The Canadian ice cream market witnessed a steady growth between 2005 and 2009, the growth in this market is expected to accelerate marginally in the forthcoming five years. Generating total revenues of $2. 1 billion in 2009 the market grew by 3. 4% in value, the compound annual growth rate of the market in the period 2005-2009 was 3. 3%. In Volume the market grew by 1. 5% reaching a volume of 388. 4 million liters. The growth rate for volume was same in the period of 2005 to 2009.
As we can see the ice cream market in Canada had a steady growth over the past few years in value and volume. Observing the trend and growth of the ice cream market it is reasonable to suggest that the market for ice cream will continue to grow in the following years in value and volume. In 2014 the Canadian ice cream market is forecast to have a value of $2463. 9 Million which is an increase of 18. 6% since 2009. Reaching a volume of 417. 6 million liters, the market will experience an increase of 7. 5% since 2009.
The numbers show a favorable growth potential for our product and that the ice cream market is a good source of revenue for second cup. The market is segmented into 4 Categories; Take-home ice cream, Impulse ice cream, Artisanal ice cream and Frozen yogurt. Take-home ice cream accounts for 67. 2% of the markets total value and is the largest segment. Artisanal ice cream (our market segment) is 10. 5% which is a value of $207. 7 million. When it comes to market share David Chapman’s Ice cream Ltd is the leading player as it generates 24% of the markets value followed by Nestle S. A which accounts 23. 6% of the market share. It will not be a surprise to us that the market is concentrated with the top three players holding 65. 6% of the total market value which include both international and local players. It is possible to enter this market on a small-scale but it is better on a larger scale. This is because the presence of strong brands and the scale of economies associated required for high volume production facilities deter new entrants from enter the market. High exist costs increase rivalry.
We as second cup can use this to our advantage as we are a well established chain and the risks are low as our revenue is not dependant on just ice cream. Second Cup can easily achieve benefits from economies of scale as we already have well established suppliers and a good brand name to start with. The only limitations to entering this market concerns distribution channels. There are high storage costs for fresh ice cream and there is considerable investment in equipment but if the product is accepted n the market and there is a good response the costs can be recouped by adding a good margin to the ice cream sold. Another problem is that manufacturers of ice cream can differentiate their products quite strongly and to hold on to market shares they may be willing to push out old flavors and replace them quickly. Adopting our flavors can be a big threat as that will take weaken our strong differentiation created through caffeine in ice cream.