"Our vision is to achieve a turnover of Rs. 6000 crore by 2022": Brahmani Nara

The Heritage Foods Limited was founded by Mr Nara Chandrababu Naidu in the year 1992, which is one of the fastest growing public listed companies in India, with two business divisions – Dairy and Renewable Energy. The annual turnover of Heritage Foods crossed INR 2344 crore in the financial year 2017-18. The company has completed 25 years of its existence last year. The company also had its presence in the retail business, which they sold to Future retail.The products manufactured by the company include loose milk, buttermilk, lassi, ice-creams, curd, flavoured milk, etc.Currently, Heritage's milk and milk products have a market presence in Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharastra, Odisha, NCR Delhi, Haryana, Rajasthan, Punjab, Uttarakhand, Himachal Pradesh, Uttar Pradesh & Madhya Pradesh.

In an exclusive conversation Brahmani Nara, ED, Heritage Foods Limited sheds light on the growth strategy of the company.

Interview Excerpts…

How do you see the current dairy and FMCG market is evolving in India? What would be the tentative market share of heritage foods in it?

The market size of the dairy stands at Rs. 6 lakh crore, out of which 20% of the market is organised and has been growing at a rate of 10 to 15%. Whereas the size of the FMCG sector is at Rs. 3.40 lakh crore and have been growing at single digits. The need for milk on a daily basis has always been a necessity in  households and consumption per family is high as compared to FMCG goods. The entry of large MNC dairy companies in to the country and expansions announced by large domestic dairy companies including Heritage shows that the demand for value added products and milk is increasing steadily and the pie of the organised dairy is going to increase besides the growth in per capita consumption of the milk.

Tell us about the Heritage parlours in including market presence and distribution. Going forward, what are the plans to increase the distribution? Kindly shed light on your franchise business as well?

Dairy products are distributed primarily through milk agents whereas FMCG products are distributed through retail distributors.

Unlike other food and FMCG companies, the dairy Go-to-Market (GTM) is significantly different. The distribution needs for different products vary vastly. Heritage’s current GTM is led by four different verticals

Everyday milk andmilk products (likemilk, curd, etc.) needs large scale operation, twice a day, which focuses on speed and agility so that markets and consumer receive the freshest products. This is done through large network on milk agents.

With the ice-cream range, the demands are quite different. This requires work on asset management and chiller purity and restocking and in a sub-zero cold chain.

Thirdly, with ambient products, the endeavour is to build a working relationship with retailers focussed on building width and depth. This is closer to the FMCG model, focussed on building a pipeline for existing and new product placement and delivery.

The fourth GTM model is having a parlour network, which has an exclusive dairy products’ distribution of Heritage foods. Heritage largely follows a franchise model that is deeply subsidised till the franchisee can find a foothold and break even. While exclusivity is one of the benefits of a parlour model, there are other significant benefits. Parlours for Heritage are testing grounds for new products when we want to measure responses to new products and keep a close watch on critical shifts in the market. It also is the first hand relationship with a consumer, which helps us in crafting out products better. They also are part of a larger social cause of providing entrepreneurship opportunities  as well as being a great branding opportunity for the company.

E-commerce is emerging as big channel for FMCG retailing. What are your plans to tap this channel?

With increasing demand for online purchasing, more and more businesses are moving towards e-stores from the brick and mortar stores. Today, e-commerce has revolutionised the way companies are doing business. Now, consumers can purchase almost anything online 24X7 a day and get an ultimate shopping experience. We at Heritage also have products like milk, ghee and curd on leading online grocery/retail platforms like BigBasket and shorter shelf-life products like loose milk and curd are available on BigDaily, which is BigBasket’s daily needs’ delivery platform. The company has also recently tied up with leading delivery platform Swiggy for delivering the products. Heritage is in talks with other E-commerce and delivery players to augment its reach of products.

According to you, what are challenges of FMCG retailing and way forward?

The biggest challenge in FMCG retailing is lack of education on preserving various dairy products at different temperature levels. The temperature requirement of loose milk and curd is different from ice cream and flavoured milk.

Having said that the biggest advantage is the dairy products are kept in hygiene conditions in these modern retail and other retail stores and they are evolving to reach to ideal preserving conditions of dairy products.

Overall FMCG retailing helps in garnering more volumes, visibility and also acts as a feedback mechanism.

These days there are many aggregators of milk distribution who primarily works on subscription model. Do you see them as your competition? What is your take on subscription business?

Milk aggregators are not procuring milk directly from farmers and retailing it. In fact milk aggregators are helping dairy companies like Heritage to distribute dairy products. They enable our products to reach our consumers on time on a daily basis. Milk aggregators are the players who work with multiple dairy companies on different terms and will ensure distribution of milk products through their platform. So they are not our completion and in fact they are enablers for us to do our business better.

Kindly shed light on product categories and best sellers? Going forward, what are the plans to expand category range?

Nationally, four product groups contribute to 90% VADP revenues. They are 1. curd/ ahi, 2. drinkables (which includes flavoured milk, lassi, chaas etc.), 3. dairyfat (butter, ghee, paneer, peda, fresh cream etc.) and 4. ice-creams. 

Recently, in order to beat the summer heat, we have added healthy variants in lassi such as Sabja lassi and Ragi lassi and they have been a hit with the customers.

Heritage has a presence in all of the above categories. While all these businesses are sizeable and growing, curd/dahi stands out as a category, which is growing at the fastest rate. While curd/ dahi contribute a sizeable part of the VADP for Heritage, we believe that the innovation of dairy products is yet to happen.

At last, kindly highlight your growth plans?

Our vision is to achieve a turnover of Rs. 6000 crore by 2022. This would require growth rate of anywhere between 20% to 25% on year on year basis.

The strategies undertaken to achieve this goal is as follows:

• To set up Greenfield yoghurt plant by 2019;
• To improve our contribution from value-added products segment from 26% to 40% by 2022 from current level of 22.43%;
• After acquiring Reliance Dairy, we have successfully integrated with the company and expecting good contribution to our revenues from these regions; and
• Working on expansion both organic and inorganic way of additional capacities in areas of procurement, processing and packaging.