We all love Ice Cream and so did Alexander the Great (356–323 BC) who sent his slaves into the Apennines Mountains for snow and ice to concoct the luscious iced fruit nectar he craved.
Ice Cream Industry
Ice cream industry in most countries is highly competitive due to its market potential. In the battle ground are the two industry giants – Nestle and Unilever and several other national brands. In India we are familiar with Amul, Kwality, Vadilal and others. Companies are continually churning out new products. Strategic moves like buyout, tie-ups with food chains like McDonald are often taking place.
Commenting on Russia’s ice cream industry Winston Churchill once put it: “You cannot defeat a nation that enjoys ice cream at minus-40 Celsius.” Well that’s what ice cream can do!
“Ice Cream of the Future”
We discussed a case study authored by Callahan, Eisner, Robinson and John Pearce II on Dippin’ Dots Ice Cream at Tasmac this morning. Dippin’ Dots is an ice cream snack invented in 1987 by University graduate Curt Jones an expert in cryogenics. The confection is created by
flash freezing ice cream mix in liquid nitrogen into tiny beads and named his creations Dippin’ Dots. It has to be stored at temperatures ranging from -70 to -20 °F (from -57 °C to -29 °C). The marketing slogan is “Ice Cream of the Future”. Many feel the product is much more flavorful and richer than regular ice cream
The company sells the ice cream to franchisees and national accounts. A regular feature in good old days Ice cream Ice cream made by hand in a large bowl placed inside a tub filled with ice and salt was a regular feature in most families. Dippin’ Dots is the marriage between old fashioned handmade ice cream and space – age technology.
The case as such talks of the founder’s innovative product and the spirit of an entrepreneur. Not much is mentioned about the company’s strategy. A summary of points that were came up in our class discussion is given below.
Dippin’ Dot Success factors
(a) Entrepreneurial zeal: Other scientists thought Curt’s idea was crazy to think he could do this because nothing like that had ever been done before. He worked 80 hours a week for months trying to perfect his method. He established as a company and production begins in a crude manufacturing unit in Curt Jones’ parents’ garage in Grand Chain, Illinois.
(b) Curt had to manage funding by sourcing loans. His parents helped d by mortgaging their properties. This paid for patenting his idea and protecting him from competitors.
(c) Initially a focused strategy that gained market recognition with a single innovative product. This helped him develop core competencies early. Today they have 12 flavors and more than 400 franchise in US alone. Overseas expansion in about 10 countries is managed through a Global division. An average growth rate of 15 percent was maintained.
(d) Word of mouth marketing proved successful because the product was innovative. Many prospective franchisees wanted to establish. The franchise route was the only way to get funds for growth and establish a brand identity.
(e) It was decided the ‘youth’ between 8 –to 18 year olds, will be the target market segment. Also segment was stretched to include the generation of parents who grew up on Dippin’ Dots. Social media technique was leveraged effectively. A company web page in ‘Facebook’ in 2007 became a big hit with 1000s youth signing up every day. Ads were put is Seventeen and Nickelodeon magazines. Franchisees were made to pay half percent of their gross incomes to an advertising fund.
(f) Another demand driver is the growth of malls and multiplexes across the country proved a boon – provide access good locations and tap the ready consumers.
(a) Dippin’ Dots must be stored in subzero temperatures to maintain the dot consistency. Special equipment and freezers for storage and transportation is serious constraint for rapid expansion especially in emerging economies. Cold chain logistics is central to the ice cream business but the irony is that it is not Dippin’ Dot core competency.
(b) In India alone, the organized ice cream industry has a turnover of around Rs. 1000 Cr. and the market is witnessing a booming growth rate of 12-15% annually. Baskin Robbins a leading brand in India is the world’s largest chain of exclusive ice cream stores with over 5,600 retail shops around the globe. Whereas Dippin’ Dots expansion at best has been modest due to the constraints.
(c) No significant diversification moves are seen. A new line in packaged ice-cream could be considered. This will help spread brand message and strengthen recognition and brand recall.
(d) The company has grown in size and needs to move out of its entrepreneurial culture. The company needs to energize its vision and build organizational capabilities. A coherent a global strategy must be developed to guide further growth. As its patent has expired competition will become more intense.