Market Analysis Summary
El Centro is geographically situated at the junction of major east-west and north-south transportation routes. El Centro is also referred to as the "center of opportunity" with benefits created by the North American Free Trade Agreement (NAFTA) becoming one of Southern California's most promising new commercial/industrial areas.
El Centro is accessible via Interstate 8, State Highway 111, and State Highway 86, where Ice Dreams will be located.
Shave ice is an ideal business for El Centro given both the potential market segment, location, and climate. Utilizing averaged priced units ($1.25) for shave ice and other products to be sold, the shave ice business has the potential market of $104,446 gross sales by the third year of operation.
4.1 Market Segmentation
According to Advertising Age (September, 1995), premium ice cream and frozen yogurt products are losing market share to mid-priced and other frozen dessert products. Information Resources reported that frozen ice products comprised a third of the $2.4 billion ice cream category for the year ending May 21, 1995, generating $717.7 million, up 9.3% from the previous year.
Based on this information, it is anticipated that the frozen dessert market can be divided into two customer segments. The first segment prefers premium ice cream and frozen yogurt products. The other segment obviously includes those that prefer frozen ice products. Shave ice products are ideal for today's health-conscious consumers. They boast no fat, no cholesterol, and are relatively low in calories.
Ice Dreams will target all segments of El Centro's population: children, teenagers, and adults. The Hispanic population will be of special interest since it comprises 65% of El Centro's total population. This population will be targeted with Mexican flavored syrups and licuados.
4.2 Target Market Segment Strategy
Ice Dreams will target the low- to mid-income consumers who want to have a high quality dessert for moderate prices. Ice Dream's shave ice meets the quality required by these customers since it will also cater to the large Latino population in El Centro with its Mexican flavored syrups.
4.3 Industry Analysis
One of the best known shave ice businesses is Sno Biz Shave Ice under the parent company of Crystal Fresh, Inc. Dealerships such as Sno Biz have demonstrated the success and feasibility of selling shave ice. The Sno Biz dealership has been in existence for the last 11 years with over 3,000 individual dealerships throughout the United States. Sno Biz syrups products are also sold in Wal Marts throughout the country. While no Sno Biz dealership currently exists in California, Sno Biz products are sold at the San Diego Zoo, Lion Country Safari, and the San Diego Military base with great success. The potential success for selling shave ice is attributed to the following:
- Compared to other food service products, Ice Dreams will be a relatively simple business to operate.
- Shave ice is similar to a Mexican favorite called raspado, but because it is softer and tastier, it is preferred over raspados.
- Shave ice has a low food cost and is easy to prepare, which keeps speed-of-service at optimum levels to keep up with high-traffic volumes.
- Ice Dreams will be easy to maintain and clean.
- Shave ice is a product that has yielded a considerable profit in terms of cost to produce at $0.16.
- Shave ice is an ideal product for the health-conscious consumer.
Market research conducted in El Centro did surface one raspado (sno-cone) business on a small scale called "Snow Shack" located on State Street. Snow Shack consists of a small trailer that accommodates only one employee. Sno-cones are sold in cups at prices ranging from $1.00 (small), $1.25 (medium) to $1.50 (large).
Sno-cones were also found to be sold at Garcia's Food Market and Wal Mart. Each sold sno-cones in one regular size at $1.00 each.
Research conducted in Bullhead City, Arizona noted that the Sno Biz dealership only sells shave ice as their primary product. Shave ice units sold for $1.25 (small), $1.75 (medium) to $2.25 (large) per unit. In interviewing the current owner, he indicated that during his first year in business he was selling 200 units per day.
Research in San Diego, California revealed that shave ice is sold along with other products. Several businesses in Mission Bay sold shave ice with prices ranging from $1.79 (small), $1.99 (medium) and $2.39 (large). In terms of licuados, prices were $2.79 (regular) and $3.15 (large).
Research conducted in Honolulu, Hawaii, showed that in some locations, shave ice sold as high as $5.00 for a regular size. However, the majority of sno-cones were sold by the flavor and not necessarily by the size. For example, one flavor was $1.79, two flavors were $2.29, and three flavors sold for $2.79.
4.3.1 Competition and Buying Patterns
The shave ice business will be new to El Centro. Competitors in this type of business primarily sell raspados or sno-cones and do not focus on the shave ice market. One major competitor is the "Snow Shack" located on State Street. Snow Shack sells sno-cones through a small, one person trailer with limited choices of syrups. Other competitors sell sno-cones through Garcia's Market and the Wal-Mart store which also have limited syrup selections and do not necessarily focus on the sno-cone or shave ice industry as their primary product.
The keys to success will definitely focus on selling shave ice and not sno-cones made with coarse ice and selling high quality syrups. Prices will also be competitive with those of the competition.
4.3.2 Main Competitors
Main competitors include the Snow Shack, Garcia's Market, and Wal-Mart. The following are strengths and weaknesses of each.
- Snow Shack
- Strengths: The main strength of Snow Shack is that it is the only business in El Centro that caters to the sno-cone market. It also has very reasonable prices.
- Weaknesses: The primary weakness of Snow Shack is that it does not sell shave ice but rather sno-cones made from very coarse ice. Syrups are also not of good quality.
- Garcia's Market
- Strengths: The main strength of sno-cones sold by Garcia's Market is their low price of $1.00 and the convenience to the shopper in buying sno-cones while doing their shopping.
- Weaknesses: The main weakness of sno-cones sold by Garcia's Market is that they do not sell quality syrups and prefer to sell the more inexpensive brand with lower quality taste.
- Strengths: Main strength of sno-cones sold by Wal-Mart is the convenience to the shopper and low price.
- Weaknesses: Wal-Mart's weakness, like Garcia's Market, is that they do not sell quality syrups. Also, the sno-cone business is not their primary focus or product.
4.3.3 Industry Participants
The shaved ice industry in El Centro, California currently has no key players since no other business of this type currently exists in the Imperial Valley.