Serving up homemade competition

Photo by: HENG CHIVOAN

A Direct Queen worker makes the latest batch of ice cream at the company’s factory in Phnom Penh.

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People don’t have much spare money, so they can’t give it to their children ...
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(Posted by CAAI News Media)

Wednesday, 11 November 2009 15:00 Jeremy Mullins and Souen Say

Cambodian ice cream brand Direct Queen tries to compete with better-known foreign brands

WITH a population skewed heavily towards youth in a country rapidly opening to the outside world, it comes as little surprise that ice cream is becoming increasingly popular with Cambodians looking for a sweet treat.

But for local ice cream maker Direct Queen Ltd, scooping out some of that action in a market dominated by foreign brands is easier said than done, even with a product that Managing Director Kham Sophannary says is vastly superior in terms of both quality and taste.

The major difficulty, she said, is that Direct Queen has a series of sourcing agreements with local farmers and pays a premium for fruit that growers assure her is organic, meaning the firm’s products hit the market at a price disadvantage to foreign brands.

With around 70 percent of her buyers children or teenagers, hitting competitive price points is particularly important. “With the global financial crisis people don’t have much spare money, so they can’t give it to their children to buy ice cream,” she said.

Even at a higher price point – the cheapest varieties retail at US$2 for one kilogram – a recent report by Indochina Research suggests that Direct Queen has a domestic market eager for home-grown alternatives.

In a survey of 600 key household purchase decision makers aged 21 and over in Cambodia, Laos and Vietnam, 58 percent of Cambodian respondents said they preferred to buy locally produced food and beverage products.

“Keeping in mind the lack of local brands available in Laos and Cambodia, this could mean that these populations are ready for local brands to enter the market,” the report said.

Local preference or no local preference, the economic crisis had had a major impact on Direct Queen’s sales, Kham Sophannary said.

In November last year, around 1,000 kilograms of Direct Queen ice cream found its way into the stomachs of Cambodian consumers every day. Now, reaching 60 percent of that figures counts as a good day, Kham Sophannary said.

The company will cut prices next year for the first time since it opened in 2005, though the ice cream queen said she refused to compromise on quality and would maintain existing sourcing contracts. “I also want to upgrade my packaging, and start advertising again,” Kham Sophannary said.

A decision to cut all advertising due to falling sales and static revenue had backfired, she said, adding that Direct Queen plans to reach out to consumers again with free samples, radio advertisements and television commercials.

Other challenges also remain to be overcome. High electricity prices mean the company keeps the amount of ice cream stored at its Tuol Kork factory to a minimum. As a result, it has only three days’ worth of orders on hand, forcing it to move quickly when its clients – mostly supermarkets and restaurants – call for a resupply. And the potential for international disputes to disrupt supply chains also remains a constant concern. “I’m worried about the Cambodian-Thai conflict,” Kham Sophannary said. “If the border closes I will have to go to Vietnam for my packaging, which must be imported because no Cambodian firm makes packaging graded for ice cream.”

With assistance from the Asian Productivity Organisation, a Tokyo-based regional intergovernmental group, Kham Sophannary has been able to travel to different parts of Asia to learn about business. In the Philippines she visited Nestle’s “impressive factory” to see exactly the competition her 10-employee company faces.

The firm is now considering taking on debt to fund its advertising campaign and price cuts, but having spent 20 years working as an accountant in the public and private sectors, Kham Sophannary said she would take a planned approach to expansion.