Amul, Kwality Wall’s and Mother Dairy all recorded a steep decline in sales.

An ice cream bar
news Consumer Goods Wednesday, May 13, 2020 - 16:17

Whether it's respite from the summer’s scorching heat or a mood lifter in down moments, ice cream is a go-to treat for many. And though the best ice cream sales are primarily from March 15 to June 15, customers likely won’t find their favourite flavours at the local shops as manufacturers are expecting a meltdown this year. 

From Amul and Hindustan Unilever (that makes Kwality Wall’s, Cornetto and Magnum), to several small ice cream manufacturers, the industry saw a sharp decline in sales, due to the high season coinciding with the nationwide lockdown. 

Ice cream makers are facing a nightmarish situation as manufacturing, distribution and supply have been hit by restrictions over the pandemic. That means a huge disappointment for customers who can rarely find ice cream at stores these days.

In a letter to Finance Minister Nirmala Sitharaman, the Indian Ice Cream Manufacturers Association (IICMA) said that production and storage of ice cream in cold storage is highest from January to March. “Crores of inventories (Ice Cream, raw material and packaging material) are in cold storages and storehouses but being a perishable item, it will expire by Aug 2020,” the industry said. 

In their peak season, ice cream makers saw several factors impacting their sales. It first started with rumours that eating ice cream would cause coronavirus.

According to Anuvrat Pabrai, the founder of Pabrai Ice Creams and the spokesperson for the (IICMA), fake news about coronavirus being spread through ice cream dampened sentiments, and locals in some places were not allowing people to open ice cream stores. The Food Safety and Standards Authority of India (FSSAI) issued clarifications that this was not the case, but it did not help much.

With restrictions easing, and interstate transport of goods being allowed, sales have marginally started picking up, but is nowhere close to usual. 

Amul Managing Director RS Sodhi told TNM that sales in the last week of March, soon after the lockdown was announced, were down by as much as 95%. This figure has been inching upwards, with the decline in sales at 80% in April, and currently hovering at a decline of 60%. 

The sector is also one of many to have asked the Centre for relief, including asking for help to pay wages, and seek to pay wages at MGNREGA norms, instead of the minimum wages for industries. 

The ice cream industry mainly depends on three business avenues to bring in sales: An extensive dealer distributed network, ice cream sold through pushcarts and institutional sales.

Supply chain issues

Ice cream has not been considered an essential commodity, with the exception of 1-2 states. This meant that during the first two lockdowns, there was no manufacturing of ice cream, and transportation of ice cream, which requires a proper cold chain supply network, was severely impacted. It is through this network that major ice cream brands reach stores across the country.  

During March and April, that completely stopped, except for stock that places like supermarkets and hypermarkets already had.

With zero sales in ice cream parlours, malls, standalone carts and others due the shuttering of businesses in lockdown, Hindustan Unilever Limited said that it has noticed a “sharp deceleration.”

“While manufacturing is continuing in limited capacity, sales continue to be low,” a company spokesperson said. 

Similarly, Mother Dairy too said that its ice cream business, which is about 3.5% of the total business, has been impacted due to a drastic reduction in selling points — like vending carts and retail outlets etc.

“We are hopeful that as the situation improves, we will be able to secure at least 80% of our annual business in the balance year,” a company spokesperson said. 

No pushcarts

Ice creams sold on pushcarts also constitute a huge chunk of sales for many ice cream brands, especially smaller manufacturers. Amid the lockdown, sales through pushcarts (primarily done by migrant labourers), has been nil.

Pabrai estimates that there are approximately one lakh pushcarts in the country in the organised sector and another two lakh in the unorganised sector. In addition, villages and small towns have local pushcarts too, all of which are not generating any revenue. 

Institutional sales

The third avenue of sales is the restaurant, hotel and caterers division, which Pabrai says is a big chunk of their business. 

“All marriages have ice creams, and hotels and restaurants have to sell ice creams. These constitute a very large chunk depending on the brand - anything between 25 to 50% of the total sales come from institutional sales. This has totally stopped,” he added.

However, it is not necessarily an utter lack of demand that has led to the present situation. Food items, including ice creams and frozen desserts, are allowed. However, the industry believes that ground level implementation is still under question with some states choosing to allow ice creams, and some not. 

Other factors impacting sales

Amul’s Sodhi says that sales of their other products have even increased, and if Amul can distribute that, it can distribute ice creams as well.

“Another issue is that shops are not open after 11 am-12 pm in many places, and ice cream sales primarily happen in the afternoon. If shops are not open, then the customer won’t be able to buy. In the morning, they only buy things they need, like milk and curd,” he added.

Sodhi expects sales to stabilise soon after conditions come back to normal. However, over 50 days in, they are still working out wrinkles with various local administrations around the country. 

Seeking relief

Letters written by IICMA to the government asking for relief state that 20 lakh people are employed by this segment. 

However, they also seek to pass on the misery to the workers, and have asked to slash wages at a time of lockdown, when sources of income are already few and far in between. 

From an employee perspective, IICMA has appealed for adjusting at least 33% days of the total lockdown days from paid leaves of employees, and the salary after that to be shared between the government and the manufacturer in a 70:30 ratio, which they need to continue for a “reasonable period” after the lockdown.

“Till the situation stabilises and establishments can manage their cash flows, wages should be permitted to be paid at MGNREGA norms instead of prescribed Minimum Wages for Industries & Establishments,” the letter states. It also asks for minimum wage/dearness allowance to be kept the same, with or without change in Wholesale Price Index (WPl) for an entire year. 

For now, the ice cream may be suffering a meltdown, but all eyes will be on Finance Minister Nirmala Sitharaman’s press conference to see if SMEs and in particular, this sector, will get any relief. 

With inputs from Shilpa S Ranipeta