A Case Study Analysis: Ice­Fili
Team Green and Gold
Introduction
Ice­Fili is currently competing in Russia’s ice cream industry. Although they have expanded to other products such as margarine and mayonnaise they will continue to focus on their core product line, which is ice cream. The reasoning behind this is that their ice cream production constitutes the majority of their profits and it is what Ice­Fili is most skilled at.
The short­term and long­term corporate goals of Ice­Fili are relatively similar in that they both are concerned with dealing with their competitors. Ice­Fili’s short­term goals are: To remain competitive within the ice cream market and to maintain their status as market share leader. The long­term goals are: To gain market share over competitors such as Nestle and to differentiate their products. The long­term goals are tied together in that Ice­Fili can hope to gain market share by differentiating their products as better than their competitors’ products.
Ice­Fili is the current market share leader in the ice cream industry but has been faltering in recent years and may be overtaken if nothing is done. Their position is in jeopardy because of competition from other ice cream producers. Nestle has recently emerged as their biggest threat and is currently second in market share in the ice cream industry. In addition, foreign companies such as Baskin & Robbins and Haagen­Dazs are gaining ground by distributing through franchised restaurants and café networks. Ice­Fili currently differentiates itself by offering the largest variety of ice cream products. It also differentiates by producing its ice cream using all­natural products. Ice­Fili plans to continue to differentiate itself through its large variety and all­natural products, but, if it 1 of 6
A Case Study Analysis: Ice­Fili
Team Green and Gold
chooses, can also differentiate itself by advertising its high quality and great taste and the fact that it is a Russian company. Plan A
Ice­Fili has a decided distinctive competency in their production process. Their all­natural products are produced at low cost allowing them to sell at lower prices than their top competitor Nestle. Still, their market share is on the decline. We feel this is a direct result of Ice Fili’s lack of marketing. With a well developed and implemented marketing plan Ice­Fili could gain significant ground on Nestle, possibly without changing any of the other value chain activities. They already have a great tasting all natural ice cream. It just needs a little help in the form of marketing.
In the past Ice­Fili has spent only one percent of total sales on marketing. We feel a small increase to two or three percent is all that would be needed to give their sales a boost. The plan we have come up with involves enhancing current marketing techniques by focusing on what Ice­Fili does best. No other ice cream company in Russia has as rich a heritage and as pure a product as Ice­Fili. This needs to be brought to the public’s attention. This can be accomplished simply by adding a slogan to every package of Ice­
Fili brand ice cream. We would recommend the packages say, “Russia’s Only Great Tasting All Natural Ice Cream. Serving Russia Since 1937.” The slogan addresses all of Ice­Fili’s unique qualities. First it makes light of the long history Ice­Fili has had in Russia. We feel Russians will get behind an ice cream that is domestically produced. Next, the slogan emphasizes the purity of Ice­Fili’s products. Ice­Fili’s ice cream is made with all natural ingredients and is high in fat. This makes the ice cream rich and gives it a great taste. Russian’s have been bombarded with all types of new ice creams in recent 2 of 6
A Case Study Analysis: Ice­Fili
Team Green and Gold
years. The new ice creams are loaded with additives and preservatives, which take away from the taste. Russians need to be reminded of the rich taste of Ice­Fili’s products. The slogan accomplishes this nicely.
Hopefully this new approach will help Ice­Fili gain a greater market share paving the way for new improvements to the value chain activities. If the campaign works Ice­
Fili can use its renewed popularity to better its distribution channel. Right now Ice­Fili has little control over their products in the market place. Gaining a greater market share would allow Ice­Fili the opportunity to integrate forward and sell their products directly to customers. They could maybe even compete with Baskin­Robbins and Ben and Jerry’s in the franchised restaurant business. Franchising is relatively cheap for the franchisor and is a definite possibility for Ice­Fili in the future.
