Ice-Fili’s key issue is making its products available to the customers. Nestle, Ice-Fili’s main competitor, benefits from high visibility and availability through multiple distribution channels whereas Ice-Fili is mainly sold through Kiosks (70% of its sales) and suffers from a clear product differentiation and brand image. Due to the fierce competition from both established international as well as local regional players, it is imperative that Ice-Fili acts quickly to not only sustain but also establish itself as the clear leader in the growing ice-cream market. Our first recommendation is to acquire Eskimo-Fili, an exclusive distributor to Kiosks throughout Russia, to improve Ice-Fili’s visibility and distribution. Our second recommendation is to develop a premium brand of carton ice cream for the growing home consumer market. Although, Ice-Fili has very limited cash in hand, it has no long term debt and we believe this is the time to raise US$ 40 million either through IPO or Bank loans to consolidate and establish itself in the industry.
The Russian ice cream industry has attracted the attention of foreign and several regional investments due to potential growth after the second financial crisis in 1998. From 2000 to 2002 the market has grown 3% (see Exhibit1) and steady growth is expected in the future. Barriers to entry in this market are low because the initial costs mainly consist of obtaining an ice cream production facility and establishing relationships with the main distributors. Low entry costs have allowed regional players, who now make up 30% of the domestic market, to become a serious threat to the Moscow-based manufacturers and multi-nationals. (see Exhibit 2)
The industry can be divided into three majo ...