1. How India’s oldest ice-cream players, Vadilal warded off threat from MNC’s

How India’s oldest ice-cream players, Vadilal warded off threat from MNC’s

Face-offs with rivals are nothing new for the battle-scarred hexagenarian Gandhi, for whom running the family’s ice-cream business, founded by his great grandfather way back in 1907, has always been a fight for survival.

By: | New Delhi | Published: May 26, 2017 5:09 AM
Gujarat, amphitheatre, ice-cream manufacturer, Gujarat Co-operative Milk Marketing Federation, GCMMF, Amul brand, vadilal, frozen dessert, manufacturers “Vadilal is the tenacious tortoise which has seen several hares fall by the wayside,” CMD Rajesh Gandhi quips.(PTI)

Recently, Gujarat became the amphitheatre for a bitter gladiatorial combat between the country’s largest ice-cream manufacturer, the Anand-based Gujarat Co-operative Milk Marketing Federation (GCMMF) popularly known by its Amul brand of products, and the frozen dessert manufacturers. Although run-ins between ice-cream majors and frozen dessert manufacturers are commonplace this time of the year—with both sweating it out for a slice of the seasonal pie in the estimated Rs7,700 crore market—what is different this time round is that the fight has turned legal, with GCMMF being hauled to courts by private players led by MNC Hindustan Unilever (HUL) and Ahmedabad-based Vadilal Industries over allegedly disparaging advertisements against frozen desserts.

Not surprisingly, even the extremely affable and soft-spoken Rajesh Gandhi, the CMD of Vadilal—which is the second-largest ice-cream manufacturer after GCMMF and also a major player in the frozen dessert space—is a trifle agitated when I meet him for a tête-à-tête over lunch at Melt In, an uber-cool gelato parlour-cum-cafe, equally well-known for its snacks and savouries. The venue has been chosen deliberately—not only is it Gandhi’s daughter’s dream project, but is also a hugely popular frozen dessert joint and eatery in the city’s upmarket Bodakdev neighbourhood—a clear message that frozen desserts are just as popular and healthy as “real milk, real ice-creams.”

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“Our main contention against Amul is that it should not attempt to sell ice-creams as a healthier option to frozen desserts. The two products are entirely different, according to the 2011 specifications of the Food Safety and Standards Authority of India. While ice-creams use milk fat, frozen desserts use simple vegetable oils instead. Let consumers have the choice to decide without any prejudice,” Gandhi says.

Face-offs with rivals are nothing new for the battle-scarred hexagenarian Gandhi, for whom running the family’s ice-cream business, founded by his great grandfather way back in 1907, has always been a fight for survival. Ironically, the adversaries have kept changing over the years. In the late 1970s, when Gandhi joined the family business after graduating in commerce, FMCG giant HUL, then called Hindustan Lever Ltd (HLL)—which is today leading the crusade against Amul’s tirade against frozen desserts with Vadilal and Kolkata-based Pabrai’s Fresh and Naturelle joining forces against a common enemy—was perceived as the biggest threat to Vadilal’s existence. “Having taken over several ice-cream players including Dollops from Cadbury, and Kwality and Milkfood over the years, we were always on the marauding HUL’s radar,” recalls Gandhi.

By this time, the maître d’hôtel, hovering differentially in the background, commences serving our lunch. The aroma of live-cooking by a team of chefs in a spankingly modern kitchen visible through a glass partition is tantalisingly distracting. The hors d’oeuvre is a cold panini served in deliciously soft Mediterranean bread baked with olives, chilli flakes and tomato sauce.

“Fresh from college, I along with my brother (who subsequently split and now looks after the Maharashtra and southern markets) were grappling with logistical issues like power scarcity and the challenge of transporting our products long distance. We were also trying to ward off an existential threat triggered by HUL’s predatory pricing,” Gandhi resumes narrating the story of his company’s struggle for survival, which, somewhere along the line, became a climb to the top of the ladder among private sector players in the country’s estimated Rs7,700 crore combined ice-cream and frozen dessert industry.

Success didn’t come easy. It was more a gradual and continuous process of learning on the job. “Vadilal is the tenacious tortoise which has seen several hares fall by the wayside,” he quips.

