An evening with Mr Viren Shah, Director, Scoops Ice Creams & Cream Stone Concepts

On Friday, Feb 11, we had the 43 rd session in the ICFAI WiseViews series of Leadership Conversations. The speaker was Mr Viren Shah, a young Hyderabad based entrepreneur. Viren spoke about how he has grown his ice creams business with a special focus on the sensory branding strategies that have played a key role in popularising his product.

Introduction

Viren Shah is Director, Scoops Ice Creams (since 2000) & Cream Stone Concepts (since 2007). He is a commerce graduate and has completed his Management Education Program from IIM Ahmedabad. He is the past chairman of Young Indians Chapter of Hyderabad, a unique initiative by Confederation of Indian Industry to engage the best young minds in the country’s development process.

The Shah family moved to Hyderabad 5 generations ago & ventured into various businesses in the Nizam’s Estate in Parmani and Aurangabad. The 3rd generation brothers, Parmanandas Shah and Madanmohan Das Shah eventually started Hotel Haridwar.

Founded in 1989, Scoops offers 100% vegetarian ice creams in a range of classic & innovative flavours which have enabled over 5000 outlets and 36 distribution centres. The younger generation — Amrish and Viren — joined the business and started expanding it. In 2004, they created a separate brand called Temptations. In 2009, they introduced Cream Stone, an interactive format where the ice cream is made on cold stone and can be customized as per the tastes of customers. The concept of making Ice Cream on stone, with a vast variety of customizable flavours and toppings, has made Cream Stone a household name.

The start of the journey

The seeds of the ice cream business were sown when Viren’s father and grandfather went to Delhi in 1989. They saw a small machine where milk was being poured from the top and ice cream was coming out from the bottom. They were interested in the machine as they were offering ice creams to their customers in their Haridwar restaurant in Hyderabad.

The Shahs immediately purchased the machine and brought it to Hyderabad. But to their disappointment, they found that the machine did not work as expected. The supplier explained that the machine needed a special kind of mix.

Having purchased the machine, the Shah family could not keep it idle. They had to find a way of making the machine work. They found a supplier of the mix they needed. They began to innovate offering various flavours. The product became popular during marriage parties. Seeing the popularity of the product, the mix supplier promptly raised the price. The business became unviable.

That is how the family decided to enter the manufacturing of ice creams under the brand name Scoops. In 2004 another brand Temptations emerged. Temptations came in tempting flavours and was offered in company operated parlours.

Cream Stone

The Shahs could see that customers were looking for something new. Thus emerged the concept of Cream Stone, ie making ice cream on a stone. The idea came when Viren’s brother visited the US. He saw how at the Cold Stone Creamery, ice cream was made on a stone. Since it was expensive to send people to the US for training, they showed the technical staff a YouTube video which explained the technique for making the ice cream. It took a couple of months to master the technique and then they were ready.

Vanilla and Chocolate flavours were popular in the US. In India, the Shahs added fruits and brought out new flavours and tried them out in a couple of wedding parties. The first store was set up near KBR Park and a fully automated factory was set up on Sagar Road. A second store came up in Jubilee Hills. All in Hyderabad.

Cream Stone was not just a mere product. It was an experience. How the customer was welcomed, served and how the ice cream was customized was part of this experience. The ice cream was literally made in front of the customers. In India, live counters always do well during parties. Cream Stone, too was like operating a live counter. The product quickly became popular.

Lessons from Bombay

As the product became popular, enquiries started pouring in for franchising. The Shah family was overconfident and felt they could expand the business on their own. Why share the profits with others? It was when the group entered Bombay that they learnt some important lessons. The Shahs made heavy investments. They chose a good location and put in place good interiors. Initially, the store in Bombay did well. But soon, the business started piling losses which added up to Rs 1 crore in a year. That is when the Shahs learnt an important lesson. They were in the food and beverages business. In this business, giving personal time and attention was important. In case of the Mumbai store, personal monitoring was missing. Moreover, the systems and processes were not in place.

Franchising

The Shahs began to look at franchising more seriously. But they decided not to give franchises to “investors” ie people who had a lot of money to throw around but would not be involved hands on. In Vizag, they chose the franchisee carefully, someone who would always be in the store and fully involved in the business. This franchise started to do well. That provided the platform for rapid expansion. The brand is now available in 87 stores across 21 cities.

The Shahs have always considered it important for the franchisees to make money. A company operated store can sustain losses for some time. But a franchisee should be profitable at the store level. (This is called unit economics.) Only then the business will grow in the long run. Passion and ownership are far more important than money for a franchisee.

Viren has developed four guiding principles while selecting franchisees:

• Should be a resident of the city.
• Should not be an investor, rather should be someone who can work in the store full time.
• Should be a proprietor: joint ventures and limited companies would not click.
• Should be able to operate in an excellent location.

The importance of location

Location is critical in Viren’s business. The location should be good in terms of visibility, availability of parking, etc. The store should be on a high street. Locating a store in a by lane will just not do. All the other investments remain the same. So, saving some money on the rentals will not be a rewarding strategy.

Viren explained that a wrong location can be counterproductive even for very strong brands. McDonald’s and KFC learnt this the hard way when they set up their stores in Abids, Hyderabad. With a poor location, even strong brands will struggle. But with an excellent location, even smaller brands can do well.

One important lesson which Viren has learnt is that it is important to sign long lease agreements typically for 9 years. If a lease is signed for 3 years, as is the common practice, landlords have a tendency to hike rentals steeply once they see the business doing well. In case of the KBR Park store for example, the rent was hiked steeply and almost doubled in the fourth year.

The importance of safety and quality

Standards must be very high in the F&B industry. Otherwise, in these days of social media, the brand can take a hit. It is important to maintain the highest levels of quality in the manufacturing set up. Cream Stone has received ZED certification (Zero defect. Zero Effect.). He was felicitated by the minister Mr KTR and Principal Secretary, Mr Jayesh Ranjan for this achievement.

Cost effective promotion

Viren does not believe in splurging money on ads and hoardings. He has believed in collaboration with (and indeed piggybacking on) other stakeholders for promoting his brand. For example, he has partnered with movies in their promotion. Movie stars visit the stores, see how the ice creams are made and then consume the ice cream. This has generated valuable publicity in the media. Viren feels that ads may or may not be read. But articles are always read.

Viren gave another interesting example. He invited the US Consulate General to inaugurate one of his stores. In the process, he got excellent press coverage. The lesson he learnt is that we must never think that something is impossible. We must keep trying and taking calculated risks.

Q&A

On how his business style is different from that of the earlier generations

Viren mentioned that market dynamics has changed significantly in recent years. The pace at which leaders must operate today is different compared to the past.

When the pandemic broke out in March 2020, people started consuming more of hot drinks and ice creams fell out of favour. When the lockdown was imposed, Viren was operating some 50-60 stores, producing 30,000 litres of ice cream per day and paying salaries to over 1000 employees. Whether the company generated any revenue or not, many of the costs were being incurred. This included the heavy amounts spent on cold storage which had to be maintained at – 18 degrees Celsius.

Viren had to react quickly. As he analysed the situation, he found that while ice cream parlours were not open, stores carrying dairy products had been allowed to operate. Viren decided to convert all his stores into dairy stores. The stores began to carry paneer, lassi and buttermilk beside ice creams. The government gave the required permission to operate these stores in 2 days. Thus, a difficult situation was averted. With departmental stores like Ratnadeep not getting their supplies of ice creams, Viren found the opportunity to sell more ice cream during the lockdown.

The lesson Viren learnt is that we have to take quick decisions in certain situations. If they had adopted a wait and watch attitude, the lockdown would have continued, and they might have incurred huge financial losses. Instead, by embracing the dairy store format, they were able to recover most of their fixed costs. Sometimes, when the situation is very confusing, we must trust our heart and move forward. We cannot just keep discussing and listening to others.

On sustaining the competitive advantage

Encouraged by Cream Stone’s success, many competitors have entered the market. But they are retailers and not manufacturers. In contrast, Cream Stone has mastered the art of manufacturing ice creams. The company has also paid a lot of attention to the quality of ingredients and customization. For example, during the Kala Jamun season, this flavour is also added. As a result of all these factors, Cream Stone has withstood competition successfully. In fact, it is competing successfully with the Cold Stone Creamery next door at KBR Park.

On what keeps him inspired

Viren loves to deal with challenges. He feels the brain really starts working when there are challenges. These challenges could come in the form of competition or some new idea which has to be implemented.

On the Sensory Branding strategy

Every successful brand is associated with emotions. Cream Stone too has tried to build an emotional connect with customers. Human perceptions, beliefs, attitudes, memories, etc all contribute to this emotional connect. It is more about providing an experience than selling a product. The colours, interiors etc contribute to the experience. The customization and the way the product is served, also add to the experience. Sometimes, young people arrive in groups and block the bulk of the parking space for 20-30 minutes. It becomes difficult to serve other customers. But for Viren this is ok as the whole idea is to provide a memorable experience. People are coming to enjoy their birthday or anniversary and they should have pleasant memories when they leave the store.