Plan B
With increasing competition from domestic and foreign competitors more drastic plans may have to be put into play. The ice cream industry as a whole has total sales of half a billion dollars a year. Ice­Fili, the dominant player in the industry, has only $25 million of it, which translates to a total of 5% market share, which is shrinking. The reason why the dominant player commands such a small percentage of the market is because there are over 300 companies of varying sizes competing for their share. To survive in such an environment a company needs more than one distinctive competency. In the case of Ice­Fili, they do have excellent production capabilities, but they lack proper research and development, they have little activity in marketing and little more in sales, a distribution system that is inefficient, and a lack of an experienced management team to employ these capabilities. Therefore, combining their distinctive competency of 3 of 6
A Case Study Analysis: Ice­Fili
Team Green and Gold
production with the distinctive competencies of another company may be the logical and mutually beneficial option. There are three alternate strategies to consider: consolidation, joint venture, or buy out.
Consolidation is the first strategy suggested because of the stage the ice cream market is currently in. As mentioned before, there are over 300 companies in this industry and one can easily draw parallels to situations in the United States where many small businesses were eventually consolidated into large chains such as McDonald’s, Wendy’s, or Staples and Office Depot, etc. In fact, the industry in Russia has already taken a small step in that direction with the creation of the 32 member Association of Russian Ice Cream Producers in 1998. One of their primary goals was to form a joint marketing campaign where their products would be marketed under one brand name and logo. However, with so many companies competing for the same markets, some companies would hard pressed to close down their production facilities due to redundancies for the good of the industry. Also, with the lack of a dominant player with a large amount of capital, it would be difficult for one company to begin buying other companies and gain significant portions of market share in such a fragmented industry.
The joint venture is second on the list because it would still allow Ice­Fili to make some decisions autonomously. This would be a beneficial compromise because Ice­Fili could gain the marketing, research and development, and managerial expertise while the foreign company can gain a low cost entrance to the Russian market and Ice­Fili’s catalog of flavors and products. However, this strategy has its negatives as well. For one, attracting a foreign investor may be difficult. The current political climate of Russia is unstable and uncertain, two characteristics that companies do not like. Also, Ice­Fili has 4 of 6
A Case Study Analysis: Ice­Fili
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several deficiencies that would make the joint venture difficult and expensive. Namely their lack of an efficient distribution system and managerial expertise, two of the reasons why Ben & Jerry’s exited the Russian market in 1997 after five years.
The final and most drastic strategy is to be bought out. With so many deficiencies, a lack of capital, and a lack of a large market share, perhaps the future of the company would be best left in the hands of another company that can truly invest the capital and expertise needed to make Ice­Fili a long term success. In fact, it would be better to be bought out now while the company still has a dominant position in the market as small as that position is. With their return on assets, return on equity, and net income all decreasing for six years straight, Ice­Fili is becoming a less attractive purchase by the year. However, it can still be an attractive purchase for a foreign or domestic investment group as well as a company looking to expand its production capabilities and products either domestically or internationally. On the other hand, it is also a beneficial strategy to management because Ice­Fili can still command a good price and many of its workers could keep their jobs because much of the work done at Ice­Fili is production which is one of the top reasons to buy the company. Recommended Strategy
After analyzing the current market and environment in Russia, along with Ice­
Fili’s own situation, our recommendation is for the buy out strategy. The company has too many weaknesses to improve upon and limited capital and managerial resources to with which to create and implement an alternative strategy such as Plan A, outlined in this paper. As mentioned earlier, we feel the company’s future would be most secure if it 5 of 6
A Case Study Analysis: Ice­Fili
Team Green and Gold
was in the hands of another company or investment group that could invest the capital and knowledge that this company needs and deserves in order to survive and thrive.
Bibliography
Paper:
Rukstad, M.; Mattu, S.; Petinova, A. Ice­Fili. Harvard Business School Publishing, Reference number 9­703­516. 05022003, 28.
Presentation:
Background picture taken from Whitey’s Ice Cream: http://www.whiteysicecream.com/.
Retrieved April 6, 2005.
Background picture taken from Ice­Fili: http://www.ice­fili.ru/. Retrieved April 6, 2005.
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