Baskin Robbins Targets Higher Summer Volumes To Offset Margin Squeeze

Baskin Robbins hopes that increased volumes could offset pressure on margins as the maker of ice cream has decided to absorb higher milk costs for now."Milk prices are going up consistently and this season, we have taken a call to not raise prices as it could take a toll on demand," said Mohit Khattar, chief executive officer at Graviss Foods Pvt.—the master licence holder for Baskin Robbins in India.The company, one of the world's largest ice-cream chains, is bracing for a 2.5–3% margin hit this year because of higher input costs, Khattar told BQ Prime. "At an absolute level, however, we are trying to make up for that by selling additional volumes as summer sets in."The firm, however, is looking to bring down "non-essential" operational costs to protect margins, Khattar said..Milk prices have been on the boil following the Covid-19 pandemic due to a combination of factors, such as a spike in input costs and a lack of supply. The cost of feeding cattle has been increasing rapidly since February last year. In March 2023, the annual fodder inflation remained elevated at 17%, according to the latest wholesale price data from the Ministry of Commerce and Industry.The spread of lumpy skin disease that led to cattle death also impacted supplies, pushing up milk prices. In the first quarter of 2023, inflation in milk and products averaged 9.25%—the highest it has been since October–December 2014, according to the latest data on retail inflation.Prices of skimmed milk powder, a key ingredient for ice cream, rose 30% from a year ago. The prices are likely to remain high at least until the next flush season that begins from October. The adverse weather conditions also endanger fodder supplies, according to industry executives.."The current indications are that prices will not come down immediately as supply-side pressure continues," Khattar said.If milk prices do not stabilise in the next six months, the ice cream chain will be forced to pass on the cost burden to consumers. "We will take a call after the season is over, depending on where the prices are headed," he said.The increasing price of other raw materials, such as sugar and white butter, forced market players to raise prices. Mass market brands like Amul, Kwality Walls, Vadilal, Cream Bell, and Mother Dairy Fruit and Vegetable Pvt. have raised prices by up to 10%.Baskin Robbins, which operates in the premium market, had taken a price hike of 2–3% last year, according to Khattar..The U.S.-based ice cream chain runs more than 850 ice cream parlours across 239 cities. It is present in modern trade formats like supermarkets and e-commerce platforms. It is also present in the B2B channels like food service space, and hotels, restaurants and catering space, he said.According to Khattar, Baskin Robbins is the second largest quick service restaurant chain operator after Jubilant FoodWorks Ltd., which has the franchise of Domino's Pizza in the country.India's overall ice cream market size is estimated to be worth Rs 20,000 crore. But it is largely dominated by unorganised or regional brands mostly operating through push carts. Of the total pie, the share of premium is 10%.Baskin Robbins enjoys a market share of 60–65% in the ever-expanding premium ice cream space, Khattar said. Other brands operating in the space include Keventers, Haagen-Dazs, Pabrai's, Giani's, Naturals Ice Cream.Baskin Robbins anticipates annual sales growth of 20%, buoyed by a surge in demand amid an early onset of summer."This summer, we expect to grow 15% over last summer and for the full fiscal, we expect to garner a growth of 20%, beating the industry growth, which is projected to grow about 16–17%," according to Khattar.Last year, the company grew 38% over 2019–20 levels, he said.The company has been ramping up production to cater to demand. It has set up a factory in Shirwal near Pune with an outlay of Rs 75 crore to expand capacity, which is currently about 7.5–8 million. It also plans to open 100 parlours in the current fiscal..iD Fresh's Dairy Revenue Dips Due To Persistent Milk Inflation

Baskin Robbins Targets Higher Summer Volumes To Offset Margin Squeeze

The company is bracing for a 2.5-3% margin hit this year because of higher input costs.

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