Arun Ice Cream Case Report

Facts of the company

Arun Ice cream was an Ice cream maker & distributor company established by the person named R Chandramogan, son of vegetable wholesaler from the south Indian state Tamilnadu. He was completely inexperienced person and did not complete his college studies as he discontinued at very pre university stage, but he had a strong urge to run the business and to succeed as a businessman.

Initially he did not know what the business to go for but after the suggestion given by his uncle he went for the ice cream business. He started with a small premise in busy locality of Madras with which he got succeeded and moved to three fold expansion in just second year of its commencement which was turned out and again resumes to previous old premise! He continuously improved the quality of his product to meet the needs of customers thus he captured the market of the hotels. Chandramogan was applying trial & error method in his business!

As Chandramogan was searching for niche market for his business he captured the rest 5 % market of educational institution and shipyard chandlers about 95 % about 1975. Talking about this 5 % market the rest 95 % market was occupied by other big banner competitor! He also approached the district market of Tamilnadu completely ignored by competitor and captured the market with the sound strategies! As his market for product grew up his sales were also taking place in high proportion and became enough financially sound to payback the debts and to earn enough.

Chandramogan identified Pondicherry, Madurai, Kumbakonam, and Sivakasi as the potential market and began advertising in such market to create brand awareness and to establish Arun as a strong brand, thus he also captured these market because these markets were also ignored by the competitor. Initially he started selling Ice cream in such area on ad hoc basis but then he gained the market and also the offer from franchisee agent who was keen to invest in the Arun’s franchisee, this lead to birth of franchisee market of Arun Ice cream which was grown very teadily that even other agents were also began to invest in Arun ice cream in their own freezers. In 1991 Chandramogan also established another high capacity plant in Salem close to Kerala and Karnataka and in the milk belt which facilitated procurement of milk. Through regular advertisements and marketing his product Chandramogan established chain of franchisee parlours of Arun ice cream. Arun emerged as the largest ice cream manufacturer in Tamilnadu with turnover raised to 28 million from 150000 in 1970 and 425000 in 1981.

Chandramogan established ‘seat and eat’ themed parlour in Madras suburbs and outskirts, By the year 1999 Arun emerged as owner of the 60 % market share of Tamilnadu and 36 % of four south Indian states. Arun began to introduce 7 to 10 new flavours every year and thus Arun’s product folio consist of 30 to 35 flavours at any given time! Arun also acquired a fully automatic plant in Red Hill area with capacity of 15000 litres of ice cream mix every day. And began operated in 1995. Because of the investment restriction The Madras plant was setup under a separate firm named Hatsun milk Products though it was fully established by R Chandramogan.

Because of the continuous advertising and promotioning of the brand Arun began to earn tremendous attention of the customers and also began to be supported by the large numbers of the franchisee agents which played a crucial role in emerging as a big banner production and distributor of ice-cream company!

Vision: To expand the company and make the company as owner of largest portion of markets share through continuous expansion and by increasingly satisfying the new and sustained customers!

Mission: To provide best quality of ice-cream to continuously expanding customers.

Company’s different ventures

• Established first ice-cream manufacturing plant in Madras under the firm name Hutsan Milk Products
• Established another completely new plant in Salem nearby Kerala and Karnataka in 1991
• Established another new fully automatic manufacturing plant in five acre land on Red Hill area on the outskirts of Madras city.
• Established a Depot in Madurai in 1995 for handling distribution over franchisees located in Tamilnadu, with adequate cold storage facility.
• Established 700 franchisees outlets in Tamilnadu, Karnataka, Kerala and Andhra Pradesh for continuous meeting the needs of increasing customers by the year 1991

Core Competencies 

1. Chandramogan had a strong urge to become successful as businessman
2. He continued business with strong advertising and promotioning activities to establish and more grab more numbers of market share
3. 3 major ice-cream manufacturing plant in Madras, Kerala and Karnataka
4. Excellent management over distribution handling over depot
5. 700 franchised outlets Having 60 % ownership of market share of Tamilnadu and 36 % of four south Indian states
6. Continuous striving for new market and trying to satisfy as much as new customers with best services and products
7. Good personal level of relationship with all franchisee owner agents
8. Established milk collection centres in major milk producing villages close to ice cream plant
9. Warm relationship with all milk producers and dairy farmers
10. Maximum satisfaction to dairy farmers in pick season of milk
11. Rich product folio of 30 to 35 products available at any given point of time
12. Advanced sales promotion activities in which participant can take part and have the product at very negligible price for making customers aware about different types of products
13. Excellent promotional campaigns for overall marketing plan
14. High margin proportion for franchisee handling agents at 20 to 25 %, comparing to major competitor at 12 to 15 %.

