Wholesale discounts being offered to retailers keep increasing and are now at 30 per cent of the retail price. Four years ago, the usual discount was only 3 to 5 per cent.

"When market competition heats up, producers rush to offer larger discounts," said Gryphon Liu, sales manager of Wall's Co Ltd.

Some are carrying out promotion activities like "buy one, get one free," lasting for the whole season.

But production costs have not fallen much in the period. For example, the price of sugar, one of the major production raw materials, has risen by 28 per cent.

This situation has eliminated more than 300 ice cream companies from the trade over the past five years.

"The 52 survivors are being pushed into a corner. After the usual discount, you lose money because returns don't even cover the costs. If you stick to a discount that suits your costs, you lose market share," said Liu.

When asked why they do not lower the retail price of their products, Liu said that discounting is only a temporary marketing strategy, aimed at gaining a larger market share.

"Should this discount fight keep on, all the companies would suffer great losses," Liu said.

Industry observers say major ice cream companies are running up deficits from the past few years. Watson's, which used to own the most popular ice cream brand in Shanghai, once had 30 per cent of the market share. It has withdrawn from the market because the group lost 140 million yuan ($17 million) over the past six years.

Their brand, "Mountain Cream," has now been bought by Wall's, which is satisfied to acquire the large local sales network of Mountain Cream.

When asked about the tough marketing situation, Liu said: "Competition knocks out the unfit and the weak. Wall's has the power to carry on and survive."

Bright Food Company, which has been incorporated into Yimin No 1 Food Company Ltd, was once the city's most famous ice cream producer. It started business in the 1930s. Now Yimin plans to grab a larger share of the pie by restoring the Bright brand.

Eager to get recognition from the market, Bright plans to develop 15 new products for the coming season, including chocolate, vanilla and strawberry ice cream. Its special product is a yogurt flavour.

"We hope to resume our number one position in the business," Sun Jingrong, sales manager of Yimin, said.

China's largest ice cream company, Yili, has also incorporated a local ice cream company, Perfetti's. Like money-losing Watson's, Perfetti, the Italy-based company, has also decided to retreat from the ice cream business.

Yili, with its headquarters in North China's Inner Mongolia Auto-nomous Region, has successfully expanded its national market.

It has now built two factories in Shanghai, hoping to develop the city into a base for Yili in East China, said Huang He, sales manager of Yili's East China department.

Yili has developed 12 new products and will have more in the coming season. It has adjusted its products to cater to local tastes.

Major products are priced between 1 yuan to 3 yuan ($0.12-$0.36). Huang said some of the new products were actually transformed from old ones.

"We simplify the package to lower costs and decrease prices. We prefer to benefit consumers more," Huang said.

She said this summer will come earlier than last year, and will be hotter. Yili's assembly lines are in full production.

But with low prices, Yili will not offer big discounts. A new product Xingxingyu offers a 20 per cent discount to wholesalers, she said.

Wall's and Mountain Cream are now developing new products, but they are being cautious.

"An unsuccessful new product will waste a lot of money," said Zhou Tingfang, sales manager of Mountain Cream.