NEW DELHI: Ice-cream companies are headed for a washout this year even as the summer of 2020 in India is predicted to be a scorcher.
For ice-cream makers like Amul, Hindustan Unilever (HUL), Vadilal, Havmor and Mother Dairy, the April-June period contributes to about 40-45 per cent of their annual revenues. With a large part of the season already gone and no demand revival in sight, the industry is staring at a cumulative loss of around Rs. 4,000 crore, companies estimate.
"It's unfortunate that both lockdown and the summer season have rammed into each other. As the nationwide lockdown was imposed right at the beginning of the season, we have reported NIL sales. For a summer brand like ours, we expect the Covid-19 crisis will have a deeper impact on the business," said Anindya Dutta, MD, Havmor Ice-cream.
Apart from subdued demand during the peak summer months, the industry is also reeling under financial burden as companies are obligated to pay wages, electricity bills, interest payments and other fixed expenses at a time when production and sales have come to a halt.
Seeking relief on various challenges, the Indian Ice-Cream Manufacturers Association (IICMA) has written to both the central and the state governments.
The association has sought "50 per cent waiver on electricity bills of ice cream manufacturers and cold storage units from March-July 2020" to tide through these tough times.
HUL, the makers of Kwality, Magnum and Cornetto ice cream brands, has also witnessed a sharp decline in business since mid of March-20. In an analysis call, the management of the company said it expects further decline in its ice-cream business as out of home consumption is likely to remain muted in the near future.
For Mother Dairy, demand seems to be steady in its milk booths. "In our case, more than 25 per cent of the ice cream business comes from the milk booths and we are not seeing any drop in demand from these stores. However, closure of general trade and vending carts have been a dampener," said a company spokesperson.
R S Sodhi, the managing director of Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), which markets products under the brand Amul, had also said that the demand for ice-cream has fallen sharply by 85 per cent during the March-April period. He, however, expects consumption to pick-up as more and more shops open across the nation.
Companies are also refraining from expansion as it means additional costs. "New retailers, new deep freezers etc also add to cost," said a company executive, adding that as it is ice cream makers are operating on wafer-thin margins.
Margins in the ice cream category hovers around four per cent, the person said, with rise in prices of raw materials margins are under further stress.
The companies, however, are working on aligning their supply chains and aggressively investing in building distribution.
For instance, HUL plans to list more of its ice cream push carts on Swiggy, while Havmor has partnered with online food delivery platforms like Zomato and Dunzo to deliver ice-creams in a bid to boost in-house consumption and, in turn, rev up sales.