Dairy firms explore sourcing strategies in expansion drive
Dairy firms are experimenting with various sourcing strategies as they begin an expansion spree, providing clues on how to enter new geographies in India’s fragmented milk market. The various expansion strategies have their own advantages and problems but there is a lone common thread among them— sourcing.
Some firms are moving into new markets with a combination of acquisitions and painstakingly slow moves.
“We are not a firm that has ever wanted to expand too fast,” said Prasanna Venkatesh Jayaraman, Associate Vice President of Marketing at Chennai-based Hatsun Agro. The firm recently expanded operations to Maharashtra’s Solapur and Sangli districts.
Hatsun now has its own network of 5,000-6,000 farmers who come to the company’s milk collection centres in the Solapur and Sangli districts. The company took nearly a year to scale operations up to this level.
In contrast, Telangana-based Heritage Foods moved quickly into north India by acquiring Reliance Dairy, part of Mukesh Ambani-led Reliance Retail Limited. A known brand in the region, Reliance Dairy gave Heritage access to about 150,000200,000 litres a day in sales, along with five new north Indian mar- kets—Punjab, Uttar Pradesh, Uttarakhand, Madhya Pradesh and Himachal Pradesh.
For Heritage Foods, too, all strategies are built to secure sourcing. “We are locally procuring milk as close as possible to our (go-to) markets to supply the best and freshest milk,” Brahmani Nara, Executive Director, said.
Yet another strategy is to go for value-added dairy products, which bring much needed margins. PepsiCo India in May launched fibre-fortified milk in two flavours. “We are outsourcing all the manufacturing to Schreiber Dynamix,” Deepika Warrier, Vice President of Nutrition at PepsiCo India, said in May.
For multinationals, who have always found it hard to break into India’s fragmented, regionally varied and cooperativedominated milk market, third party manufacturing can come as a relief.