B's Home Made Ice Cream vs International Brands

Table of Content

Introduction. ………………………………………….3

Executive Summary…………………………………...4

Issues in the Market …………………………………..5

Situation Analysis …………………………………….6

SWOT Analysis………………………………………..7

Industry and Competitive Analysis……………………8

Primary Research…………………………………….…9

Porter’s Five Forces……………………………………12

Present Retail Model for B’s…………………………..16

Conclusion …………………………………………….17

Assume that you were a market analyst hired by a client to advice on a decision to invest in B’s Home Made Ice Cream Ltd. The client does not need a financial analysis bit needs to understand the position of the retailer in respect of its main competitors Cold Stone Creamery and Dairy Bar.

Briefly review the industry (Porter’s 5 Forces Model) history of the retailer and its competitors and describe its general strategy to maximize value created for the consumer vs. its competitors- the retailer’s target market and positioning, its retail mix (merchandise variety and assortment, pricing, services offered etc.)(25 Points)

Introduction
Ice Cream is very popular treat in the Trinidad & Tobago market, the range of customers for ice-cream come from low income all the way to the upper middle class income.
The local ice-cream industry has expanded tremendously in the last 10 years. The present trend for the Caribbean ice-cream market is a growth trend and the trend is learning towards consumers asking for a healthy product served with local fruit toppings. Psychologically this type of delicious desert allows the customer to indulge and satisfy that urge for a delicious sweet treat without the guilt feeling.
B’s home Made Ice cream is a locally owned Ice Cream Company. The idea of selling Ice –Cream came from the experience of a couple standing in long lines on a Sunday evening to enjoy the popular home made frozen treat. The birth of B’s home made ice cream came when this couple got the approval of a loan for $TT3, 000 at a credit union to purchase their first Ice-cream pail, blender and fruits.
The first retail model for B’s was the use of ice cream carts positioned in different strategic locations. The first cart was stationed around the Queens Park savannah. What clearly started as a small family business has now grown into an enterprise with a staff of approximately forty workers

on a full time basis. The analysis will lead the exploration of various opportunities for B’s Ice cream. For our paper we will examine two ice cream competitors to get an understanding of B’s competitive advantage. The first competitor is international franchise Cold Stone the second a localized Ice cream distributor Diary Bar.
Executive Summary
Ice cream is a frozen treat made from pasteurized mixture of milk, non fat milk solids, cream stabilizers and sugars. The contents and manufacture are regulated by the government and must meet standards to be called ice-cream. The product must contain a minimum of 10% butterfat which is dispersed throughout the mix to impart smooth texture. Fresh sweet cream is the best source of butter fat. Other fat sources can be used which can include hydrous butter oil concentrated sweet cream and dried cream. Other standard ice cream ingredients include sugars and sweeteners milk proteins emulsifiers and stabilizers. Sweetening agents can be natural or artificial. The milk proteins used are whey proteins and casein. Stabilizers help to prevent texture deterioration caused by temperature fluctuations that occur during distribution, this causes ice crystals to melt and reform into larger crystals. Emulsifiers enhance the whipping qualities of the ice-cream mix by creating a smoother body and texture. Research has shown that ice-cream is not a product that customers research for price comparison; customers just try different brands

to determine which brand they enjoy most. They are usually willing to pay the ask price to enjoy their favorite brand. Ice cream is a product which is also bought on impulse for this reason location is very important. The time of the year and celebrating different occasions also play a large role in the quantity bought by the customer. Trinidad & Tobago enjoy a warm climate which is an added incentive to consumers to enjoy the frozen treat on a regular basis.
Issues in the Market
On a global scale the ice-cream industry is seen as a growth industry and is valued in the billions of dollars. “In 2005 the ice-cream industry globally was worth $36.46 billion dollars” [1] data has shown that “2010 sales in this industry has surpassed $40.6 Billion” [2] which is an 11% increase from 2005. Global trends are good to use as a measure of the trends for our local market since the local market is heavily influence by the U.S. Market.
Globally the ice-cream industry is segmented into two primary divisions: Take home ice-cream and the super market and hyper markets. Take home is the larger segment of the market which accounts for about 46.6%.
More than 90% of the house holds in Trinidad and Tobago consume ice-cream and related frozen desserts. The actual data is not available for the production and total sales every year for this industry it has been reported by the Caribbean Basin Agricultural Trade office that the ice-cream

