Vadilal Ice Cream

OVERVIEW

• Vadilal is an Indian ice cream and flavoured milk manufacturer
• It has been active for about 115 years.
• 27 Awards Over 4 Consecutive Years At “The Great Indian Ice Cream Contest”
• Voted As India’s Most Trusted Brand In The Ice Cream Category By Trust Research Advisory Board.
• Vadilal has so many divisions and product lines under its roof, dairy products like ghee, milkshakes are also exclusively produced
• Has opened a retail store “Melt in” which has huge franchising opportunities
• The business is extremely seasonal with maximum sales happening during the summer months.
• The company is increasing its thrust into the global markets especially US. The company acquired Krishna Krupa Corporation, an Illinois (USA) based ice cream parlour to better understand the ice cream parlour business in the US.

INDUSTRY ANALYSIS

• India is the largest producer of milk with about 1/5th of the total production providing ample raw materials for the company
• The ice cream market in India is forecasted to exhibit a CAGR of 17.03% during 2016-2021.
• The total organised Indian ice cream market is estimated at approx 6000 crores. Though overall organised & unorganised ice markets are estimated near about 10,000 crore
• Compared to western countries, per capita ice cream consumption in India is low
• The rise in disposable income and the “eating out” culture in a ramp will give a steep increase to demand for desserts, especially ice cream.
• There is huge scope for ice cream market expansion and penetration with an innovative product mix to attract India with all class & mass of Consumers.
• The global frozen food market is expected to grow from $167.34 billion in 2020 to $174.4 billion in 2021 at a compound annual growth rate (CAGR) of 4.2%.
• The global ice cream market stood at a value of $62.3 billion in 2020. The market is further anticipated to grow in the forecast period of 2021-2026 at a CAGR of 7.5% to reach $96.1 billion by 2026.

COMPANY DEVELOPMENTS

• Vadilal to consolidate leadership brought in various measures including rebranding the logo, slogan etc. Brought in many different variants of ice cream
• The company took on serious marketing campaigns to attract the customer base
• The brand’s existing variants like Gourmet, Badabite, Flingo Jumbo Ice cream Cups and Ice trooper continue to show substantial movement in the market.
• Vadilal is growing, the brand spread its wings wide in South India, and enjoyed widespread acceptance. Vadilal ice creams and frozen desserts were introduced for the 1st time in Tamil Nadu.
• Has started exclusive parlours in three formats: Scoop Shop, Hangout & Express along with the newly started Melt in
• Currently the brand’s ice cream production facilities are located at Pundhra in Gandhinagar district, Gujarat and the other at Bareilly in Uttar Pradesh.
• Possesses the best infrastructure in the market from machinery to networks
• Apart from ice creams, Vadilal is also vigorously expanding in categories which offer value chain benefits and show a strong potential to grow.
• The international competition has encouraged Vadilal to grow and improve. It now has a premium section with Melt-in to compete with the international brands
• The company had launched Waah! Vadilal campaign and took to extreme advertising to gain market share
• Vadilal has presence in over 45 countries including the countries in North and South America, Europe including the UK, the Middle East, South East Asia and Australasia. Hence, strategy for every territory has been planned on the basis of respective country’s market demands and thorough research.
• VADILAL FOREX in its 25th year of services – is Numero Uno in Gujarat having more than 450 Corporates associated with it

RISKS

• High Competition from foreign brands.
• Change in consumer view after the pandemic
• Online selling which can bring in more revenue and reduce administrative expenses is not a strength for the company.
• There are certain concerns like infrastructure and rising input costs.
• The major raw materials for manufacturing of ice-cream are SMP (skimmed milk powder), milk, cream and nuts, which the company procures from local dairies near its manufacturing units. It also procures palm oil for manufacturing frozen dessert. There have been significant fluctuations in prices of key raw materials in the past and is possible in the future as well which can cause significant changes in margins.

Financials

https://www.screener.in/company/VADILALIND/consolidated/

Promoters

Vadilal was promoted by Vadilal Gandhi who started ice-cream business in 1907. Currently, the operations are managed by the third and fourth generations of the family i.e. Rajesh Gandhi, Managing Director, Devanshu Gandhi, Managing Director and Mr. Kalpit Gandhi, Director and CFO (Son of Rajesh Gandhi). While Rajesh Gandhi looks after the overall operations of the company, Devanshu Gandhi looks after the sales, marketing and distribution functions. Apart from the finance function, Kalpit Gandhi looks after the plant operations on day to day basis.

The promoters own nearly 65% of the equity of the company.

Corporate governance issue

Ref: Deloitte resigns as Vadilal’s auditor; raises red flags, CFO News, ETCFO

• During FY19, Vadilal’s two sets of promoters made various allegations and counter allegations on each other
• Was primarily due to the fact that some personal expenses were treated as company expenses, Fund management and price dissemination.
• One promoter director and the CFO have accused another promoter director of claiming personal expenses amounting to Rs. 25 Lakhs to Rs.33 Lakhs as official expenses between 2018-2019
• The latter has accused the other director and his family of treating travelling expenses as office expenses between 2015-2019 which amounts to over Rs.23 Lakhs
• Vadilal stated that the outcome of this event would not have any material impact on its financial statements.

Annual report: