2. Scroll Cold Plate Ice Cream - Context
Launched Melbourne in Nov ‘15, Adelaide Jan ‘16 to capitalise on increasing consumer demand for
niche artisan ice cream. Business leverages high-end and high quality experience of its product.
Projections of current Business model indicate losses in June, July, August before ramping up again
slightly for Summer.
Projections developed using a
combination of mean-moving average
and sinusoidal regression. Includes
temporal damping parameters for
seasonal and ‘hype’ related effects.
Month Projected Profit
June -$944.96
July -$2100.5
August -$944.91
September $2212.0
Assume current date is June 2016
Projections assume continued opening of Melbourne store
3. Key Questions of Focus
Identify expansion and
growth strategies in both
the short and mid/long
term
How do we streamline
operations and maximise
profitability?
How do we consolidate
ourselves as the
preeminent brand in our
segment?
Pricing Strategy
Who is our
target
demographic?
Franchising
Are we ready for
such expansion yet?
Organic Growth?Customer
Engagement
Market Conditions
Domestic
/Overseas
Understand
strengths and
weaknesses of
current operation
4. - Costs have been controlled in
respect to declining revenue,
but still remain persistently
high due to element of fixed
costs
- Occupancy costs just outside of
target band
- Wages remain stubbornly high
- COGS have remained consistent
with target range
- Shrinking net profit
- Mainly a revenue issue
- Is declining revenue a structural
decline or seasonal due to
weather?
Issues - Financial Performance
5. - Web-scraping analytics utilised
to categorise online reviews
(Zomato)
- Conclusion: Great concept is
being overshadowed by the
perceived lack of value given
the high price point
- How can we rectify this and
convert initial consumers to repeat
customers?
Issues - Consumer Feedback
6. Competition
Scroll ice cream highly fragmented as new concept within Australia
But competition exist in traditional ice cream space
- Medium concentration of market share by major players
- Significant number and presence of minor players and independents,
particularly in the premium category
8. New Locations
- Must meet following criteria
- Low market/competitor saturation
- High passing foot traffic - ice cream generally an on demand, impulse buy
- Above average disposable income
- Target demographics - 15-35 years of age
- Sydney, Melbourne and Brisbane highly dominated by competitors
Consider Perth
9. Pricing Strategy
High Margin - Low Volume → Current Model $9.00
Low Margin - High Volume → Not in-line with company values and brand
Suggested Strategy → Lower Price enough to appreciably increase volume
whilst not diminishing brand and perceived value
Two Possible Pricing Strategies Identified
Price reduction to $8.00. Assume
conservative volume increase of 20%
(for quant. estimation purposes).
Scope for further tinkering to find
price sweet spot.
Tiered Pricing
$7.00 baseline option with added combo
options. Possible option to explore in the
future as value added purchases can be
lucrative. Successfully implemented by a lot
of sweet food brands.
$7-8 Key
Price Point
Adds complexity for both
consumer mindset and
inventory management
Quick to implement and can
perform real time price sensitivity
in the market
10. Marketing - Social Media
Current utilisation of Instagram
Number of instagram posts
11. Marketing Strategy
- Better utilisation of social media
- Increase engagement of Instagram - leverage off current high
followers
- Consider utilisation of additional social media platforms such as
SnapChat
- Generate hype with additional limited edition flavours
- Create customer participation by flavour suggestions
- Cross promotion with other complementary niche non ice-cream
products
- Promote quality of ingredients to help ascertain value of product
- Partnership with local events
12. Quantitative Forecasting
Forecasting model developed to extrapolate from trends given in the balance sheet. Model developed using
a combination of mean-moving average and sinusoidal regression. Various damping parameters included in
the model to account for lack/increase in hype, potential marketing surges, and an overarching parameter to
account for 3% increase in the industry p.a. Average Monthly costs calculated from 5 month data (excluding
starting month).
Cost Type Value
COG Variable 32% of Sales
Payroll Variable (hidden fixed
amount)
42% of Sales
Bank Fees Variable 1% of Sales
Admin Fixed $2000 p/m
(conservative)
Rental Fixed $4000 p/m +
2000 new store
Accumulated
costs of
opening new
store
Fixed $9300 new
store
Original Strategy $9 a scroll. Rough Calculations suggest
~ 8900 scrolls sold in February translating to peak
throughput of 30 per hour. Assuming 4 plates per store
and average delivery time of 5 minutes, peak production
per hour is 48. Thus there is significant scope to increase
volume to better utilise labour + capital resources.
Reduced Price Strategy $8 per scroll with a conservative
20% increase in volume. In addition, a larger overarching
growth rate is accounted for in this strategy to account
for increased market penetration and repeat customers
due to lower price.
Perth Store Perth store introduced in Oct. ‘16 with ~85%
volume of Melbourne and Adelaide stores. Upfront costs
accounted for during store opening.
13. Quantitative Comparison of Strategies
Scenario 24 Month Revenue Average Profit Margin
Original Pricing Model and Seasonal
Trends
151.2 K 7.53%
New Pricing Strategy 226.4 K 12.82%
New Pricing + Perth Store 264.8 K 14.60%
14. Questions for Management
- How much did quantity/demand increase following price drop from $10
to $9?
- What was the transient and permanent effect of Groupon promotion in
Adelaide?
- Response of loyalty card - Buy 5, get 6th free
- Result of collaboration with Cupcake Central?
- Level of product shrinkage as ingredients are refrigerated with shorter
shelf life compared to frozen products
15. Final Recommendations
● Franchising should be delayed until business model is proven for at least 18 months due to
seasonality of ice cream sales
● Proven and profitable financials will increase prospective franchisee confidence
○ 6 month brand offers little value to a franchisee.
○ Took decades for large brands to migrate to SE Asia and India. Without a proven business
model and well established brand (18 months+) is a risky proposition.
● Implement price reduction and continue to monitor price/volume relationship to find the optimum.
● Consider penetration into the take-home ice cream market in diversifying revenue source: this
represents 84% of ice cream manufacturing market.
● Leverage data analytics to gain insight into customer demographics and the effectiveness of general
and targeted marketing campaigns
● Leverage government grants and start-up assistance
○ Enterprise Melbourne – Small Business Grants - Up to $30K available
