The Ahmedabad-based company has two manufacturing plants and 25 C&FAs (carrying and forwarding agents) catering to around 400 distributors and 40,000 dealers across 14 states. It uses third-party logistics services to meet its transportation needs, and over 150 refrigerated trucks to supply products right up to the distributor.
Earlier, like most businesses, Havmor’s distribution network comprising C&FAs was governed and dictated by state boundaries with the transfer of goods from one state to another not being favourable under the value added tax (VAT) regime VAT. With GST kicking in, the ice cream maker has been quick to reorganise and rationalise its C&FA network in select markets.
For example, in the pre-GST era, the company operated two C&FAs in Delhi. After GST, it closed one of the C&FAs in the national capital. At the same time, to save cost and ensure uninterrupted supply to dealers and distributors in the city, Havmor began supplying products to the market from C&FAs from the neighbouring states of Haryana and Uttar Pradesh. C&FAs located in Sonepat (Haryana) and Noida (UP) is taking care of supplies to Delhi.
Similarly, the company has let go of a super stockist in Gwalior, Madhya Pradesh. Instead, the supplies here now come from Aligarh which is closer to Gwalior. Post-GST, the distribution strategy for Havmor has been driven by a razor-sharp focus on optimising the supply chain by providing stocks to dealers and distributors from the C&FAs closest to them.
With changes in its supply chain, the company expects to save 5 to 10 per cent on distribution costs. This could bring in significant gains for Havmor in an industry which lacks a national player and is dominated by strong regional players. Barring Amul, which can claim to be a national brand due to its widespread distribution network, no other ice cream maker enjoys a pan-India presence.
According to Euromonitor, the ice cream and frozen food market is estimated to grow from Rs 117.43 billion in 2017 to Rs 187.86 billion in 2022. In terms of capacity the industry is forecast to grow from 4.5 lakh tonnes in 2017 to 5.5 lakh tonnes in 2022. The top brands are Amul, Vadilal and Mother Diary with a market share of 12.8, 6.2 and 4.9 respectively.
Havmor’s distribution system is largely driven by a few key factors like sales (current and future), service norms (turnaround time and fulfilment rate), number of distributors and distance (lead time) to the distributor. In ice cream or any other cold storage category, storage costs are huge because of specific infrastructure requirement (cold room, electricity costs, etc.). Transportation cost is even more given the rudimentary road network and low availability of on-demand refrigerated trucks. Therefore, Havmor sees merit in opening multiple storage points to be closer to the customer.
Chopra explains, “For the FMCG industry which supplies dry goods, the cost of transportation is less than the cost of storage. They can have one C&FA which supplies to the rest of the distributors in a region. But in the ice cream business it is the other way round. The cost of transportation of goods is more than that of storage. For us it makes sense to have multiple C&FAs.”
Such an approach, claims Chopra, helps reduce time to market and ensures the stock is in better condition. Multiple C&FAs also helps to optimise or reduce the number of vehicles to be used for moving the stock.