Economy

Ice cream sector melts under lockdown woes

Rutam Vora Ahmedabad | Updated on April 03, 2020 Published on April 03, 2020

Since February, demand for ice cream has been dull   -  THE HINDU

Uncertain future, escalating costs and negligible sales bring financial stress

The ice cream industry is melting under the heat of the nationwide lockdown. What adds to their woes is the uncertainty over the return of normalcy even as the summer season progresses.

For ice cream makers, the four months of the summer season account for over 40 per cent of the annual sales. This year, since February, the demand has been dull, first due to the extended cold weather conditions and then the coronavirus outbreak. Going by the present scenario, the ice cream sector is headed for a near washout this summer.

Twin challenges

The country’s approximately ₹10,000-crore ice cream industry is currently staring at two major challenges. First the demand slowdown during the peak season and, second, the financial burden over the lockdown. As sales have come to a halt, stock inventories are piled up in cold storages. Having no sales, there is currently only financial outgo for the companies, which have obligations to pay wages, electricity bills, interest payments and other fixed expenses.

“It is difficult right now to make a judgement on the ice cream industry outlook. Major business comes from these four months. The season had just started picking up in February and this crisis came up. We are not sure how and when the lockdown will be lifted and what the people’s response (demand) will be after that. We have to see how things shape up. Currently, there is a lot of uncertainty,” Rajesh Gandhi, President, Indian Ice Cream Manufacturers Association told Businessline.

Milk/SMP availability

Notably, liquid milk procurement has increased, but consumption has dipped as bulk buyers such as hotels and restaurants remain closed. This has diverted a larger part of liquid milk to skimmed milk powder (SMP), which is one of the key ingredients for ice cream players. A reduced off-take and increased stocks of SMP may bring down the prices. But with no demand during the peak season, the ice cream players are less likely to have a cost advantage.

Korean major Lotte Confectionery’s ice cream arm, Havmor Ice Cream, stated that it doesn’t see any concern on the cost aspects of milk and SMP. “We are suitably covered on milk/SMP and do not see any concern on it, as our production and sourcing are aligned,” informed Shekhar Agarwal, Head of Marketing, Havmor.

Commenting on the outlook, Agarwal said, “We had a few plans in the pipeline for this summer but unfortunately the Covid-19 outbreak has scuttled them. There will be an impact on Havmor and other brands in the industry from a business point of view. The severity of the impact will depend on how quickly the recovery begins.”

Ice cream outlets of all major players having been closed since March 25, the summer spirit for the companies have been dampened.

Amul readjusts

Largest milk products maker Amul, which sells its milk products, including ice creams, through its own milk parlours, has also witnessed slump in ice cream sales.

“The sales are drastically down. The ice cream sector will definitely get impacted because of the slump in demand during this peak season. For Amul, it may not be a big problem as we may shift to other products, but those players dealing exclusively in ice creams will surely face the challenging times,” said RS Sodhi, MD, Gujarat Cooperative Milk Marketing Federation (GCMMF), which sells Amul brand of ice creams.

Published on April 03, 2020
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