Mumbai: Gujarat-based dairy firm Prabhat Dairy Ltd is aiming to double its consumer business of packaged milk and value-added dairy products by FY2020, a company executive said.
Prabhat Dairy, which launched a new logo and a range of new dairy products, estimates its consumer business to be worth Rs2,000 crore by financial year 2019-2020, joint managing director Vivek Nirmal said in a press briefing on Tuesday.
To boost the consumer business, the firm has launched new value-added dairy products including a range of milk-based drinks from which it expects to earn about Rs100 crore by 2020, Nirmal said.
Besides, the company will introduce products like dahi, paneer, and other value-added dairy products in tier-2 and tier-3 towns, primarily in north, east, and central India where it does not have a strong presence.
“We are focusing on general trade to ramp up distribution," Nirmal said in an interview. The firm currently reaches 100,000 outlets in general trade, which it plans to double to 200,000 while in modern trade it has access to 300 outlets which it will increase to 1,100, Nirmal said.
“We want to focus on the consumer business because the institutional business (sales to other manufacturers) is not going to grow," Nirmal said in the interview. About 70% of the company’s sales come from this business-to-business (B2B) segments, which the company wants to reduce to 50%.
“The institutional business is mostly sales to firms like Cadbury’s (owned by Mondelez India Pvt. Ltd)," said an equities analyst with ICICI Securities. “It has very low margins and return on investment is also low. So you can keep going deeper into the business, but the returns are low. The company instead wants to make the split between consumer and institutional businesses 50-50 by 2020," the analyst said on condition of anonymity.
Most dairy firms in India have been trying to increase margins by focusing on value-added products in their portfolio. However, the bulk of business for India’s largest firms—including brands like Mother Dairy and Amul —continues to be packaged milk that homes in India buy every day. These include PepsiCo, which launched Quaker Oats Milk in May this year, and Coca Cola, which introduced flavoured milk brand Vio in January last year. Meanwhile, Gujarat Milk Marketing Cooperative Federation’s Amul is also betting on high margins from its value added products including cheese and dahi for growth, Mint reported on 1 April.
Shares of Prabhat Dairy closed 3.05% higher at Rs130.10 while the benchmark BSE Sensex closed 0.68% higher at 31,497.38 points.