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Post-Covid pandemic, the Indian ice cream sector is witnessing a steady push up the pricing bracket, with companies churning out premium products, including low-sugar and low-fat content options gaining traction in urban areas. Meanwhile, an improved cold-storage back-end and quick commerce expansion are also helping boost sales in smaller towns.
Ice cream sales in India had dropped during the first wave of the Covid-19 pandemic but recovered and even boomed after the cases dropped to low levels in March 2022. Companies, such as Ahmedabad-based Vadilal, saw a drop in turnover during the pandemic but later recovered. Analysts attribute the growth to increasing disposable income, quick commerce companies like Zomato and Swiggy providing the last mile link and changing consumption trends. Ice cream products with low sugar and fat content are selling well, and the trend will likely continue.
Change of Taste
In the 26 years of being in the industry, R S Sodhi, president of the Indian Dairy Association and former managing director of Amul, has seen how premium ice cream keeps changing its shape and title.
“What was premium in the 90s is now standard; take double chocolate or butterscotch as an example. We had simple cones before, which are replaced by jumbo cones now.
“As consumers keep changing tastes, brands attract consumers with new flavours and variants each season to create product differentiation. And that’s a good thing for the premium industry,” he told the Indian Express.
Anand Ramanathan, Partner, Deloitte, thinks consumer behaviour has a lot to do with changing patterns in consumption. “There is a dramatic growth. As people become more health conscious after the pandemic, the low sugar, low-fat trends will continue to sell, leading to faster growth for premium products.”
With the easy availability of ice cream through quick commerce, in-home consumption has also grown.
“There is definitely a positive signal for ice creams after the pandemic as in-home consumption led to the growth of impulse consumption, causing further premiumisation,” said Sodhi.
Siddhant Kamath, Director at Naturals Ice Cream, said much of the company’s growth has started to come from smaller Tier-2 cities.
“Higher disposable income and the middle class’s growth have helped generate good sales and brand loyalty. We are looking to add 25-30 stores this year to expand our pan-India network further,” Kamath added. The company has grown to 155 stores and 75 cloud kitchens in the last three years, registering its highest turnover of Rs 230 crore in FY 22-23.
Adding flavours
India currently consumes 400 ml of ice cream on average, compared with per capita consumption of 22,000 ml in the US and 3,000 ml in China. Maharashtra represents the largest market, accounting for nearly 14 per cent of India’s share.
India’s organised ice cream sector, which accounts for 65 per cent of the total market, is estimated at approximately Rs 8,000-9,000 crore. Brands make ice creams more relevant to geography to ensure freshness and seasonal customisations.
Hindustan Unilever (HUL), which markets ice creams and frozen desserts under Kwality Wall’s brand, had, last October, offered Noler Gur ice cream during the festival season. The parent company saw its ice cream segment post double-digit growth in the previous December quarter.
Mother Dairy, meanwhile, launched “Indian flavours” such as Phirni, Paan, Malai, and Pista. Baskin Robbins, India’s largest ice cream retail chain with 750 outlets in more than 200 Indian locations, introduced Gulab Jamun ice cream and a Gulab Jamun sundae.
Vadilal, the country’s oldest ice cream brand, has a Gourmet Natural Tub Range, which includes Gulab Jamun, Mahabaleshwar Strawberry, Kesar Pista, and Classic Malai flavours. “You will always need themes, where there is constant innovation which happens in ice cream with flavours… it also kind of signals some freshness to the category,” said Ramanathan.
With emerging trends, companies are also finding ways to cater as much as possible. “With micro-markets now, the manufacturing strategy is changing as it is possible to distribute premium products in smaller lots,” the analyst said.
Reaching the backwoods
But what is happening in the small towns?
Large companies such as HUL are acquiring smaller ice cream brands to capture a larger share of the fragmented ice cream market in Southern India. The Adityaa Milk ice cream brand acquisition by HUL from Vijaykant Dairy and Food Products Ltd in 2021 is an example of this. With investments in technology, sales, and distribution, monitoring the product has become easier, leading to higher consumption in Tier-2 markets. Purchasing smaller brands also helps the distribution process as the logistics become more viable with low-cost manufacturing.
“In our Tier-2 markets, with investments in technology and sales and distribution, monitoring the product has become easier, leading to higher consumption,” added Ramanathan. He said the ice cream journey would converge in favour of strong national brands rather than regional ones, which, over time, will lead to acquiring local brands to serve in Tier-2 and hinterlands.
According to Sodhi, the growth is not just confined to Tier-1 cities. With 24-hour electricity helping to manage cold storage better and the internet leading the way for e-commerce expansion, premium ice cream products are more readily available.
“Share of premium products may be more in metro cities, but there are definitely more takers than before in smaller towns,” Sodhi added.
Despite the growth in the cold chain market, the Indian cold-chain management still is woefully short, causing branded ice cream companies to lose sales in areas far from their production centre. According to Rajat Wahi, Partner, Deloitte India, the cold chain market is expected to grow 20-25 per cent in the next 4-5 years.
As per one IMAARC study, India’s ice cream market may touch Rs 50,840 crore in the next five years, with a compound annual growth rate of 17.5 per cent.
