ICRA maintains a stable outlook for the long-term and projects that industry-wide demand for the Indian dairy sector will increase by 9–11 percent in FY2022 and 7-10 percent CAGR over the next three fiscals. According to the agency, increased economic activity, rising per-capita consumption of milk and milk products, shifting dietary habits due to urbanisation, and continued government support for the dairy industry would all result in increased demand.
This bodes well for established players like Parag Milk Foods who will benefit from their extensive track record of operations, strong brand, diverse product portfolio, robust distribution network and improved liquidity profile.
Reflecting on this positive development, Akshali Shah, Executive Director of Parag Milk Foods remarks, “HORECA and out–of–home consumption have witnessed a good comeback post-pandemic. Our growth in this segment in FY22 has crossed pre-COVID levels. Further, with economic activities on the upswing and festive seasons coming ahead, we will continue to witness good traction for this segment.”
With e-commerce being the soul of the recipe of transformation the organised dairy segment, which accounts for 26-30 percent of the industry (by value), has seen faster growth compared to the unorganised segment aided by digitisation and major private players could be witnessed investing heavily in omnichannel and integrated solutions that expand their reach beyond the tried and tested metro cities.
“E-commerce has evolved as a very fast-expanding segment that is now dominating the entire distribution. In the fiscal year, our e-commerce business tripled in size, and we have noticed a rapid increase in demand across all market sectors and product categories. It is one of the fundamental cornerstones of our distribution strategy because it enables us to reach a wider audience with lower additional spending on advertising. The spending on this platform will expand in the upcoming years because it gives us greater visibility to win market share. As a company, we are using a variety of classic and modern media to spread brand recognition and reach people in tier1, tier 2, and urban areas,” says Shah.
The farm-to-home or farm-to-table approach is another trend that is here to stay and flourish as customers become more and more conscious of their health and nutrition, the environment, and their local economies.
As early as 2011, Pride of Cows, a brand of Parag Milk Foods, introduced a first-of-its-kind superior farm-to-home milk. As the trendsetters in using advanced farms and the finest international technology and practices they have been at the forefront of sustainable solutions and have also been awarded certifications such as ISO 9000 and AGMARK. Shah elaborates on how the company is synergising new trends with their fundamental sustainable practices to pursue its passion for milk in an era when the concept has manifested itself as a popular social movement.
“Our premium offering, Pride of Cows, is founded on the idea of farm-to-home. We are the innovators in this market. We have grown our brand with the inclusion of varied products for various preferences and now we have a bouquet of products (which we continue to grow) to cater to a larger audience however mainstream or niche they may be. Our definition of a target market; is anyone looking for quality products and so with a tech-savvy approach, we invest in digital marketing to raise awareness and exposure of the brand for anyone browsing for quality products online,” she explains.
She adds, “We operate on a subscription basis and provide Our Pride of Cows milk in four cities: Mumbai, Pune, Delhi, and Surat. Pride of cows Ghee is sold all over India. We are a subscription-based company, which is why we were able to reach more people during the pandemic as consumers surfed for food options online.”
There is a strong resurgence in demand for liquid milk and value-added products (VAP). India is in the process of switching from the production of plain milk to VAPs and from a local, disorganised market to a more organised one. Given its higher margins, the ratings agency also anticipates that private companies will continue to invest in the VADPs (value-added dairy products) segment.
Shah offered her own case in explaining the contribution of value-added products by saying, “We are a fast moving dairy player embarking on innovation and currently, the value-added products contribute 68 percent of our total revenue. During the pandemic, we have expanded our premium brand offerings in Pride of Cows by adding Ghee, Paneer, Curd to the portfolio. Further, in FY22, we continued to introduce products across price points for our fast-moving beverage segments. We have added mango milkshake and mango lassi to our portfolio.”
She remarks, “Also, as a first in the category of affordable whey we have launched our whey-based drink – RAPID at the price point of INR 10/- in two flavours lemon and orange which comes in a 125 ml pack. This is backed by a completely new line of infrastructure to establish a larger footprint. The initial consumer response has been very encouraging. We will maintain this drive going forward since, in a diverse country like ours, milk has historically been a source of strength that now merits a creative modern twist.”