Cream of the crop: Scooping up the business, melting away competitors

MD explains success of ice cream parlour Alpine Gelato.

KARACHI:

According to the Pakistan Startup Report, many Pakistanis who have studied and worked abroad have returned to the country to start their own personal ventures. The report is an international study on local start-ups, which concludes that this is an “interesting” time for entrepreneurs to launch businesses in Pakistan

Alpine Gelato Managing Director Muhammad Shahzad is one such name that exclusively endorses the aforesaid report, but also explains why the study profiles Pakistan as a viable destination for future investments.

The Australia-returned expatriate, who started from a small ice cream business in Hyderabad, currently operates arguably the fastest growing chain of ice cream parlours in the city – employing more than 200 people in both Hyderabad and Karachi.

Shahzad has faced many ups and downs of running a business in Pakistan – challenges such as energy shortage, money extortion and violence. His story is a good case study for business graduates, who want to launch themselves on an entrepreneurial spree but hesitate to do so because of challenges facing the country’s businessmen.



A chemical engineer from Dawood College of Engineering, Shahzad, moved to Australia for higher education. There, he studied management and joined Unilever Australia, serving in the company’s ice cream production department as a plant operator.

“My engineering background helped me understand the working of machines and techniques of producing ice cream,” the 46-year-old Karachiite said. As his children grew up, Shahzad decided to return to Pakistan. He then graduated with a MBA degree from the Institute of Business Administration to improve his understanding of the business.

Interestingly, Shahzad chose Hyderabad for launching his business – and not his hometown [Karachi], the country’s largest consumer market. “It was cheap to rent and buy property in Hyderabad,” said Shahzad.

In 1994, the IBA graduate started ice cream production for retailers in Hyderabad and rural Sindh, expanding his market share. However, he didn’t anticipate what was coming next: a major setback, which threatened his business’ existence.

With load-shedding prolonging to 14 hours a day, the retailers refused to sell his ice cream. The company’s sales shrunk and profits nosedived, forcing Shahzad to think before it got too late.

“Small retailers could not afford to power their freezers only for my ice cream,” said Shahzad.

However, the engineer-turned businessman changed this adverse situation in his favour by entering the retail market in 2012 to sell his own ice cream. “There is no denying that the business community is facing many challenges but we should look for opportunities even in these difficult times,” he said.

By carving out a niche market, Shahzad alienated his business from the main stream competition – the likes of Unilever, Igloo and the now defunct Polka. His first retail outlet in Hyderabad got an overwhelming response, giving him the confidence to open more.

The company now has five outlets in Karachi within only a year of operation. And they are expanding with four more this year – purchasing a 2,500-yard plot for a factory in the city, to facilitate their plan of operating 25 outlets in the city.

Interestingly, Shahzad chose areas that make most of the city’s population as opposed to the upscale neighbourhoods of Defence and Clifton – he is selling the product at low prices.

“It is not viable to run a single outlet by selling a scoop for Rs50,” he said. “We are using economies of scale.”

With such a low profit margin, it is not easy to expand the business at a pace, especially with the use of retained earnings.

That’s where his engineering background helped him. Shahzad designed and manufactured the display freezers for every outlet in his own workshop, located in the Hyderabad factory.

The freezers would cost Rs1.6 million each, but he built them for only Rs300,000. In fact, from furniture to interior, he designed and manufactured everything himself.

Chocolate production is another area, where he cut costs. With the exception of imported Belgian chocolate, he produces several variants of chocolates at his own facility.

An optimist even in difficult of times, Shahzad believes the least the government should do is provide its entrepreneurs a friendly business environment.

“You can either do business or fight with extortionists, doing both is not possible,” he said.

Published in The Express Tribune, August 18^th, 2014.

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