industry has the most potential to succeed. The market however is asking for variety and healthier choices. The threat of new entrants into the desert market in Trinidad and Tobago is to date unavoidable and very competitive. Dairy Bar ice cream has been on the market for a very long time since 1970. They operate in a highly competitive market yet still have five branches open in strategic locations, Main Road Chaguanas, Piarco, St. James and Curepe. One of the advantages to their brand against one of the fairly new competitor is that they are both owned by the same company; hence, the threat of this new entrant was strategically positioned to target a different segment of the market.
Threat of Substitute Products or Services- the market for yogurt/ gelato/ dark chocolate is booming. It has always been on the market, however, as people become more educated/ travel more and health conscious, the market for these products appears to be thriving in their industry. The variety of yogurt as compared to ice cream is almost on par. Today, people are leaning towards a healthier lifestyle, and are promoting weight loss and a great body as a result of choosing the healthier choice of desert/ food.
The bargaining power of customers has been prominent due to the level of competition in the industry. Prior to the entry of foreign ice cream and deserts, Dairy Bar Ice cream was once pitched as premium priced ice cream in Trinidad. Customers now have a range of options to choose from in the ice cream industry. Although Dairy Bar has their own niche target market and caters for a specific segment of the market, customers still know to themselves that they have options and a wide variety to choose from, hence making their purchase a more valuable one. “Value for money” plays a pivotal role now that their bargaining power has heightened.

The bargaining power of suppliers within the ice cream Industry is highly competitive and poses a significant amount of pressure on the availability of raw materials and this in turn affects the cost of the finished product to the customer.
Competition exist within the industry, however, Dairy Bar Ice cream shops are strategically positioned in a category that does not compete with the top ice cream shops in the industry. Dairy Bar ice cream shops are a family oriented retail outlet that offers ice cream and deserts to middle to lower income bracket families.
SWOT
The strengths that were identified by the marketing manager for Dairy Bar Ice cream was that they remain competitive in the local market space and their price is competitive with in the local ice cream industry. Their retail stores are family oriented and its décor is tailors for families.
Weaknesses, they identified their distribution channel as one of their major weaknesses. They believe that they need more market presence and needs to establish more independent stores; Franchising would now be an option.
Opportunities for Dairy Bar ice cream would be to establish a relationship with supermarkets and restaurants to offer their brand at their stores. Because of the local taste and local manufacturing they see this as an opportunity to develop the local ice cream industry.

Threat, the taste and preference is changing and this is inevitable. As other ice cream enters the market, people tend to acquire the taste of international standards rather than appreciating their local flavors. The location of the stores seems to pose a threat with regards to safety for some of the branches. Dairy Bar ice cream is aware of this and is considering security officers at their stores. Dairy bar has only sixteen (16) flavors) where as other competing brands has 35-40 favors.
The overall performance of the shops, since it was bought over from the Aying Family, known as the Original foods limited, is now in the hands of favorite foods limited and has maintained the same taste and the same recipe since 1970. Their ice cream formulation has allowed them to be consistent with regards to taste and this has allowed the company to maintain their customer base and stay profitable with in the industry. With the upgrades to the stores and the increase in market presence Dairy Bar sees their brand as a leader in the local ice cream industry and will strive to maintain and meet the needs of its local market.

What does the Brand Communicate

The B’s brand is strong and is still growing. B’s maintain a local neighborhood feel of the brand. B’s has a strong positive brand image. Generally B’s ice-cream use pure extract and fruits, nuts and syrups to add flavor. Mixing popular flavors to create imaginative and popular ice-cream flavors like Ginger Coconut. Using all top quality natural ingredients and no artificial stabilizers B’s created a clean tasting ice-cream. The message that the product is made with only fresh local products reaches the consumer and is communicated in the Brand.

