Industry Analsis of Arun Ice Cream

The ice cream industry in India is in many ways, reflective of the overall population distribution. The country’s population is primarily rural with approximately 65% of the population living in villages with a population of less than 5,000; this means there are well over 150,000 villages with a combined population in excess of 650 million. This has contributed to a highly fragmented industry that by many estimates has over 70,000 ice cream entities. Many of these are single family operations where the product is made either in the home or in very small factories and sold on the streets. The 350 million remaining people are concentrated in the cities where the industry is reasonably concentrated in the hands of a few international and domestic firms. It is estimated that only 30% of the entire market is “organized” and the industry meets the classic definition of a fragmented industry, that is, one where there is an absence of market leaders with the power to shape industry events. Ben & Jerry's has prepared a detailed analysis of the industry following the pattern established by Michael Porter, the complete study is included as Appendix A with a brief description of the major forces as follows. v Barriers to entry – The two favorable factors are the opportunity for product differentiation within the super premium segment and the importance of corporate experience in all phases of the operation (production, distribution, and marketing). The most important down side factor is that consumer switching cost is nil. v Power of buyers – With ice cream there are virtually no important end consumers. However if one focuses on the consumer as retailer then the importance of the few powerful and growing grocery chains represents a significant hurdle. This is offset by the almost complete lack of potential for backward integration and the relative insignificance of ice cream to this customer group. v Power of suppliers – The most important