Strategies & Planning

• He focuses the key selling point like addressed to outside the locality and focus on 5% market which are general stores, hotel, restaurant, college canteen and social events like wedding parties.
• He met to agents who procured and supplied to various ship line and understood special requirement regarding packing and delivering to capture the market.
• Where fresh ice-cream was not got, he had plan to supplied ice cream on ad hoc basis through agent within 4-5 days of the booking.
• Because of imbalance in seasonal demand, milk which is the key input was procured from the farmer by collection center and he offered guaranteed procurement of certain quantity of milk based on his lean season and peak season, pay higher price.
• He sourced other input and ingredients such as sugar, fruits, packing material, etc. rom leading wholesaler/ manufacturer.
• He transported his supply by railway or by refrigerated vehicles and also planed to set up new plant in 250-300km. radius area to provide effective service with average 7 to 10 flavors ice cream with the product port folio of 30 t0 35 products.

SWOT Analysis

Strength

• He was risk taker and very enthusiastic person with strong thinking of “doing something “
• Provide vast variety of product with 30 to 35 different favor ice cream
• There was a strong symbiotic relationship between the company and its franchises. He recruited well skilled and experienced manager in head of division.
• There were 700 outlets and 120 franchises and market share around 36% in south India.

Weakness

1. He uses single tier distribution strategy, directly supplying to the retail customer sales.
2. He did not have the excellent capabilities of anticipating the future demand
3. He gave his franchises to relatives and uneducated people
4. Vast advertisement without proper assessment of financial position
5. He sold his product to such area where transportation services took more expensive. Don’t match demand when there is a pick season because of shortage of milk and other material.

Opportunity

• There is a huge network of franchises and it will expand
• There is good chance to stand in competitive environment after emerging in Hatsun Milk Food Ltd.
• There were lot of variety in product for demand and growth of business
• It has cover 60% market so good sign to future growth through set up new plants.
• Advertising & promotioning of brand made his company strong in terms of market share & brand recognition

Thteats

There are various competitors which are giving their best in grabbing the market share

• Chandramogan was not having specialized knowledge in managing the business
• Distribution channel was not so wide to cover all the marker share

Problem Identifying Facts

He did not believe in delegation of authority, he used to take the decision on his own! He was applying ‘trial & error’ method in business. Initially he stepped in market with vastly improved service and deliveries they were unaccustomed to He had restricted big banner ,elderly, & highly potential franchisees agents to join him as franchisee agent. Initially the problem arose because of the seasonal demand-supply imbalance in respect of the product and its extremely short shelf life. Even despite the financial crisis, he continued to increase the numbers of franchisees on one hand and in the variety of ice-cream flavours on the other hand.

Establishing Problem

Because of the centralization of the authority & no delegation of responsibility over the wide franchised network, nobody is able to take key decision in meantime Chandramogan was applying ‘trial & error’ method in business which sometimes became worst nightmare for him. Chandramogan was very enthusiastic about the expansion and approaching the different beneficiary projects, this led the company to financial imbalancement of the company during the expansion and establishing the plants. He was making more expenditure on advertising and promotioning the brand and products of the company which also played significant role in financial imbalancement.

Generate Alternative

Minimizing expenses over advertising and promotioning the brand can lead to effective utilization of the resources towards a better management of company.

• He should improve his decision making skill and he should learn some of the strategies about the business marketing-promotioning & expansion of the business
• He should invite the suggestions from the all its franchisee agents because there are the franchisee agents who are directly dealing with the customers so they can better understand the customers He should appoint high educational people who help him to lead business in good position.
• The remote area where no transportation facilities available in that case they have to supplies in fixed period so that cost can be minimized
• He should have the capabilities of forecasting the future and to act according to the customers trends
• He should establish such a small various numbers of the distribution channels area wise which can distribute its products effectively to the customers in meantime.

Evaluate The Alternatives

Chandramogan improving his skills and appointing some experts person ould lead his business at good position:

• Inviting the suggestions from the all over its franchisee agents can lead the company towards a better understanding the needs of the demand of the customers.
• Suggestion from agents, franchisees members and customers will help to fill defects in production, marketing and distribution areas.
• Learning from past events and anticipating the future events can lead the company towards excellent grabbing the market share and establishing the increasing numbers of customers in very lean time Establishing excellent system of distribution channels can lead the company to reach every customers and satisfy them, thus maintaining the good relationship between the supplier and consumer.

Best Alternative

Recruitment of highly trained and technically experienced people lead the company in better way in context of reaching the customers and taking the decisions related to minimizing the cost expenditure taking place on advertising and promotioning the brand and steps related to expansion and diversification of the business.

Contigency Plan

The company should most importantly recruit best personnel for the technical and distribution task of the company for better management of the company. The company should establish such a distribution channel which can efficiently reach every franchisee agents thus reaching every customer. The Company should control their expenditure on advertising & promotioning the brands so that available resources can be used for different development purpose.