“The fear of HUL cornering us on the price front scared us so much that we decided to go pan-India. What paid off in this gamble was that not only was our costing much lower, but our overheads were minuscule as well. Also, HUL had its hands full, trying to consolidate its acquisitions, and we took this opportunity to expand rapidly.” Apart from fighting adversaries, dealing with mindsets of financiers like banks was also a huge challenge for ice cream manufacturers as the industry was still in its infancy. “Many bankers didn’t even classify us as an industry,” Gandhi chuckles.

The gamble paid off, and soon Vadilal was a force to reckon with. Then, about two decades ago, the HUL threat receded, with GCMMF emerging as the largest threat to the private industry. “As a cooperative, its prices were highly competitive and it sold products at 40-50% of our costs. Survival became difficult with the onslaught of Amul ice-creams,” reminisces the Vadilal CMD.

An assortment of mango chilli wrap stuffed with fresh succulent alphonso mangoes, cheese, cucumber, lettuce and cilantro, and oven fresh tomato, mozzarella and basil bruschetta have been served and we take a break to relish the irresistible offerings. This is immediately followed by thin-crust hand-toast pizzas lavishly topped with mushrooms, olives and sun-dried tomatoes.

So what strategy did Vadilal deploy to ward off the Amul challenge? “We almost went sick in 1994-95. That is when I resolved that our sales should not go down at any cost.” Bracing for the challenge, Gandhi took stock of the situation. “We initiated a series of steps including restructuring of our products, volume reduction and revisiting the packaging with the goal of cost reduction without compromising on quality,” he muses.

That’s the time when Vadilal struck gold with its audacious “buy one, get one free” scheme, which took the market by storm. “It was my biggest gamble. We moved from the net profit concept to the marginal costing and contribution concept. The rationale for this move was that since we were losing market share anyway, we should attempt to cover the variable cost and sell however best we could. We also slashed margins for retailers and distributors, and launched an advertising blitzkrieg to promote awareness for the scheme among customers,” he says.

Needless to say, the scheme scripted marketing history, was an instant hit and increased volume sales manifold.

Today, Gandhi exudes the quiet confidence of a war veteran who can take on anyone from a small local player to a multinational company, as “I have learnt to view things from the right perspective.”

Vadilal’s foundations of strong marketing and product development have made it almost invincible.

The near brush with extinction also prompted Gandhi not to “put all eggs in one basket.” Vadilal undertook diversification first into canned and frozen mangoes, and subsequently into frozen vegetables and fruits for the export markets, with an eye on the burgeoning NRI diaspora. “Our foray into frozen fruits and vegetables was a big hit and virtually sounded the death knell for the canning industry,” he reveals. Gradually, the company moved out of the non-branded commodity space, which, according to Gandhi, was “neither remunerative nor consistent and was extremely price-sensitive.”

Vadilal is now a major exporter of frozen vegetables, parathas, meals and snacks, and has a presence in 45 countries. With two ice-cream manufacturing facilities at Pundhra in Gujarat and Bareilly in Uttar Pradesh, the company has a strong distribution network of 60,000 retailers, 750 distributors and 300 distribution vehicles. It has a production capacity of 4.6 lakh litres per day. It also has the largest range of ice-creams, with 150-plus flavours sold in a variety of packs and forms.

Our meal over, the gracious Gandhi invites me to inspect the wide array of fresh gelattos and sorbets on display at the counter, urging me to sample them before choosing my dessert. I opt for the divine strawberry sorbet with a scoop of blue berry gelato, while my host settles for gelato mille feuille, an exotic puff pastry interspersed with layers of gelato and sorbet.

I am curious to know what would be Gandhi’s growth strategy for the future to take on the cooperative might of GCMMF and its phenomenal milk procurement network and strength? “We also have our own network of milk collection centres at the farm level and even pay slightly more to ensure quality and loyalty,” the wily Gandhi discloses. And what about the future of the ice-cream industry in the era of cow nationalism? “It’s a win-win for us. The lesser the number of cows slaughtered, the more they would be available for milking.” Clearly, the ice-cream industry is Vadilal’s main milch cow.

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