The timing could not be worse for Lovello Ice Cream.
In November 2019, it had applied to raise Tk 30 crore by offloading three crore ordinary shares at Tk 10 each for later in 2020 or early 2021.
Its prospects then seemed cheery as the ice cream flavours itself.
The industry was growing at 12 per cent a year, according to a report of Brac-EPL.
And it was thanks to the rural consumers, who discovered a taste for the soft, sweet frozen treat, enabled by the massive electrification and the availability of refrigerators in bucolic areas, and the country’s rising per capita income.
The ice cream market became a Tk 1,200 crore-one.
But before Lovello, which was founded in 2016, could make its stock market debut amid a din of excitement, a rogue pathogen jumped out from Wuhan, China and went on to turn the world upside down, particularly Lovello Ice Cream’s and the entire ice cream industry’s.
And it is all because of an unfounded rumour.
Around March last year, when the ice cream industry enters its peak sales season centring on Pahela Boishakh, a rumour was spread on social media quoting the United Nations Children's Fund that ice cream consumption would lead to catching coronavirus.
Though the United Nations agency denied it, the damage was already done, with people avoiding ice cream like plague.
The peak season for the industry ranges from March to September, during which about 75 per cent of the annual sales take place.
On top of the rumour, the government put the country on a two-and-a-half-month-long general shutdown to slow the spread of coronavirus, which was tearing through the country then.
This wiped out ice cream sales in the street. About 60 per cent of the ice-cream sales take place in the streets, according to Brac-EPL.
Factories were also closed during the lockdown. Product distribution to local stores was disrupted.
The closure of educational institutions was another critical factor that contributed to the sales drop in 2020.
Hence, the industry lost about 60 per cent of its annual sales in 2020.
To avoid the risk of catching a cold, people are still avoiding icecream.
“Lovello’s top line growth of 2.2 per cent in its 2019-20 financial year reflects the impact of the pandemic,” said the Brac-EPL report.
The top line growth refers to an increase in gross sales or revenue.
The unsold inventory is causing manufacturers to incur an increasing amount of electricity bills and they are also afraid that the already purchased raw materials may also be distorted if the demand does not pick up quickly, it said.
Sales increased slightly after the lockdown was withdrawn but it may take one year to fully recover the losses, the report said quoting industry experts.
Amid this situation, Lovello, whose IPO subscription window shuts today, is making its stock market debut.
However, not all is lost.
Though the company’s top line registered a flat topline growth of 2.2 per cent, it has been able to maintain a “healthy gross profit margin” of about 41 per cent in its 2019-20 financial year that ended on June 30.
In Bangladesh, ice cream is an occasional item and its penetration is about 2 per cent.
“Therefore, there is still huge potential for the industry to grow further,” the report said.
Contacted, AKM Zakaria Hossain, company secretary of Lovello Ice Cream, said: “Our big market is outside Dhaka. Besides, outside of Dhaka, Covid-19 has no core influence. Our sales in other cities and villages have not decreased much.”
Ice cream is a perishable product, so to further expand the industry, more cold storage needs to be set up across the country,particularly in rural areas, the report said.
In general, ice cream manufacturers sponsor the freezers as promotional items and it requires a huge amount of investment. It is also applicable for product distribution. Manufacturers need to keep in mind the available storage capacity of the transport vehicle and the dealers before manufacturing ice cream.
Lovello, which introduced date-flavoured ice cream in Bangladesh, plans to use 30.6 per cent of the IPO funds towards strengthening this aspect of its business.
About 30.1 per cent of the funds would go towards purchasing machinery for its factory in Bhaluka, Mymensingh such that it can churn out another 50,000 litres of ice cream per day.
At present, Lovello produces 1.1 crore litres of more than 60 different ice cream products in a year, which are available in more than 22,000 stores across the country.
Its current and planned product mix includes normal stick, premium stick, cup, cone, 0.5-litre tub, 1-liter normal, 1- and 2-litrepremium tub, 5-litre tub and cake.
