In 2009, the streets of Lahore were hit by an orange storm. All over the city smartly dressed men in orange shirts and caps driving orange ice cream cycles were found in small caravans. riding across the city.
And that wasn’t all.
Television adverts, billboards, banners, flyers, lucky draws, and every manner of traditional marketing technique was loudly trying to sell Omore ice cream. On the surface it seemed nothing more than the launch of a new brand of marketing. But in the background was a struggle between a Pakistani conglomerate and an MNC. By launching Omore, Engro was looking to take on Unilever in Pakistan.
You see in 2009, Pakistan’s ice cream market was ruled entirely by Walls, which had been introduced into the country by Unilever nearly 15 years prior.
In the years since its arrival in Pakistan, Walls set out on an expansionary path in major Pakistani cities, absorbing their competition such as Polka and becoming the top dog in the sector. By the year 2000, their dominance was undisputed and unchallenged. The launch of Omore by Engro Foods was the first real competition anyone had threatened Unilever and Walls with. There was a feeling at the time that even though Walls could not be routed, they could be seriously hurt and brought down a notch or two.
That plan hasn’t quite played out. According to the latest data available for the ice cream sector, Walls continues to control a simple majority of retail sales in the ice cream sector. With a selection of different brands and types of ice cream, Walls leads with 53.4% of the overall retail market share which was worth over Rs 50 billion in sales in 2023. Omore is firmly placed in second place, but it isn’t a close second with 17.4% of share in overall market sales. There are other players too. Igloo is a leader in some small areas while Hico has made most of its business by selling tubs of ice cream particularly to restaurants, and while they thrive in this small niche, they are not a major player.
It is clear Walls has been a dominant force over the past thirty years. Not only has this brand of ice cream remained the leader in the ice cream market, it has also seen off some concentrated efforts to dethrone them. Omore has also not done badly for itself. While their initial strategy to get neck and neck with Walls hasn’t worked out, they have been biding their time with great patience maintaining the market share that they do have. Now, a very unique opportunity might be there for Omore to get a leg up. But first, let’s look at how we got here and what the state of the industry looks like.
The ice cream story
In 1995, the ice cream industry in Pakistan was taking an interesting turn. The major players on the market were Hico, which had been operating since the 1950s, Igloo, and Polka. The first two were traditional ice cream manufacturers that sold out of shops and made gelato. At this point in time, ice cream was not really part of the retail business. Shops sold ice cream both in individual servings and in larger ones, but fridges were difficult and expensive to keep in retail stores which is why ice cream was sold separately.
And while Hico and Igloo did sell ice cream in the form of wrapped bars and small packaged cups, the real pioneer of this side of the business was Polka. Polka ice cream was Pakistan’s first national and well-known ice-cream brand. It was set up by Mr. Azhar Ansari who had previously worked for Igloo ice-cream of Chittagong. Mr. Azhar Ansari, along with his brother Zakir Ansari, decided to set up an ice-cream plant in West Pakistan. Using bank loans, they set up a plant each in Lahore and Karachi, where Polka sold and distributed its products throughout the country.
Polka brought a lot of innovations to the industry in Pakistan. They had pop-up stores in Lahore and Karachi, their packaging 3was colourful, and they aired a number of iconic television ads. They also brought a very unique set of flavours, and in particular their Pop Cone modelled after the Cornetto sold in foreign countries became quite popular.
But in 1995 Polka’s quick rise to the top was to stop dead in its tracks. Seeing the evolving nature of ice cream in Pakistan, Unilever decided to enter the market. They were already present in Pakistan in the form of Lipton and other household names, so their introduction of Walls was going to be historic.
There was also a lot of excitement surrounding this. Put the time frame in its context. The cold war was over, Pakistan was undergoing some form of democracy or the other, and an influx of foreign brands were coming into the country as the country was swept up in globalisation fever. The first prominent international chain of any statutes established in Pakistan was Pizza Hut in 1993. In 1997, the American fast food chain KFC set up its first branch in Pakistan and was quickly followed by McDonalds opening its first branch in September 1998. Both fast food giants started operations in Lahore. In the middle of this, the launch of Walls was another item of curiosity.
Walls came to Pakistan in 1995 establishing the Wall’s factory on MultanRoad in Lahore. Fully equipped with state of the art machinery.