Viren emphasised that it is important to be clear about who the customer is. Cream Stone is not for everybody. It is targeting a certain kind of affluent people and the experience has been designed accordingly. We should also be clear about the USP. In case of Cream Stone, the differentiating factors have been manufacturing, customization and serving in the car for drive in customers.

When Swiggy arrived, Viren saw an opportunity to increase revenue even though there were some concerns about whether the ice cream would melt before reaching the customer. This problem did arise, but Viren and his team sorted it out. Customers were happy to get the product delivered at their home. Soon Cream Stone became the top ice cream account for Swiggy.

To promote the brand on an online platform, like Swiggy called for big investments. Again, Viren deployed his jugad mindset. He sold the idea of developing some flavours only for Swiggy. (Even the stores would not offer these flavours.) It was decided to tie up with an Australian Master Chef to develop the flavours. Swiggy promoted Cream Stone’s online presence. It was a win-win situation as revenues increased sharply.

On the choice of the colour combination

The first outlet was named Cold Stone. Some 2-3 months later, the concept was changed to Cream Stone and a different logo was offered. When entering the Bombay market, consultants recommended a livelier logo in keeping with tastes of the youth in that city. Since it was expensive to change all the boards in Hyderabad, the experiment was first done in Bombay. Viren admitted that the choice of colours is an evolving process. A perfect solution does not emerge on Day One. In any case, the colours should keep changing to keep the stores fresh.

On dealing with negative feedback and complaints

Viren accepted that this is not unusual in his business. The important thing is how we handle these complaints. If we accept the mistake and take some steps to make the customer happy, the problem is usually solved. In fact, in 90% of the cases, there will be no further escalation. We are all human beings. Mistakes can always happen. Viren tells his employees that they should not be worried about owning up mistakes.

On the usage of technology

The use of technology continues to evolve at Cream Stone. The initial focus was on billing software. The bulk of the traffic comes between 9 pm and 1 am. That is when the billing load increases and the systems tend to hang. Viren tied up with some good vendors and paid them premium rates so they would provide support when needed in the nights. The front end is now fully automated. Viren can track sales in each store with the click of a mouse.

The back end is still not fully automated. Inventory is automated but not procurement. Virens’ vision is to have all the information available at the click of a mouse. It is important to take people along. Many have been around with the company for a long time. It is a close bonding with the employer and employees caring for each other. Sometimes they are hesitant about using new technology. They must be taken along. So the pace of technology adoption should be acceptable.

On increasing ice cream consumption in India.

The per capita consumption of ice cream is 20 litres in the US, 9 in the UK, 3 in China and only 0.4 in India. Culture and local consumer behaviour have a big role to play. In the US, people are used to snow and ice cream is consumed even in winter. In India, if it rains, people stop having ice creams. Some subtle nuances are also important. When it comes to paying and buying individually, Indian customers are hesitant to buy ice cream. But when served free to them during weddings, they are happy to consume.

Eating out has not really taken off in the rural areas even though many people are wealthy. Ice cream is still an urban phenomenon. Absence of well-functioning cold chains also poses challenges in distributing ice creams to the villages. So, culture, infrastructure and low level of urbanization are all factors that need to be addressed to increase ice cream consumption in the country.

On sustainability

By and large, the ice cream industry is non-polluting. Wherever possible, Viren does not use plastics. Instead, he uses paper. This applies to cups and take away bags. However, plastic spoons and straws are still used in many of the stores as paper does not provide a good customer experience.

On dealing with pilferage.

In the ice cream business, pilferage is common. Viren is guided by a principle that he has learnt from his elders. If the pilferage is within manageable limits, there is no need to break our head. If the business is growing well and the losses due to pilferage are small, we must be large hearted enough to take them in our stride.

On the road ahead

The business is not static, and things will continue to evolve. It is important to align with the market needs. One must adapt to change. Viren believes in keeping his eyes and ears open and being aware of the ground realities. It is also important to stay connected with the team; even with people who are junior like office boys, delivery boys. They sometimes have a lot to teach us. There is no place for ego. Ideas can come from anywhere. Viren is accessible to all the employees. HR managers are sometimes unhappy that employees can bypass them and come directly to him. Viren feels this is ok. Consumer behaviour must also be monitored very closely. In Connaught Place in Delhi, during winter, ice cream sales go down. Viren is toying with idea of offering items like hot chocolate. Each city is different, and the needs must be addressed accordingly.

We thank Dr. Vedpuriswar for bringing out the highlights in the form of this note