Mumbai-based Prabhat Dairy plans to expand its goodness centres, which were launched in May, as it ventures on a retail expansion drive to more than double its annual revenue.
The centres sell products such as lassi, masala chaas and milk shakes.
The company, which has over 40,000 distributors in Maharashtra, plans to hand-pick franchisees that have the requisite real estate and willingness to invest Rs 4 lakh in the business, Joint Managing Director Vivek Nirmal told Moneycontrol.
Prabhat Dairy is keen on expanding its goodness zones as it wants to increase its retail reach and targets a revenue of Rs 1,000 crore in the next two years from Rs 400 crore at present.
Nirmal said a retailer can break even in four months thanks to 20 percent margin and rising demand for quality products in smaller cities.
The management plans to spend Rs 80,000 in the interiors and provide cooling solutions in each of the retail outlets. It has set aside Rs 30 crore for marketing and awareness initiatives around the goodness zone and is currently targeting places where it sells over 4,000 litres of milk.
The company is looking to expand franchisee outlets of 'Prabhat Goodness Zones' in Tier II and III towns of Maharashtra.
Started in 1998 by Founder and Chairman Sarangdhar Nirmal, Prabhat Dairy is an integrated milk and dairy products company producing ghee, flavoured milk, sweetened condensed milk, skimmed milk powder and packaged milk. Its sole manufacturing facility is located at Srirampur in Maharashtra.
Prabhat Dairy caters to retail and institutional customers and also sells co-manufactured products to a slew of institutional and multinational companies.
Excerpts from the interview:Q: What is the contribution of value-added products in your portfolio and do you see a change in mix in the medium term?
A: Contribution is around 80 percent. We expect this to remain at these levels, but we see products like cheese and yogurt increasing against milk powders.Q: Last quarter's result was mainly led by volume growth, milk pricing was weakfish. Can you describe the current scenario?
A: Milk prices continue to remain weaker in India due to the overhang of inventories.Q: The Department of Animal Husbandry expects organised sector to grow from 20 percent at present to 50 percent by 2022-23. What is your take on the shift from unorganised to organised in the dairy space?
We definitely see this happening. We see more and more consumers shifting to packaged milk in place of loose. We also see a lot of preference for packaged curd as against home preparation.
With a stronger cold chain and growth of organised retail, we see this shift happening faster. The strong role played by food regulator FSSAI is providing confidence to consumers of packaged dairy products.Q: Various regional players are moving pan India in coverage and few FMCG companies like Britannia Industries are attempting backward integration. How do you see the competitive landscape emerging?
A: More organised players in dairy will mean a more organised dairy industry. As far as milk procurement is concerned, it’s a tough play.
We have been working for more than a decade and finally have a very high tech milk procurement platform, sourcing from more than one lakh local farmers. Bigger companies will have to work on milk procurement to have a better business model.Q: What are your plans for capacity expansion and distribution?
A: We are now adding new milk packing stations on a job work model without investing on our own. We are expanding our consumer business more aggressively in vacant parts of the state. Our exports to the Middle East and Africa for butter and cheese is growing.Q: In terms of milk procurement, what is your take on unorganised players from whom you face stiff competition?
A: We see that segment growing very fast among organised players. Players like us provide extensive support to farmers in financing, training and feed as well as by making direct bank payments. This creates a preference.Q: Will profit margins of dairy companies remain strong in the near term given soft milk prices and increased focus on value addition to avail subsidy announced by various state governments?
A: We see it at normal levels as softer milk prices have been more or less passed to consumers. Government subsidy is also passed on to farmers.Q: Do you plan to venture into any new products?
A: We are focusing on dairy beverages, which we launched this year, like lassi, masala chaas and milk shakes. We are also working aggressively towards expanding our franchisee outlets - Prabhat Goodness Zones - in Tier II and III towns of Maharashtra.