Lovello sets sights on untapped rural markets
The government's efforts to ensure electricity at rural areas have opened the doors to a vast untapped market for the ice-cream and processed food sectors, said Md Ekramul Haque, managing director of Taufika Foods and Agro Industries.
Taufika Foods and Agro launched its Lovello Ice Cream brand on February 14, 2016.
Five years later, 60 per cent of Lovello's sales came from the country's rural areas.
And so, the company now aims to become the number one local ice-cream brand through higher sales in the countryside.
"We achieved the number three position in terms of market share within four years of inception," Haque said.
Lovello is available even in places where any branded ice-cream is seldom heard of such as St. Martin's island, Bandarban and Khagrachari.
"It might not be profit-worthy to always go for sales in the countryside but we do not think about profit in every step," he said, adding that when people find their product in remote areas, it boosts the brand image.
In response to a query, Haque said the absence of branded ice-cream products at affordable prices in rural areas made it possible for Lovello to grab such a great share of the market.
"Our research shows that around 150,000 shops in these areas can keep a refrigerator for their business but major ice-cream producers are yet to reach them.
"So, we are adding 16 more vehicles to our transportation fleet and adding 10 more depots," he added.
The export of locally made ice-cream also has good potential.
For example, India's domestic market for ice-cream is worth around $124 crore, making it a potential destination for exports.
"So our target is not a dream only," Haque said.
Last year, the ice-cream industry registered sales of around Tk 1,500 crore whereas the market size was around Tk 2,000 crore earlier.
This is because there was a gap between the real market for ice-cream and sales due to the lack of preparation for Covid-19 from ice-cream producers.
On the other hand, the ice-cream market witnessed double-digit growth.
"So, we are going to expand our business," the managing director added.
Lovello currently has the capacity to produce Tk 500-700 crore worth of ice-cream products annually.
Taufika raised Tk 30 crore from the stock market when it got listed with the country's bourses earlier this month.
The company believes the proceeds from the initial public offering will help it increase its production capacity by another Tk 300 crore within 2022.
"So our production capacity would be around Tk 1,000 crore within one or one and a half years," he said.
"We dream to tie up with a good foreign ice-cream brand. But to do so we needed a compliant factory and needed to be listed with the stock market," Haque added.
"Raising a fund was not my intention but to be listed as a good company and see its valuation is the main target," Haque said, adding that Lovello will be a blue-chip stock within five years.
Blue-chip companies are those that have higher capital and pay dividends consistently.
In regards to product innovation and diversification, Haque said that Lovello recently launched its Shahi Khajur Malai ice-cream, which is made of date palm jaggery.
"This is our own recipe," he added.
Lovello launched a few smaller products at lower prices so that university students could afford them.
"A cone ice-cream worth Tk 70 is costly for a university student. So, we launched Mini Cone at half price. It was a first of its kind initiative in the industry and a hot product."
He said almost 15 per cent of the company's sales come from the single mini-cone item.
The low price also allows the general public in rural areas to easily afford the product.
The frozen foods sector has huge potential for export as well alongside local market demand.
Taufika Foods has plans to go for frozen foods now, Haque said.
"We have already selected our products to make a foray into the frozen foods market within the next six months."
Initially, Lovello will start with 10 lines where products such as Paratas and Samuchas will be produced.
"We also have a plan to produce chocolate in the country," Haque said.
Most of the chocolates consumed in Bangladesh are imported and so Lovello has plans to begin chocolate production from next year.
The brand's mother company is largely based on construction, engineering and consultancy while Haque has a presence in the banking sector as well. He is the director of NRB Bank.
"But my dream business is ice-cream," he said.
Haque admires the beauty of ice-cream as a product and that is why he came into the industry.
"We named our brand relating to the word love," the managing director said.
And so, it is no coincidence that its commercial operation started on February 14 or the Valentine's Day.
"Although I am a civil engineer, ice-cream suits my mindset better," he said with a smile.
The local ice-cream industry has huge potential but there are few market players, making it easy to reach the number one spot.
"Thanks to the government's massive works for rural electrification, we were able to launch operations in the rural areas," Haque said.
The local ice-cream industry faces three major challenges for growth. The first is import dependence for raw materials like chocolate, milk fat and other ingredients.
The problem is that the National Board of Revenue changes the duty imposed on raw materials from time to time while ice-cream prices remain stagnant.
The second challenge is logistics.
"Our fridges are imported but we are now trying to buy them from Walton. Likewise, the transport vehicles and our cold chain are all imported since they are very sophisticated," he said.
The third challenge is the country's natural disasters, which hit almost every year in the coastal areas.
Last year, the ice-cream industry was mostly impacted by the ongoing coronavirus pandemic as people were reluctant to eat ice-cream in fear of infection.
"A rumour that ice-cream may increase the possibility of infection impacted the industry," he said.
However, since Lovello had taken full preparation beforehand, they were able to sell their products at a discount as well as on credit. This ensured the company to keep their sales stable.
"We took the strategy that it is better to sell at lower prices than keep them in the fridge," Haque added.
Besides, the Covid-19 fallout had a greater effect in the capital than it did in the rural areas, where Lovello gets most of its sales.
"So, when others failed to sell their ice-cream, our sales were better and we logged profit also in the last fiscal and in the first half of the current fiscal,'' he said.
In response to a query, Haque said it is quite costly to reach the rural areas but their target was to reach a break-even point first and then make profit considering the huge potential in rural areas.
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