SWOT Analysis

Strengths

Variety of flavors
Customers can create their own combinations
The Product is rich in flavor and high in quality
People love the business because they appeal to the neighbor-hood providing entrainment and never forgetting an occasion to celebrate
Very unique store experience that offers fun
Low affordable priced product for all
The message that the product is made with only fresh local products reaches the consumer.
Positioned as a high quality low priced product

Weaknesses

Not all stores are the same the quality of the experience can vary depending on the store no standardization
Health Concerns
Trinidadians are not necessarily loyal to local products they tend to favor imported products
A local feel but not very appealing depending on the store
Low market presence

Opportunities

90% of the market consume ice-cream
The Ice Cream industry has a well established market with high usage and continuous growth
B’s have five stores located in growing towns like Arima , Dinsley, San Juan, Tobago and Point Fortin.
Great variety of local flavors

Threats

Emergence of new competitors from the International market carrying not just ice-cream but frozen deserts and yogurt stores

Competitive Analysis
Direct Competitors
Cold Stone Creamery & Diary Bar these competitors have:
So much more flavors and variety
Very personal contact with the customers by having fun with the product
A great in-store experience the colors the selections the different added fruits and candies to add as toppings
Very modern and up to the date feel
All their outlets are standardized offering the same quality and service
The staff is very knowledgeable about the products
The outlet has an international feel very modern

High Market presence
Indirect Competitors
Yogurt Land – they sell the product by the weight gives the consumer the freedom to add what ever different topping to their dessert and the perception of the product is that it is good for you.
Compared to B’s both Cold Stone and Diary Bar are well known well established franchise very strong regional and local presence. These brands have world wide recognition. These brands sell their products in large quantities to top restaurants and supermarkets they also have retail stores located in the malls and City Centers.

Primary Research
In order to support the competitive analysis and to deliver a little more information, it was necessary to conduct research by visiting most of the B’s ice cream outlets and also websites and having interviews with a few of the customers. Also visiting both Diary Bar and Cold Stone to gain the experience and understand what the customer was talking about. The information derived was to support the competitive analysis and to learn more about the customers’ insight.

When asked to rank the factors that matter when selecting an ice-cream outlet. The customers ranked taste first what followed was location of the shop. The other items that followed were service, atmosphere, variety nutrition and finally price.
Nutrition is usually the least important factor because deserts are treats or indulgence and most consumers are aware that ice-cream is not necessarily a healthy treat.
The most popular flavor selected by the consumers was Coconut. It was the first flavor that came to their minds and the flavor that B’s found most popular as well.
For most of the participants in the interview they also voiced a fun experience with a clean environment as a requirement when they entered the ice-cream store which involved the variety of choice the quality of the ice-cream and the variety of local products used. Coming so close to reproducing that home-made experience makes B’s the number one choice when it comes to local home made ice cream.
I think B’ ice-cream outlets have there own subculture that is distinct from every other outlet that is visited. Each location has a true reflection of the communities’ interest and values.

B’s run weekly contest on their Facebook page in line with the occasion whether it is Father’s day Independence or any other community activity going on. B’s selects an activity and promotes that activity or contest for the week so fans or followers can win a weekly price which is usually ice-cream. This simple weekly engagement activity motivates consumers to interact with their page and increase Brand recognition and fan engagement. B’s averages over 200 engagements per post. Campaigns like this foster an active fan base.

Porter’s Five Forces

In most of the interviews with Katheline Bethel the owner and Finance manager of B’s home made ice-cream, she spoke about competition and the difficulty with suppliers, and the availability of raw material to produce the ice-cream.
Katheline Bethel holds an MBA from Henley College of Business Management. She is a coach and mentor for young entrepreneurs. Katheline voiced her second main challenge was finding good employees. She said “we need more good people.” One of the things that B’s tries to be is the employer of choice.

The company has an on going demand for fresh fruits pulps and juices. A great demand for coconut, pineapple, barbadine, guava, sorrel, soursop and passion fruits. The company is one of the few Ice-cream producers in Trinidad & Tobago that utilizes condensed milk and fresh creams in the manufacture of its ice-cream products. B’s has stayed away from alternative products like powder milk and artificial flavors which will definitely affect the quality of the product.
It is difficult to replace these core products with substitutes like powder milk and artificial flavors which will definitely have an effect on the flavor of the ice-cream. This will affect quality. In most cases products are so scarce or seasonal that getting the fruits is already a plus so trying to influence the price by increasing the quantity needed does not really work because most of the fruits supplied, the supply could never really exceed the demand as a result you are happy to purchase in what ever quantity and to some extent price when available. “market demand for imported ice cream brands accounted for close to $12 million in imports in 2009”.
“Demand is not the problem but reliable suppliers is the problem for local ice cream manufacturers”
The market for non-alcoholic after-work entertainment is also growing, and the ice-cream market growth is part of that.
Sales for ice-cream are good and for many different reasons mainly because Ice-cream is a feel good product. Ice cream is comfort food

