We take a look at the pros and cons of working with an ice cream supplier versus making your ice cream & gelato in-house.
From childhood after-school treats to sweet late night dates, ice cream parlours are the backdrop for countless fond memories. It's little surprise that starting an ice cream retail business is an attractive choice for those looking to enter the F&B industry.
Some benefits of starting an ice cream cafe include:
- Attractive gross profit margins - the cost per scoop is relatively low market-accepted retail prices per scoop (average of $3-$5 per single serve).
- Ice cream & gelato have a longer shelf life, hence less wastage
- The product doesn't require a high level of training to serve
- Simpler operational requirements compared to full service restaurants
- Demand for ice cream in Singapore is not subject to seasonal factors given its hot weather all year round
- It's a fun, celebratory product that brings joy to people around you!
One key decision every ice cream retailer faces is whether to make their products in-house, or outsource to a manufacturer. Four main factors influence this decision: creative freedom; manpower; financial investment and operational efficiency.
Factor #1: Creative Freedom & Product Quality
The main benefit of making your own ice cream is that the business owner retains complete control over the end product. They can design their own recipes, select ingredients and make products exactly to their taste. They also have the flexibility of quickly changing their menu, or launching new flavours to stay on trend. That said, many manufacturers (including ourselves) work with clients to develop customised recipes or OEM products to give some level of exclusivity and control to the retailer.
Supplier-made products are generally more consistent in terms of quality because manufacturers generally adhere to stricter food manufacturing guidelines and processes than restaurants or cafes (due to regulation and food safety standards), and don’t rely on the flair or skill of an individual chef.
Factor #2: Manpower
Staffing is the number one concern cited by small food businesses in Singapore (Study of Micro Food Enterprises Landscape in Singapore 2014, SPRING Singapore). A combination of factors, including long hours, the labour-intensive nature of kitchen work and foreign worker quota requirements make hiring in the F&B industry a constant challenge. The job vacancy rate in F&B was 5.5% in 2014 - the highest among all industries (Labour Market Report 2014, MOM Manpower Research & Statistics Department).
Outsourcing production to a manufacturer helps to alleviate the manpower shortage faced by small businesses in Singapore. Business owners need not hire staff with specific ice cream or gelato-making skills, thus saving considerable costs associated with the hiring, training, wages, and other administrative costs inherent in hiring staff (eg. sick leave, resignations, re-training, re-hiring etc.)
Factor #3: Financial Investment
Ice cream or gelato making equipment starts from around S$12,000 for small machines, with larger commercial equipment prices in excess of S$50,000. While there are various government grants such as the Productivity & Innovation Credit (PIC) scheme in Singapore to assist with defraying the cost of automation equipment, the up-front capital outlay as well as ongoing maintenance costs are still significant. As F&B lease terms are typically short (two to three years), business owners are typically under time pressure to recoup and achieve positive returns on their initial capital investment.
As for ongoing costs, the raw ingredients required to make the gelato will cost less than a supplier's wholesale price of the same finished product. But what is saved in ingredient cost will usually add up in other operational costs such as rental & utilities, depreciation, and manpower as artisanal style ice cream or gelato production is a labour-intensive process.
Working with an ice cream supplier enables you to defray your initial capital outlay and in essence only pay for what you require on a weekly basis based on demand for your product or service. A good supplier will even share the cost savings associated with their ability to purchase raw materials in bulk with the end consumer in order to make their products more competitive on the market - a plus for your business.
Factor #4: Operational Efficiency
Managing inventory and placing countless purchase orders are tasks any F&B business, regardless of its size, faces daily. Ordering is made much simpler by purchasing completed products from a supplier - for instance, instead of ordering anywhere from five to 10 ingredients for a Vanilla ice cream, you need only order one item (the finished vanilla ice cream) from a supplier.
Working with a supplier also means that you can streamline your workforce, saving cost on production staff. You will also realise savings in ongoing utilities bills and not have to worry about factoring in hefty depreciation line items for production equipment on your monthly profit & loss.
The decision on whether to make your own ice cream or work with a supplier will ultimately depend on the entrepreneur’s priorities and preferences. At The Ice Cream & Cookie Co., we work closely with our clients to understand their needs and preferences.
At times, nothing beats making your own ice cream & gelato. The ability to quickly test & launch new creative flavours, churn your products fresh daily, and speak to your customers from a true artisan perspective are elements that an ice cream supplier simply cannot replace.
However, there are many cases and scenarios for which working with an ice cream supplier is undeniably the best solution for your business.
We are here to help and would love to hear from you. Feel free to contact us at firstname.lastname@example.org with any enquiries you may have.