Yaneek Page | Ice-making as a business opportunity

QUESTION: Currently, I noticed that there are just two ice-making companies in Jamaica. I have done some research and seen where one company has experienced a fire and there is a shortfall of ice, and the remaining company cannot fill the gap. As a result, the State has to be importing ice. I always wanted to start an ice-making company but got some negative response from people. Do you think it is a good idea to start another ice-making company here in Jamaica?

– Owen

BUSINESSWISE: I know that there is market-driven demand for ice. However, I don’t know if starting an ice-making company is a good idea. The definitive answer to that question will only come with two things: rigorous due diligence before deciding to take the leap and start a business, and the actual outcomes of that venture vis-a-vis what you had projected.

Let’s take the approach of a savvy investor trying to evaluate the ice-making business opportunity in Jamaica. Here is what you would focus on:

Is the market demand high and growing?

Persistent shortages and reliance on imports indicate a strong and underserved market.

In fact, Jamaica’s tropical climate and the rising temperatures ensure consistent year-round demand for ice, particularly in sectors like tourism, hospitality, entertainment, and retail.

In 2021, one of the industry players was reported to have embarked on an expansion plan of over $120 million, to double their annual ice production.

Is the business model lucrative?

Ice has great prospects for recurring revenue, repeat customers, and high customer lifetime value. It is a consumable product that will provide consistent revenue streams from repeat customers like event management companies, factories, supermarkets, gas stations, and hotels.

There are virtually no returns, no spoilage or ‘bad and dumped’ products.

There’s no variance in consumer taste or preferences.

It has premium pricing potential – for example, premium clear ice, bagged or speciality ice.

It can be relatively low-cost to produce and can have high margins.

You can focus primarily on pay-on-delivery/demand business, which allows for steady cash flows and low receivables and bad debts.

As an investor, these are all very strong cues for an attractive business model.

Is the competitive landscape oversaturated?

There has been consolidation in the market, which was already dominated by only a few players.

However, this could change quite early in 2025. Earlier this month, the Jamaica Stock Exchange published a press release from Kintyre Holdings (JA) that it had invested over US$300,000 to acquire an associate stake in Seven Kingston and to lay the groundwork for Sevens Ice. Sevens Ice is a new ice manufacturer that is slated to be operational in the first quarter of 2025, according to the release. The company also plans to import ice in the short term, to capitalise on the urgent supply gap, as they build out production facilities.

Take note that the set-up costs are high, which will pose a high barrier for new entrants to enter or leave the market. The tens of millions in set-up costs and high electricity serve as a disincentive to new competition, protecting established players.

However, where you have an industry with only a few large players who are struggling to keep up with growing demand, it is ripe for disruption, which is another positive indicator for an investor.

What is the operational viability?

One of the biggest challenges mentioned by existing players, as reported in various media publications, is high electricity costs, because ice production is energy-intensive. A savvy investor would be focused on how these costs can be mitigated through energy-efficient technology or alternative energy sources, for example, solar.

The current competitors have also reportedly invested heavily in technology and infrastructure to scale production. Therefore, a smaller player must plan for similar scalability and increasing efficiency to stay competitive.

Can you compete with the distribution network of the larger players?

Savvy investors know it can be a fatal error in business to underestimate the competitive advantage of an existing distribution and supply chain network.

A key question a new entrant would ask is how can they quickly and efficiently establish a reliable and scalable distribution strategy to compete.

How will they ensure proximity to customers, especially strategically located facilities near demand hotspots, for example, Montego Bay or Kingston?

I get excited when I see readers drawing inspiration from the latest business news and developments to address urgent problems or fill gaps in the market. Recognising a viable market-driven prospect is a critical component of opportunity-driven entrepreneurship.

Considering all the factors outlined, starting an ice-making venture appears to be a worthwhile investment opportunity only under the right conditions. Those conditions include a great team and leadership, a capital investment plan, viable energy strategy, a solid distribution plan, strong market differentiation to set your business apart from competitors and capture market share. and a capital investment plan.

Good luck and one love!

Yaneek Page is the programme lead for Market Entry USA, and a certified trainer in entrepreneurship.yaneek.page@gmail.com