By Michael G. Rukstad , John R. Wells , Pai-Ling Yin ,. View Details. By Glenn R. Carroll , Jennifer Chatman , Victoria Chang ,. By Benjamin C. Esty , Daniel Fisher ,. By Tulsi Jayakumar ,. It concerns the production of frozen ice cream products from the raw material to the selling of the different sorts of ice. The original Russian ice cream consists only of natural ingredients.
The people love its unique flavour that comes mainly from the high percentage of milk fat which makes it less sweet and more aerated than the western products.
The Russian ice cream industry had to suffer from two economic shocks in the late 20th century. The first was after the dissolution of the Soviet Union in , when the state-run economy had to shift to an open-market economy. This meant for the Russian companies big structural changes.
The companies had to invest significantly if they wanted to compete with the foreign firms who entered the Russian market now. The second economic crash was in Russia slithered into a financial crisis when the country was not able to comply with its debt payments.
The ruble was devaluated by two-thirds and left the people with almost no money. The low purchasing power of the consumers forced many foreign companies to reduce their imports dramatically and the domestic competitors to rely on the Russian ice cream products with their natural ingredients.
But as the imports started to drop, the export of ice cream increased. Already one year after the crisis, in , the exports exceeded the imports by 3, tons compared to 13, tons of import surplus in The capacity of the Russian ice cream market is growing.
During the Soviet time, the ice cream production increased steadily to , tons in After the dissolution the production fell to a minimum of , tons in due to the privatization with its transition to market-based production conditions and the imports of foreign firms. After the financial crisis in foreign imports got too expensive. This led to a steady increase of domestic ice cream products and the production volume rose again to , tons in This changed after the economic crisis in when it got too expensive and they had to rely much more on local suppliers.
Most ice cream is distributed by small distribution companies. But they are almost saturated and attract mostly impulse purchasers. Starting from that, we will evolve opportunities for Ice-Fili and show possible future threats. To examine the threat of entry the barriers to entry must be analysed. High barriers lower the threat of new entrants.
The Russian ice cream industry has high economies of scale and new competitors will face high initial costs for the production facilities. The product differentiation is high and the brands are well established. Despite those relatively high barriers the threat of new entrants is high, especially from regional producers.
Also, certain marketing strategies, for instance, TV advertising, are essential to compete with the foreign competitors. Strategy recommendation We divide the strategies to two parts, sales increasing and cost reduction. In the future, Ice-Fili should follow the market trend, producing healthier take-home ice-cream. This can make the sales less market-dependent and redu ce storage, distribution cost.
But in winter, people may like to having ice-cream indoors, sitting on a stove. Supermarkets will be used as the place to distribute this product mainly because people are searching for something for storage not on impulse in the supermarkets. Ice-Fili is the market share leader but has been threatened by not only local producers and international big companies. How to compete successfully can to maintain its status in the Russia market and follow its plan to expand to other European countries, the first thing Ice-Fili should do is to build its own brand though advertising and registering the trademarks.
Advertising can be a good way to differentiate itself by high quality using natural ingredients and the oldest traditional Russia ice-cream. The advertisement can be made on TV, on the freight cars or on the refrigerator. The advertisement on TV targets the family members who contribute to the sales of the take-home ice-cream. So the advertisement can emphasize more the sense of belonging and the sweetness of the flavor.
And advertisement on the refrigerator should more focus on the unique ingredients of the ice-cream. Ice-Fili contracts with many distribution companies now to distribute its products to different destinations, such as kiosks, carts and regional warehouses.
Even though Ice-Fili decided not to participate the distribution activities themselves for the high investment capital, distribution will be the new battle. The avaliability of a Nestle product is twice that of an Ice-Fili product. Ice-Fili can set up its own distribution channel from the start or acquire a local distribution company. Then, simplify the salary system to cut cost and give large premiums to encourage innovation in the product.
The innovation can be reflected on not only the flavor of the product but also the design of package. There are some people on a diet and do not want to absorb fat, thus, we can provide fruit ice and frozen yoghurt to them. To find the growth point of Ice-Fili, we should diversify our products for target customers, not blindly. Octavio Lerena. Popular in Marketing.
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