Ice-Fili Ice-Cream Company Case Study

Ice-Fili, originally a government operated ice-cream producer, overcame the fall of the Soviet Union and the subsequent 1998 financial crisis to enter the new millennia as the premiere Russian ice-cream vendor. However, from 1996-2002, the Russian ice-cream market saw a 200% increase in new businesses and a 69% increase in production volume (Exhibit 1). In that same time, Ice-Fili’s ROA dropped 12.9% (Exhibit 2) and market share shrank from 6.8% to 4.3% (Exhibit 1). By analyzing the the current and future ice-cream industry structural attractiveness, assessing areas and segments of potential competitive advantage, and comparing Ice-Fili’s market position to international and domestic competitors, we can better understand Ice-Fili’s economic and positional predicament and implement a strategy to increase Ice-Fili’s market share and financial health.

Analyzing the underlying sources of competitive pressure generates a better picture of the immediate circumstances of the Russian ice-cream market. First, many variables nurtured the rapid development of both international and domestic competition during the 1996-2002 timespan: (1) Cheap cost of goods and resources, (2) Simple manufacturing techniques, (3) Low labor costs, (4) Easy access to distribution channels, and (5) Friendlier fiscal and monetary regulations. Although the raw materials and ingredients to ice-cream products aren’t unique or expensive (making it it easy for producers to switch between suppliers easily and cheaply), there are only 10 suppliers of manufacturing technology for the 300 ice-cream producers in the Russian market. The ease of entrance into the ice-cream market not only enhance rivalry for market share but also increased existing pressure for Ice-Fili to compete with yogurt, soda, chocolates, and other candies that are cheap and easy substitutes to Ice-Fili’s products. The low cost of switching between an abundance of products, along with low product differentiation and demand elasticity, increases the bargaining power of the Russian buyer. Thus, with a high threat of new entrants and industry competition, high buyer and equipment-supplier power, and ease of substitution, the current Russian ice-cream industry isn’t attractive to incumbents like Ice-Fili.

There are several factors (economical, political, social, and technological) that indicate the the Russian ice-cream market will stay competitive. First, the industry is in its maturity stage of it’s life cycle: changes regulations spurred growth; however, cash cow products like the Lakomka aren’t generating sales like they used to since new entrants like Nestle are stealing market share from existing products. Secondly, consumer preference surveys indicate that demand for confectionary goods, chocolate, and yogurt are on the rise while demand for ice-cream is declining. This trend will enhance the low brand loyalty and low brand preference among the population. Third, Russia