The ice cream company owned by Unilever has a fascinating story of its own. Born in the United Kingdom in 1786, Walls actually started off as a meat company. The Walls family was in the business of butchery, and had cold storages all over the country which they used to store their meat. But they had noticed very quickly that the demand for meat was lower in the summer month. Because of the blazing sun, meat would go bad very quickly and in the early 1900s refrigerators were not common in homes. People would either buy small quantities to consume immediately or not buy at all. This meant Walls had massive cold storages available to them in the summer months that were underutilised.
In 1914, a young Thomas Walls took over the company at the age of 19 after his father died. Up until this point, the elder Walls had dealt with the issue simply by firing employees during the summer months and bringing them back to work in the winters. The new owner took stock and noticed they wouldn’t have to get rid of their staff if they could figure out a use for their cold storages other than meat. That is where the idea of a line of ice creams was born.
Thomas Walls himself did not get to start the idea. Soon after he took over the company the second world war broke out and the idea was shelved. When Unilever acquired what they thought was a meat company in 1922 after the war, they found plans for the ice cream idea and thought it was a good bet. And that is how Walls ice creams first hit the market. By the 1950s, Unilever had shut down the meat business and Walls became an exclusive ice cream company.
By the time Walls arrived in Pakistan, it was a company with a gritty back story and the backing of one of the largest conglomerates in the world. Polka was toast. Still they resisted and refused an immediate offer to be acquired. Despite their best efforts, Polka could not beat back the massive marketing campaigns, price wars, and new products that Walls had to offer. In fact, Polka had been the company that introduced Pakistan’s iconic ice cream tricycles that go neighbourhood to neighbourhood selling the frozen desserts. Even though by 2000 Walls ended their own tricycles in most parts of the world, they introduced them in Pakistan when they launched in 1995 to compete with Polka and still run the tricycles to date, although the fleet has been significantly reduced.
Feast was one of the first Products introduced by Wall’s in 1995 and to date remains one of the most popular treats that Wall’s has to offer. By 1998, Polka knew they had been beaten and came back to the negotiating table. The company was acquired by Walls through a merger, and brands like Jet Sport, Choc Bar, and Pop Cone were acquired by them when they bought Polka.
A competitor at last
And for a few years that is how it went by. Other brands such as Hico and Igloo stayed in their lane (even though Walls did hit the market with deep freezers at retailers and tubs of their own ice creams, but the others were able to keep up). Walls was the undisputed King and their ice creams ruled all over the country.
Then came the 2009 introduction of Omore.
Engro Foods Limited formally launched its dairy-based premium quality ice cream, starting its sales from Lahore due to the city’s proximity to the plant and would spread its network in a phased manner to become a national player soon. The brand had started with 24 different formats and flavours. Aiming to bring innovation to the ice cream category, Omore introduced the first three flavoured ice-lolly in Pakistan called Lick-a-flavour. For this purpose, Engro Foods was running a state-of-the-art plant located in Sahiwal. The new ice cream company also went on an aggressive marketing campaign.
And this wasn’t just any old company, it was backed by one of the largest companies in Pakistan. FrieslandCampina Engro Pakistan Limited (FCEPL) is a publicly listed company, incorporated in Pakistan. The Holding Company holds 39.9% shareholding in FCEPL. The principal activity of FCEPL is to manufacture, process and sell dairy products, beverages, ice cream and, from 2009 onwards, frozen desserts.
But Walls remained unbothered. In fact, their leadership at the time expressed the hope that this would end up improving their sales.
You see ice cream falls in a category of what is known as “fun money”, meaning people buy this product with disposable income to have a bit of leisure. The company’s branding needs to be youthful, exciting, and evoking a good time. “It is the biggest blessing for existing ice cream manufacturers!” claimed Khayyam Rajpoot, the Brand Director for Walls in 2009 when Omore was first launched.
Customers willing to part with fun money have a wide array of options to choose from. They constantly need to be convinced and reminded to buy ice cream. “So far Walls has been the only brand that spends a significant amount on advertisements on TV, in magazines and other mass media,” explained Khayyam. “When they (Omore) launch nationally, there will be more ads for ice creams and that would translate into more overall demand,” he concludes.
Khayyam’s optimism is not completely unfounded. Total sales of branded ice cream stand between 70 and 80 million litres and even according to competitor estimates more than 60 per cent of that volume is bagged by Walls. “Walls is synonymous with ice cream,” Khayyam said, citing that when an ice cream cart or ‘trike’ pulled into a neighbourhood and played the brand’s familiar jingle, everyone knew the ice cream man had arrived.
