Daybreak - VCs think ice cream is a dish best served cold and sugar free. Newbie Hocco says hell no.

Episode Date: July 30, 2024

Craving a low-cal, zero-sugar, guilt free tub of ice cream? Well then, Hocco isn't for you. The ice cream brand, founded by Havmor scion Ankit Chona, takes great pride in making and selling ice cream the old fashioned way. It's a brave choice considering low-cal ice cream is really having its moment. VCs seem to believe that ice cream is a dish best served cold...and sugar free. But Chona is sticking to his guns. And if the numbers are anything to go by, his bet seems to be paying off.  Tune in. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. You've probably heard of the ice cream brand Have More.

Chances are you have picked up a tub of their ice cream from your local Kirana store at some point, or maybe even stopped at one of their carts during a drive with your family growing up. The 80-year-old brand is steeped in nostalgia. And the family behind the brand, the Gujarat-based Chona family, is now nothing short of ice cream royalty. Particularly after they sold Havemore to South Korean food conglomerate latte for a cool $1,020 crore rupees back in 2017.

Instead of kicking up their feet and enjoying the good life, the Chona family is now back for more. After the Laudet deal, third-generation Hammo family sign, Anki Chona waited out a five-year non-compete clause and is now back to do what he does best. Over the last few years, Chona has been building Hawko,

which he describes as a new-age ice cream brand. And if Hawko's rapid success is anything to go by, he really hasn't lost his touch. The company was launched last October and has already earned 35 crore rupees as of FY24. It is now aiming for a monthly revenue of 20 crore by FY25. And here's what's interesting. Despite having the tremendous have-more legacy behind it,

Hawko is an outlier in many ways. Let me explain. You see, it's a great time to run an ice cream brand. The Indian ice cream market is booming and VCs are all swooping in looking for the next big brand to back. Now, the thing is, in the last couple of the last couple of them. couple of years, guilt-free dessert has become a big thing. So a lot of the ice cream brands that have emerged over the last couple of years have gone down that route. Think no-to, go zero,

get away. In all likelihood, you've come across some of them on blanket or instemart whenever you've been looking for a midnight snack. But healthy ice cream just isn't Chona's thing. He has ditched the health-conscious route and instead is positioning Hocko as a guilty pleasure, an indulgence, which some would argue ice cream was always meant to be. And that's not the only thing Hocco is doing differently. From pricing to distribution, it is very quickly proving that sometimes the old-fashioned way really, really works. So in this episode, we delve into the hawkow story.

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Rahil Filippos, and I'll be joining Snickha Sharma every week to bring you one business story that is worth understanding and worth your time. Today is Tuesday, the 30th of July. The story behind how Hawko was named is actually pretty interesting. You see, like with any business, an ice cream brand needs to have a name that stands out.

So generally what happens is that the name of an ice cream brand hints either at the ingredients they are made out of or their market positioning. So, for instance, getaway implies that the ice cream contains weight protein, or you have natural. which hints at the fact that the ingredients are largely all-natural and chemical-free. But in this department too, Hawko founder and chairman Ankit Chona decided not to go down that road and do his own thing.

He looked at as many as 200 options for his second venture. And at one point, he even entertained the idea of calling it Chonas. But he finally landed on Hocko, which loosely stands for House of Chona. He describes it as a bunch of letters. strung together into a one-word name that has a zinc to it. But even though he may have picked out a rather unconventional name,

Shona's approach to the business is still rooted in tradition. So like Havemore, Hawko introduces three new flavors every single month. Typically, one is fruit-based, one is Indian-inspired, and one is more of a chocolate-based

Western flavor. And all of this is very deliberate because the thing is Hawko is addressing a very specific white space in the Indian ice cream market. Yash Dhollakia, partner at VC firm's SauceWisi, puts it pretty simply. He says that there's a certain amount of brand fatigue that are set in with the likes of Amul, Wadi-Lal and even Havemord, all of which are decades-old legacy brands. So there is a craving for an ice cream company designed specifically for the new-age Indian consumer.

So to fill that gap, Hawko has relentlessly been innovating for the new-age. customer. In the process, it has come up with some cool experimental ice creams, like its unexpected hit, charcoal leachy. Sales for this particular flavor tripled in May 24 compared to its debut last November. So in the flavors department, Hawko clearly knows what it's doing. But Chona says balance is everything. Hawko understands that relentless experimentation can sometimes isolate the paying customer. So it's all about striking the balance between. creative combinations and identifying what will sell. And striking that balance is exactly what is making Hocko work.

It's working hard to appeal to mainstream taste buds. Chona says Hocko's future flavours will also cater more to Indian taste buds. Now, if Hoco continues down this path, it's likely that it will always be in a league of its own. That's because industry upstarts like GoZero and Noto healthy ice cream may grab VC attention by focusing on the calorie-conscious eater, but their market is a fraction of the larger, more mainstream ice cream sector. Basically, ice cream is and always will be an indulgence,

and for it to be accepted by the Indian masses, it has to be tasty and sweet. And Hawko fits the bill. But while its ice cream making may be old school, its sales strategy is anything but. More on that in the next segment. Picture this. You've just had a really great heavy family lunch. And once you're done, you're all craving something sweet.

Back in the day, you may have sent someone across to the local Kirana store to buy a quick tub of ice cream. But now things are different. You don't have to go anywhere anymore. You can simply order ice cream on a quick commerce app of your choice. And voila, it ends up at your doorstep in a matter of minutes. New Age ice cream brands very quickly caught on to that trend. For most of them, a majority of its sales come from QuickCommerce. But the thing is, quick commerce platforms alone can't build brands.

They help with discoverability, but eventually, because of slim margins, it becomes unsustainable for newer companies to stay afloat. Meanwhile, Hawko sells ice cream cups at about 15 rupees, so it positions itself as a no-frills mainstream ice cream company. But Quick-commerce, doesn't work for Hawko. That's because they generally have little interest in selling budget-friendly ice creams. So in a meeting with employees at a major quick-commerce company, Chona conducted a blind taste test.

Participants were asked to choose between a Hawko ice cream priced at 40 rupees in general trade and a similar ice cream listed on their platform at three times the price. Despite choosing Hawko's product, pricing remained a pain point. Chona explained that earning a 35% percent price, profit on a rupee's 40 product versus a rupee's 100 product was economically not feasible for quick commerce companies. But he recognizes that quick commerce is important. So moving forward, while maintaining their commitment to innovation, Horko has to develop a product that fills this gap. The bottom line is with Hoko, Chona wants to do what he couldn't do with Havmar. He wants to

take it public. And that's a big dream to have. You see, at present, Horko's Ahmedabad neighbor, Badi-Lal Industries stands as India's only listed pure play ice cream company with a profit growth over the last five years. Others include Chennai-based Hudson-Agro products, primarily a dairy company that also produces the Arun Ice Cream brand across southern Indian states. But now is exactly the right time to be an ambitious founder of an ice cream brand. The message is clear for the likes of Hawko. Scoop up the opportunity before it melts away. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings.

A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippo's produced by me, Snigda Sharma, and edited by Rajiv Sien.