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 includes loose milk, buttermilk, lassi, ice- creams, curd, flavoured milk etc. In an exclusive interaction with Brahmani Nara, ED, Heritage Foods Limited sheds light on the growth strategy of the company.
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 dairy stands at about Rs. 6 lakh crore, out of which about 20% of the market is organised and has been growing at 10 to 15% CADGR. Whereas the size of the FMCG sector is at Rs. 3.40 lakh crore and has been growing at single digits. The need for milk on a daily basis has become necessity in households and consumption per family is high as compared to FMCG goods.
Tell us about the Heritage parlours 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/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 channels.
Everyday Milk & Products (E.g. Milk, Curd etc.) needs large scale operation, which focuses on speed and agility so that markets and consumer receive the freshest products. This is done through large network of milk agents / distributors.
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 & new product placement and delivery.
The fourth GTM channel is having a parlour network which has exclusive dairy products’ distribution of Heritage foods. Heritage largely follows a franchise model which are on cash and carry model. While exclusivity is one of the benefits of a parlour model, there are other significant benefits. Parlours for Heritage are testing ground for new products when we want to measure responses to new products and keep a close watch to 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 opportunity. Also great branding opportunity.HDC distribution model, wherein he or she will act as a seller cum distributor. It can operate in both residential and commercial places. They distribute exclusively Heritage’s products to retailers.
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 to e-store from brick and mortar stores. Today, e-commerce has revolutionised the way companies are doing business. Now, consumers can purchase almost anything online conveniently 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 fresh milk and curd are available on Big Basket Daily. The company has also recently tied up with leading delivery platform Swiggy for delivering 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 awareness on preserving various dairy products at different temperature levels. The temperature requirement of fresh 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 work 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 to our consumers on time on a daily basis. Milk aggregators are the players who work with multiple dairy companies on different trade terms and will ensure distribution of milk products through their platform.
Kindly shed light on product categories and best sellers? Going forward, what are the plans to expand category range?
Nationally, five product groups contribute to 90% VADP revenues. They are 1. Packaged Milk 2. Butter Milk 3. Curd / Dahi, Drinkables (which includes flavoured milk and Lassi), 4. Dairy Fat (Butter, Ghee, Paneer, Peda, fresh cream etc.) and 5. Ice creams.
Company has recently launched healthy variants in lassi such as Sabja lassi and Ragi lassi and they have been a hit with the customers.
At last, kindly highlight your growth plans?
The company is aiming for better than Industry growth rates during the next five years. We are pursuing following growth initiatives currently:
- Setting up Greenfield yoghurt plant by 2019 through our JV company
- Increase the contribution from value-added products segment from 25% to 40% by 2024
- Expand the presence of the brand in relatively newer geographies like North and West to achieve sizable business
- Working on expanding both organic and inorganic processing capacities and also in areas of procurement of milk
The company had entered western markets in the last few years and the northern markets a year back. We have also seen an increase in the volume of our products being sold in western markets. Additionally, as a part of our expansion plan, the company is setting up a milk processing plant in Maharashtra. After fully integrating Dairy business of Reliance Retail in to the company, the company is focusing on increasing its share of business from Northern Markets. The marketing efforts in newer markets have been pepped up to increase the depth of the brand in these markets. The newly set up plants in Sonipat and near Chandigarh would cater to this market. These are some of the initiatives taken by the company to develop new markets.