Omore also had an uphill task. Walls has managed to develop a strong working relationship with retailers since it started operations in 1997. A lot of these retailers had gotten their first deep freezers through Walls, and would have to be convinced to sell other brands as well. Still, Omore had already made big waves among potential consumers with their marketing campaign.
The only problem was that Omore was trying to model themselves on Walls. They had made a big splash and had also launched many products that were there to directly compete with the range Walls had to offer. They made similar TVCs, and the hope was that they could out-market and out-price Walls. But other than the initial excitement about a new brand, there was nothing that set Omore apart from Walls significantly, which is why consumer patterns returned towards Walls very quickly. That did not mean Omore failed to make a dent, but it worked out for walls because the overall sale of ice cream also increased.
In 2009, the total retail sales of ice cream were under Rs 20 billion. By 2023 they had grown to Rs 50 billion. The growth has been steady mostly, and the real uptick took place over the past couple of years due to inflationary pressures, since we only know the retail sales and not the volume of ice cream being sold overall.
State of the industry
Last year saw an increase in the value of retail sales in the ice cream sector. Retail value sales increase by 31% in current terms in 2023 to Rs 49.6 billion. Take-home ice cream is the best performing category in 2023, with retail value sales increasing by 34% in current terms to Rs 9.3 billion. Retail sales are set to increase to a current value CAGR of 17% (2023 constant value CAGR of 9%) over the forecast period to Rs 108 billion according to a Euromonitor report.
Walls is the undisputed King in the middle of this with over 53% of the total sales, giving Unilever a retail revenue of over Rs 25 billion in 2023 from their ice cream segment. In comparison, Omore has around 17.4% of the total retail revenue which comes out to around Rs 8.7 billion in the year 2023. In comparison, other companies have much smaller numbers with Hico at 2% recording revenue sales worth around Rs 1 billion.
According to one industry high-up, despite the challenges posed by economic factors, there has been a noticeable increase in the visibility and availability of ice cream products across various channels. This increased presence has contributed to raising awareness and driving sales. Return on investments (ROIs) are being achieved, indicating a positive trend in the industry. On one hand, there is a growing market with increased consumer interest and spending. On the other hand, the decrease in disposable income poses challenges for sustained growth. The demand for luxury items like ice cream has been impacted. However, this shift has also led to an increase in sales of impulse products, which are more affordable. While volume sales may not be as high, there has been growth in terms of value and overall market performance.
The Hico story
But what about the brands other than Omore and Walls that are part of this industry? Just take a look at Hico. To find out more about this, Profit spoke to Assistant Brand Manager at HICO Ice Cream, Uzair Mateen who gave insights on the ice cream industry and particularly how the brand has performed and evolved over the years.
Hico started with a basic vision to provide 100% pure dairy ice cream to consumers eschewing the use of vegetable fats. In the early years, with minimal competition in the market, Hico’s focus on organic growth and quality quickly gained traction among consumers. Slowly but steadily, the brand expanded its reach and solidified its position as a trusted name in the ice cream industry. Uzair stated that the main financial key indicators are revenue, profits, market visibility and market share. Over 70 years, the brand has propelled its annual revenue. Hico has a majority market share for dairy ice cream as compared to Glory, King and Yummys.
Not only that, the shift towards digital marketing and increased visibility has played a crucial role in driving sales and revenue. By deploying freezers in various stores, enhancing brand awareness through digital and conventional mediums, and focusing on consumer engagement, brands like Hico, Omore, and Walls have been able to connect with a wider audience and drive growth. As of 2023, Hico has multiplied the number of freezers they have deployed in the country. “The more visibility you have, the more your retail network grows,” stated Mateen.
Playing the Pakistani Card
And this is what our story boils down to. Profit is in a tricky situation doing this story. The tricky situation is that the latest date we have available is from 2023. Now, normally this data would be recent enough. Especially since we are only a few months into 2024. The only problem is that a major shift has occurred in consumer preferences since October 2023.
As a result of the horrors in Gaza and the Occupied West Bank, many in Pakistan have chosen to boycott MNCs. Last month Profit did a similar story regarding the sales of carbonated drinks in Pakistan, and we had said initial reports are emerging that there will be a further dip in the amount that these MNCs are able to sell in Pakistan. This may mark a watershed moment. In our story on carbonates, we pointed out how there was no real local competition to Coke Pakistan and Pepsico, but drinks like Cola Next and Sufi Cola were emerging as having broken some of the market due to the boycott. This is the case in a market where there is no clear local competitor.
