away their freezers for free; however, they ensured safety of their freezers by checking background of the shopkeepers.

Cart sellers: Cart sellers collect required amount of ice cream from nearby distribution house or company showroom (Igloo has one showroom in Panthapath) on a daily basis. They also have to buy cartons of products, not pieces. Kwality carts collect their ice cream from factory (Tejgaon) or nearby distribution house. Cart sellers contribute around BDT 3000 sales in a day and generally sell at BDT 1-2 higher than set price of each product. The cart sellers generally keep at least a two-day stock so that they can meet sudden upsurge in daily demand of ice cream or if they get the opportunity to sell at parties, programs or any open air event (Wedding at community centres or outside cultural programs at auditoriums).

If cart sellers need replenishment of stock, they even take service more than once in a day either revisiting showroom/ house or they call up company delivery people to serve them at their location if there is opportunity for selling more ice cream. Policy regarding Damaged Ice cream: All the ice cream producers have very good relationship with the shopkeepers. If the retailers have refrigeration problem, company takes ice cream back until the problem is fixed, whether it is stored in branded freezer or not. Also if any ice cream gets damaged or there is bacterial formation, company takes them back. Usual return time varies from 15-30 days. For large sellers however, they take less time.

Payment Method for Ice cream Purchase: All the companies give credit of around one month to large vol

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