Our group evaluated the ice cream industry from a Porter’s Five Forces perspective to determine the attractiveness of the market. Next, we observed Amy’s Ice Creams’ strategy through interviews and class concepts to see how Amy’s competes. Then, we assessed the strengths and weaknesses of the company’s strategy to offer recommendations for Amy’s Ice Creams going forward.
Production and Sales
The biggest activities in the ice cream industry consist of production and sales. In 2011, U.S. manufacturers produced 1.53 billion gallons of ice cream, a 6.5 percent increase from 2009. In addition, U.S. ice cream sellers sold 25.4 billion servings of ice cream and other frozen ...view middle of the document...
Lick is celebrated by Austinites for its parlor design, staff friendliness, and fresh ice cream flavors. Lick’s embodies the same qualities that distinguish Amy’s from its competitors. In addition, Amy’s Ice Creams also faces competition from mobile ice cream vendors who have the same small, local Austin appeal as Amy’s Ice Creams. Currently, there are over 1,600 mobile vendors in Austin, and many of these vendors offer ice cream products (Castillo). Mobile vendors have lower operating cost allowing them to invest more money on innovative products and marketing efforts.
Within Austin, Amy’s has three main competitors in Cold Stone Creamery, Ben & Jerry’s, and Dunkin Brand Group (Hoover’s). All three of these companies all hold the immediate advantage of being national company and Cold Stone Creamery even uses a similar business model to Amy’s. Ben & Jerry’s spend millions on philanthropic efforts and champions social equality issues. Dunkin Brand is a public company with lots of capital and product variety. All these companies are in a position to threaten Amy’s with their capabilities, which makes the competition for market share intensive in Austin.
There are several substitutes to ice cream. Basically, any sweet snack or dessert can serve as an alternative. Popular substitutes include frozen yogurt, smoothies, baked goods, and candy. However, ice cream is not even a necessary part of someone’s diet, so substitutes extend past sweets. A consumer can eat fruit or choose to eliminate desserts from their meals entirely. The ice cream industry also suffers from cyclicality where sales peak in the summer and drop dramatically in the colder seasons. Therefore, the threat of substitutes is even higher in fall and winter.
Ice cream production demands an aggregate of certain ingredients. These ingredients include milk, sweeteners, stabilizers, emulsifiers, and bulky flavoring (Milk Facts). Stabilizers are the carbohydrates and proteins added to ice cream to give it creamy consistency. Ice cream manufacturers use egg yolks as the emulsifier; the egg yolks keep ice cream smooth during freezing and food storage (Milk Facts). There are many suppliers each of these ingredients, so supplier bargaining power in the industry is low.
Ice cream production and sales constitutes a huge portion of the food market in the United States. 90 percent of households consume ice cream in a given year (Sarokin). With the various amount of choices, customers are very price sensitive. If the price of ice cream increased significantly, customers would decrease or eliminate their ice cream consumption or find other substitutes for ice cream. Consequently, the buyers in this industry have a lot of power.
Barriers to Entry
The barriers to enter this market are decreasing significantly. Nowadays, startups can rent a truck and sell ice cream straight from the trailer. However, in order to succeed in the...