In the ice cream market, there is a very clear and strong local contender in the shape of Omore which is 100% a Pakistani conglomerate. The only issue is that Walls is not on the top of people’s boycott lists the same way as Coke and Pepsi are, since it does not evoke the same globalisation rhetoric. Similarly, other Unilever products have not seen a major hit. What we have seen with other products is local companies strongly marketing their localness to appeal to the masses. Omore has not launched any such strategy, but it will be interesting to see how consumer patterns have or haven’t shifted in this sector when the numbers come in next year.
Challenges faced by the industry
The biggest overall industry problem is inflation at the moment. Consumers in low- and middle-income groups are cutting back on non-essential purchases due to the cost of living crisis in Pakistan. Inflation continues to rise in 2023 putting pressure on household budgets.Some disposable incomes are unable to stretch to ice creams. This is a luxury product,although many consumers are opting to trade down to more affordable options. Manufacturers have had to raise prices of ice cream due to inflation, rising costs related to cold chain storage (including providing refrigeration to stock products),and taxes on imported brands. Larger players such as industry leader Unilever and second-ranked Engro Foods (Pvt) Ltd (Omore) have been better able to address these issues due to their greater financial strength and economies of scale which has helped them to maintain their attractive pricing. Nevertheless, the average unit price of ice cream is set to further rise in 2023, leading to a substantial increase in current value sales.
The landscape is dominated by a few major players, which include, Hico, Walls, Omore, Yummys and Igloo each catering to different regions within the country. Hico has a strong presence in Punjab, Igloo is prominent in Sindh, and Yummys serves a distinct market segment. Despite the dominance of these established brands, the industry has seen new entrants such as Glory and King, signalling a shift in the competitive dynamics. The hot summer season in Pakistan drives significant demand for ice cream, making it one of the most sought-after products during these months. This seasonal demand has encouraged various brands to capitalise on the trend, with newcomers successfully positioning themselves in the market.
The historical evolution and brands adapting to changing market dynamics and evolving consumer preferences have led to the diversification of product offerings, with brands introducing innovative products to cater to different consumer segments. For instance, Hico has diversified its product range to include impulse products like Swirls, Cone, Chocbar, Creamy Pop, and the premium range, Indulge. This strategic product differentiation targets various consumer groups, including families, kids, and the premium segment.
Although brands have emerged and catered to the growing demand for delicious frozen treats. However, along with the growth and popularity of ice cream, there have been regulatory challenges that brands have had to navigate to ensure compliance and maintain the quality and safety of their products.
One of the key regulatory requirements for ice cream brands in Pakistan is the percentage of fat that must be present in their products. This regulation aims to standardise the quality of ice cream and ensure that consumers are getting a product that meets certain nutritional standards. Additionally, the Food and Fast-Moving Consumer Goods (FMCG) industry in Pakistan is subject to regulations that prohibit the use of hazardous materials in food products, including ice cream. Brands must adhere to strict guidelines to ensure that their products are safe for consumption and do not pose any health risks to consumers.
Maintaining cleanliness in the manufacturing plants is another crucial aspect of regulatory compliance in the ice cream industry. Brands must follow strict hygiene standards to prevent contamination and ensure the safety of their products. This includes regular inspections and adherence to sanitation protocols to uphold the quality and integrity of the manufacturing process.
Furthermore, the approval of ingredients and flavours used in ice cream is a vital regulatory requirement that brands must meet. Ensuring that only permitted ingredients are used in the production process is essential to guarantee the safety and authenticity of the final product. Compliance with these regulations not only demonstrates a brand’s commitment to quality but also builds trust with consumers who rely on the brand to deliver safe and delicious ice cream products.
In terms of legal challenges, branding and intellectual property rights are significant considerations for ice cream brands in Pakistan. Protecting trademarks and logos is essential for establishing a unique brand identity and preventing infringement by competitors. “Brands must invest in legal resources to secure their intellectual property and defend against any unauthorised use of their branding assets,” Mateen pointed out.
One of the most significant hurdles that companies in the frozen foods sector have had to overcome is transportation. Ensuring that ice cream products are transported at the right temperature to prevent melting and spoiling, managing loading and unloading processes, and maintaining cold storage facilities have posed constant challenges for businesses operating in this industry. It is no secret that the logistics of moving these frozen treats from production facilities to distribution centres and retailers require “precision and efficiency”.
Cold storage facilities are vital for preserving the freshness and texture of ice cream products, necessitating investment in advanced refrigeration systems. Timely deliveries to retailers are crucial to prevent stockouts and meet market demand, requiring a reliable and efficient distribution network.
