Ice-Fili Question 3 Harvard Business School
...ey have been displaying lately. It is evident that in the Russian ice cream market the force driving industry competition is the rivalry among existing firms. Ice-Fili’s cost position and price realisation plays a large part in how well it is positioned. Ice-Fili covers the price range of around 6 rubles, which is the middle level of the market. Their financial statements indicate they are making around 0.4 rubles profit for every ice cream sold. This low level of profit would be attributed to their outdated production methods and poor management. Nestlé has been in the Russian food industry since the 19th century and has laid the foundations and infrastructure that cause it to be a force to be reckoned with. Unlike Ice-Fili, Nestlé uses its brand to position itself and its products and build brand equity. Nestlé is the second largest ice cream producer after Ice-Fili and is well known by the Russian ice cream consumer. It is known among other things for its quality of ice cream. It appeals both to consumers who want the traditional Russian ice cream without preservatives and high levels of fat and to those who prefer the styles of international ice cream and its innovations. It positions itself as high quality ice cream and prices its ice cream accordingly. It has a product range that incorporates products such as its more traditional style 48 Kopeek and its more exciting, innovative international style products such as Extreme and Mega. Nestlé however has the positioning downfall of using inexpensive but unhealthy and quality reducing ingredients such as palm and coconut oil and preservatives in their products. In terms of cost position and price realisation Nestlé covers the high end of the scale charging upwards of 10 rubles for its products. This adds to their positioning strategy because their high price, combined with their brand equity implies a position of a high quality product. Profit margins for ice cream production are estimated at 15-20% and it would be assumed that Nestlé are at the high end of that scale due to their use of less expensive ingredients and manufacturing processes. Therefore, it would be expected that for each sale of a 10 ruble ice cream Nestlé would see around a 2 ruble profit. It is not only the Ice-Fili brand that has no positioning or brand equity, but it is also Ice-Fili’s individual products. Ice-Fili’s flagship product “Lakomka” cannot be registered as a trademark due to being recognised as a traditional Russian ice cream style. A number of other leading product names could not be registered and therefore competitors started producing ice cream under the same name and product style. This then meant that Ice-Fili not only had no brand position itself, many of its products had no unique position and were just another generic type of that style of ice cream. This lack of brand equity leads to difficulty in promotional efforts, as there is no stringent element to promote. Large volumes of their main products are being sold by other producers. The small regional producers of ice cream in Russi...