The Gulf's hot and humid summers are great for ice cream makers – but sales drop substantially in winter. Now UAE companies are exploring new markets to make up for the fall in demand.
The aim is to make the ice cream segment less of a seasonal business. And, as part of the strategy, there are plans to develop products containing ice cream that can be served warm.
Companies are also focusing on low-fat and sugar-free products because of the high incidence of diabetes in the region.
Pure Ice Creams and Unipex Dairy Products of Sharjah are expanding into Iran and Iraq, Asian markets including India and Pakistan, African and Europe. Pure Ice Creams produces Kwality products and Unipex part of the IFFCO group – makes the London Dairy and Igloo brands.
The UAE ice cream segment, dominated by six companies, produces 210 million litres per year and Igloo is the market leader. Nestle and Unilever, two leading global players, entered the local market five years ago.In winter, local ice cream demand is down by 15 to 20 per cent," said Raju Joy, Pure Ice Cream's Area Manager. "We use part of our production capacity in Sharjah to meet demand from the African market.
"Our Kwality brand is popular in the UAE, Oman, Qatar and Bahrain. We recorded 47 per cent growth last year and are expanding into new markets."
Unipex Director Sudhir Chavan said: "The seasonal demand for ice cream in the region falls by 30 per cent in the winter. We are trying to deseasonalise the market by introducing warm products such as ice cream in pastry and ice cream sandwiches.
"The company has a 42 per cent share of the UAE ice cream market and 24 per cent of the GCC market. We are starting a new joint venture in Iran to produce 50 million litres per month.
"Per capita ice cream consumption in Iran is seven litres compared with three litres in the UAE. It is 21 litres in the US.
The annual demand in the UAE is about 180m litres for the retail chain and $30m litres for the hotel and foods services sector. We are present in 15 countries and within five years London Dairy and Igloo will be available in 25 countries. Chavan said Unipex was holding talks about opening a factory in Pakistan.
"Land has been allocated for a new factory and by the second quarter of 2010 it will be ready. We are also entering North African markets such as Morocco, Tunisia and Libya. The Indian market will be supplied from our factory in Sharjah.
Transport costs for premium ice cream brands is low. London Dairy, a premium brand developed by our company, will enter the UK market within four months.
"It is difficult to export ice cream to the West due to food and drug regulations. It is easier to set up joint ventures to sell our brands in the UK and other European markets.
"We are getting ready to offer tough competition to international brands such as Baskin-Robbins, Movenpick and Haagen-Dazs.
"The GCC ice cream market is seasonal. It is a market of 210 million litres per year and we want to tap as much of that as we can. Igloo is the market leader and we have successfully entered the Saudi market, which used to be a cheap, low price market. "We have had extraordinary success with London Dairy. We currently have 25,000 outlets in the region and our production capacity in Sharjah is being expanded."
He said the Iranian ice cream factory was being set up in collaboration with the Iranian distributor of IFFCO's edible oils. The sanctions against Iran won't affect our project as it is a food industry venture.
Tahir Rahmatullah, General Manager, Sales and Marketing, of Pure Ice Creams, said: "Ice cream is not normally affected by an economic crisis or recession. The market would be affected only if the population came down due to a severe economic recession.
We are currently expanding and upgrading our production facility at the Sharjah Industrial Area. During the off-season in the Gulf, our production capacity is partially used to produce ice cream for the African market.
"We are expanding our production capacity because due to power and infrastructure problems in Africa, we cannot have a manufacturing and distribution network there. We will serve the African market from our Sharjah plant." The ice cream segment was hit by rising commodity prices but now the cost of key ingredients such as sugar, cocoa and milk powder are coming down.
Pure Ice Creams increased its prices by 10 per cent when the milk powder price reached $4,000 (Dh14,700) per tonne, added Rahmatullah.
"Some commodity prices are coming down but the logistic costs remain very high. The refrigerated container rates are too high. Operating in Africa, Iran, India and Pakistan will ensure we have adequate supplies of dairy products."