J. Samba Murthy, Head – Dairy Division, Heritage Foods Ltd., speaks to Progressive Grocer about how the company is moving ahead with its plan to achieve Rs. 4,100 crore in turnover @ 23 per cent CAGR with 18 million tonnes of milk handling capacity by 2020
Tell us about your dairy business and its products.
We procure the milk from farmers, process the milk, pack the milk as per the standards and manufacture different kinds of products, which we market/ sell to the consumers.
The milk that is sold has various variants based on fat and SNF per cent, such as skim milk, double toned milk, toned milk, standardised milk and full-cream milk.
Our milk products include curd, butter milk, lassi, paneer, doodhpeda, milk cake, flavoured milk, ghee, SMP, PT butter, cooking butter, UHT milk, sweetened condensed milk, ice-cream and frozen dessert.
What is the value differentiator for your products – pricing, ingredients, taste, flavours…?
Our products are manufactured keeping in mind the local/ regional tastes and on top of it we maintain premium quality always. Quality is our focus and strength of the company. Our prices are certainly higher than or on a par with the competitors. This is because the quality of products is high and so is the cost of production, which is aided by our state of-the-art technology plants.
The dairy market is flooded with strong regional players like Parag, Vadilal, Amul, Dabur, etc. What is the assessment of your performance in the face of tough competition?
Heritage is a renowned brand particularly in the southern market and is well-known for its service and quality. Our focus is to make the availability of our milk and milk products nearer to the consumers through our exclusive parlours, which are run by the franchisees and have been able to compete very well in the marketplace.
What is your strategy for ensuring a more comprehensive retail outreach of your products?
As mentioned, our products are available to the consumers through our parlours. We are also enhancing our distribution network to make the products available at the retail outlets in general trade and modern retail stores. We have prepared an activity plan to implement our retail strategy, which will be implemented soon and we are already working on the plan. Under this strategy, we plan to add 30,000 outlets during next FY 2016-17.
What is your target in terms of sales turnover and volumes sold?
As per our vision 2020 agenda, Heritage Dairy Division is expected to reach Rs. 4,100 crore in turnover @ 23 per cent CAGR with 18 million tonnes of milk handling capacity, which will be realised with the launch of new value added products (VAP) in next FY. Our target is to grow 23 per cent YOY in the overall dairy business whereas VAP is expected to grow 25 per cent.
Which are the major markets you are looking at for selling your products?
Our focus is on the recently launched markets for our products – Delhi/NCR and Mumbai/Pune, along with a deep drive in the southern markets.
What is the kind of investment you have made for this business and how much do you plan to spend on marketing and advertising?
The capital expenditure is expected to be Rs.30 crore per annum to enhance the production capacities in the existing plants and Rs. 150 crore for setting up new products’ manufacturing plants in the next three years. We also plan to take up ATL/ marketing activities by allotting 1 per cent to 2 per cent of our turnover.
Which have been your recent innovations in the dairy category by way of upgradation of plant and machinery, supply chain, etc.?
We have set up Bulk Milk Coolers (BMCs) at the village level to procure the milk and store at four degree centigrade so that quality and freshness of milk is maintained. We have also placed milk analysers at the villages for ensuring accuracy in testing and volume measurements. We have around 150 such chilling centres/ BMCs and 14 packing stations with sophisticated machinery where we process, pack the milk, manufacture different kinds of products and send these to different markets through PUF insulated vehicles. Also, we have recently set up Rapid Milk Coolers (RMCs) where milk is instantly chilled.
Are you also planning to launch new products?
We are in the process of launching cheese and ultra high-temperature (UHT) products. There are new product variants, which are under the development process in categories like yoghurts, ice-cream and frozen dessert.
How do you see the dairy trends worldwide and how does it compare with the Indian situation?
There has been excess milk production for the last two years globally. The prices of SMP and fat products are coming down, although they may firm up next year. The consumption of milk and milk products are increasing in India like the developed countries. There could be heavy competition in the Indian dairy market if foreign brands and companies enter the country.
The entry of Coca-Cola in the flavoured milk segment has created quite a buzz. What do you think of it?
The entry of Coca-Cola in the flavoured milk segment is good for us and the industry. I hope it will help to increase the consumption of flavoured milk.
In veiw of the approaching Budget, what do you think that the government can do to encourage and boost the dairy industry?
Government should extend the incentives under National Dairy Plan (NDP) to private dairy sector. Also, in order to improve the quality of milk and improve the production and productivity of the dairy sector, the government should also encourage exports by extending special incentives.