Low raw material prices boost ice cream makers' margins

Consumers too get relief from hike in prices

This summer, while the ice cream makers are expecting better margins, consumers might be in for a little relief as well as prices are unlikely to rise.

With prices of Skimmed Milk Powder (SMP) down by 40 per cent, and sugar prices down by about 15 per cent, raw material prices this summer are also under check.

Rajesh Gandhi, managing director of Vadilal Industries said, "Usually, we raise prices in the range of 5-7 per cent before summer sets in. However, this year thanks to low raw material prices, we have not increased prices of our ice creams."

R S Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF) too claimed that Amul, the brand under which GCMMF markets its products, had no plans to raise prices, as raw material prices were lower.

He also added that while milk and sugar prices are under check, dry fruit prices are up and in some cases like cashew and almond, are up by 30 per cent.

SMP prices are in the range of Rs 200-250 per kg in the country now owing to low global prices, and huge inventory of SMP in the country. Sugar prices too have crashed in the recent months to around Rs 21-24 a kg for ex-mill prices owing to bumper sugarcane crop.

Milk constitutes roughly 20 per cent of the cost of raw material for ice creams, while sugar is around 2-3 per cent, fat around 18 per cent and the remaining are ingredients like cocoa, fruits, nuts, vanilla etc.

Ice cream makers, thus, say that raw material prices on the whole would be down by about 7 per cent this summer, boosting their margins.

R G Chandramogan, managing director of Hatsun Agro, which sells ice creams under the Arun brand said that for most ice cream players, the first quarter is the most profitable, while the rest of the year is muted. "This year, the margins during the first quarter would be better and this would increase the overall profits," he said. Gandhi said that for the whole year, margins can improve from 3-4 per cent to at least 6-7 per cent during the fiscal. Players say that the first quarter is likely to see a 20-30 per cent boost in margins.

Even prices of liquid milk are under check, and according to most players, procurement prices are at the level of winter months, owing to higher availability.