We have learnt that the female market is very important because a larger segment of the female population consume ice-cream.
The target market for B’s is not children but adults between the ages of 35 to 50 who will enjoy a well made home made ice cream not made at home with all the local ingredients. Both Cold Stone and Diary Bar operate in a separate market their target markets are the young adults range in age between 17 and 30. At a store like Trincity Mall and Movie Town this age group dominates the heavy traffic.
Ice Cream brings sweet rewards to entrepreneurs but with that sweet reward they must withstand the tough challenges for a significant share of the local market. There is limited grocery shelf space for all the different varieties of frozen treats. The tariffs charged to local manufacturers outweigh the incentives and the price by volume formula creates quite a disadvantage for the local manufactured ice –cream products.
The Bethel’s provide direct employment for citizens of Trinidad & Tobago and also indirect employment for several farmers and individuals employed within the agricultural sector. These persons supply the company with all their requirements of fresh fruits and juices.

The Bethel’s take on the challenge of distributing which requires cold storage vehicles to get product to Pt Fortin and Rio Claro and still maintain competitiveness with imported product.

They compete with global brands with million-dollar advertising budgets to maintain their share of the market.

“The playing field is certainly not level,” were the remarks of Mrs. Bethel as a business person you encounter so many rules and regulations as a local producer and also as an exporter. The external markets exercise quantative restrictions they exercise restrictions on dairy products especially when we have quite a range of these restricted countries’ products in our supermarkets. “(How can we compete when we have a four-liter foreign product, priced at a two-liter, from a local (manufacturer)?” When the consumer see a B’s, two-liter priced at that, what will they buy based on volume, they’ll pick-up the four-liter (import)”
Global Economic forces and trade liberalization forces will impose serious challenges for the local market ice-cream manufacturers. Local manufacturers will have to become more competitive and learn to adapt quickly to survive. Local manufacturers will have to review their entire operation and become more internationally competitive. We see today US based franchises have become omnipresent in our society. Gaining a competitive edge will require diversification, improved customer service, high quality standards, market expansion of products as well as enhanced human resource development.

Present Retail Model for B’s
B’s charges qualified applicants $40,000 to franchise their business model. A scoop of B’s savory ginger coconut, passion fruit or beetroot ice-cream can cost $10. “You pay $210 for a 9.5 liter tub of B’s ice-cream, which tub offers 100 scoops.

If scoops were sold on a consistent basis income can be generated. B’s overhead is in the ballpark of $750, 000, that includes importing branded freezers, packaging and soursop. The company estimates that its quarterly revenue is between $2.5 and $3 million, which is between $10 million and $12 million annually.

Can Greater Investment in B’s lead to Healthier Returns?

Yes, the founders and owners of B’s home made ice-cream both over the years have acquired a good understanding of business; they have a customer- focused attitude and a willingness to work hard. Among the many advantages of making an investment in the franchise B’s homemade ice cream is that each franchise will be benefiting from an established brand name with strong marketing support.

B’s have the right business model for ice-cream that offers great customer value compared with the competition. They deliver a quick inexpensive high quality ice-cream. A large enough production scale to enjoy some economies of scale. The scale advantage will be reflected in the operations margins.
They occupy primary location sites for franchise stores this further explains the healthy operating margins and the high return on assets. B’s have a low degree of penetration therefore there is more room for the company to grow and open new outlets. Above all B’s is different they’re local and they’ve built a strong team to take them into the future with great ice-cream. The customers are demanding new flavors with tasty healthy topping and innovative ways of serving up the ice cream and B’s Home Made ice-cream always makes the effort to listen to their customers and see how best they can meet the demands of their fans.

References

Guardian.co.tt/business/.../ice-cream-makers-join-forces-against-import.
Store.mintel.com/Ice-Cream-Report‎

Bibliography

Trinidad & Tobago Investment Guide 2011 – 2012
The Hampton Road Economy Analysis and Strategies Part II

References: Guardian.co.tt/business/.../ice-cream-makers-join-forces-against-import. Store.mintel.com/Ice-Cream-Report‎ Bibliography Trinidad & Tobago Investment Guide 2011 – 2012 The Hampton Road Economy Analysis and Strategies Part II