CREAMY PROFITS

Ice-cream, which was considered an indulgent category in the past, has now evolved to be perceived as a snacking option by consumers. This change in perception has come about thanks to increasing disposable incomes and greater discretionary spending. Read on to know why ice-cream outlets represent an impressive investment opportunity.

Ice-cream consumption has increased drastically with each member having a say on flavours. “There is a discernible demand for a flavour profile that is different from what the country has historically consumed. Customers are opting for fresh fruit based and exotic flavor ice-cream. In fact, the demand for real dairy-based ice-cream products is working well for players like us,” highlights Mohit Khattar, CEO, Baskin Robbins.

Gourmet flavours are gaining in popularity and are the triggers for brands seeking premium positioning. In addition, brands like Ice Cream Lab are further expanding the horizons of the space with made-to order instant ice-cream. “Using liquid nitrogen to instantly freeze all-fresh natural cream base is a dramatic experience for the customers. We are offering quality shift from frozen dessert to the freshest ice-cream, which no other brand is so far offering,” points out Sachin Pradhan, Operations Director, Ice Cream Lab.

GROWING DEMAND

With the current wave in favour of eating out and increasing disposable incomes, spending on ice-creams has increased manifold. “While 5-6 years back people used to spend Rs 10-50 on ice-creams, currently it has increased to Rs 100- 200 per person. Most of the times it is a family affair or friends’ party when people splurge on desserts,” explains Raghavendra Thane, Managing Director, Thanco’s Natural Foods. He adds that real fruit flavours including chiku, pineapple, mango, jackfruit and dry-fruits or nuts-based ice-creams contribute almost 50% of the store revenues.

Moreover, trend towards home delivery is further increasing ice-cream consumption. “The home delivery business for ice-cream is increasing at 25-30%. Although home-delivery reduces the margins, but it contributes well to the top line,” shares Anuvrat Pabrai, Founder, Pabrai’s Ice Cream.

STARTUP COST

Ice-cream outlets are recommended for high streets and malls or food courts with good visibility to drive consumers in. While an ice-cream parlour requires modest space of 300-500 sq. feet, a kiosk requires 100-150 sq. feet space. An ice cream kiosk calls for a startup investment of Rs 12-15 lakhs, which goes up to Rs 20-25 lakhs for parlours. Major startup expenses include interiors which accounts for Rs 4-5 lakhs in case of kiosk and Rs 6-8 lakhs for a parlour. Equipment demands Rs 2-3 lakhs in a kiosk and Rs 3-4 lakhs in a parlour, and may include deep freezers, display freezers, waffle machine, thick-cream machines, steel containers, mixers, POS software and billing machine. Further, most of the brands demand Rs 3-4 lakhs as franchise fee and refundable security deposit of Rs 50,000 to Rs 1 lakh. A store requires at least Rs 80,000 to Rs 1 lakh worth inventory to start with. License and registration requires another Rs 40,000. Besides, branding requires Rs 1-2 lakhs expenditure.

HIGH RETURNS

Ice-cream retail is a high return business with impressive margins. Being a small format business, the operational expenses are quite low, which makes it lucrative enough. Operational expenses include lease rent of Rs 50,000-60,000 per month and security deposit for 3-6 months. While a kiosk may require 1-2 people to run the show, a parlour would require up to four staff; hence total salaries may range from Rs 20,000 to Rs 45,000. Electricity expenses could be Rs 18,000- 20,000 per month and miscellaneous expenses Rs 5,000-10,000.

Brands like Baskin Robbins and Thanco’s Natural don’t charge any monthly royalty or franchise fee on revenues. Further, a franchise owner can expect monthly revenue of Rs 3-5 lakhs with a gross margin of 45- 50%. “Franchise owners can easily expect over Rs 1-2 lakhs of gross profit, which will enable them to achieve breakeven in just 24 months, with operational breakeven within 3-4 months,” shares Khattar.

EXPANSION PLANS

While Baskin Robbins has over 777 outlets across the country, it is continuously looking for franchise expansion. Thanco’s Natural Foods, which has over 100 outlets, has plans to add at least 100 stores over the next 1-2 years. Further, with its first outlet in Hyderabad, Ice Cream Lab has massive expansion plans. Detailing on the franchise selection criteria, Thane says, “We look for franchise partners who commit 100% focus and time on the business. Ideal candidates are the ones having retail and business background.”

Khattar, on the other hand, gives high value to financial stability and drive for the business. “We do not necessarily look for prior experience in the field as we help make entrepreneurs from scratch. Their attitude, willingness to learn, and their outlook towards customer service are paramount in the selection criteria.”

Kiosk

AREA REQUIRED: 100 - 150 sq ft

STARTUP COST: 12 -15 lakhs

OPERATIONAL EXPENSES: 2-3 lakhs

MONTHLY REVENUES: 3-4 lakhs

GROSS PROFITS: 1 lakhs approx

BREAK EVEN TIME: 24 months

Parlour

AREA REQUIRED: 300 - 500 sq ft

STARTUP COST: 20 - 25 lakhs

OPERATIONAL EXPENSES: 2-3.5 lakhs

MONTHLY REVENUES: 4-6 lakhs