Premium ice-cream parlours put the freeze on expansion, seek to rationalise operations

General Mills-owned Haagen Dazs has been steadily shutting down its ice cream parlours across the metro markets.

It has reduced its count to having a single parlour each in Delhi and Mumbai. There are also indications that it may bring down the count in Chennai, too. The firm has also been staying away from opening or relocating to new locations in the key metro markets.

MNCs with super-premium ice cream brands such as Haagen Dazs and Nestle’s Movenpick, has always found the going tough.

Achieving the threshold volumes needed to sustain the revenue-to-rental ratio across big markets such as Delhi and Mumbai has always been challenging.

But Salil Murthy, Country Head, General Mills, is optimistic about the business in India. “Relocating and shutting down outlets is a natural part of the business. For General Mills, Haagen Dazs globally is a big strategic business. We will continue to expand our parlours and retail presence in India,” he said. However, in the past six months, the firm has downed the shutters at its ice cream parlours in strategic locations such as Bandra and Palladium mall in south Mumbai. Its south Delhi parlour at Select Citywalk mall has now been shut aSmaller spacesnd is currently left with a single parlour in Gurugram.

Smaller spaces

“Mumbai and Delhi are our biggest markets and our strategy will be to continue to address the middle class with purchasing power. For our business model to be successful, we have decided to move away from areas with high rentals,” Murthy said.

Going forward, industry observers claim, having large-format ice cream parlours at 1,000 sqft may not be sustainable for such players.

“Haagen Dazs may decide to reduce its parlours in favour of retail freezers, but even those seem to have considerably reduced of late. It is in the process of winding up its parlours in a metro market like Chennai as well,” said an industry observer.

Movenpick has also being cautious while expanding its parlours through its master franchise, Nectar Hospitality.

Having entered the country for the third time, Movenpick has again decided to focus on retail trade while keeping its overheads low in the parlour business.

“Consumer spending has slowed down over the past two years. High import duties at 30 per cent along with 18 per cent GST, is making it difficult for us to absorb the costs,” said Tarun Sikka, Managing Director, Nectar Hospitality.

With about seven parlours across the metro markets, the company has been trying to control the high overheads and steep rentals at its parlours by keeping them small, at 250-300 sqft.

GST impact

“Apart from the 18 per cent GST on ice creams, which most of the players are grappling with, the cafe format attracts GST at 5 per cent, and we cannot avail of input cost credit in this format. While we are planning to expand to new markets, we have to keep our sizes small since the revenue-to-rental ratio is not good in this segment,” Sikka added.

Having shut down a couple of parlours in Gurugram and Bengaluru, Movenpick is now tapping into smaller markets such as Pune and Chandigarh, which have relatively low rentals compared with the bigger markets.

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