Heritage Foods eyes expansion, launches more value-added dairy products

“Our core markets are the Telugu states. The second one is the neighboring markets, namely Karnataka and Tamil Nadu. Then, there are the developing or emerging markets. The core markets are the slowest growing, emerging markets The market is growing the fastest. In about three or four years, the business shape will be very different from where we are today,” Srideep Kesavan, CEO of Heritage Foods, said in an interview. Mint.

Currently, southern states account for more than 87% of the company’s business. In fiscal 2024, Heritage Foods’ revenue was $37.94 billion rupees, profit $91 Crores. The company sells products such as milk, cheese, butter, curd and paneer.

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“About 12% comes from other parts of India, mainly from western Maharashtra and NCR (National Capital Region)-Haryana. We have enough production capacity to cater to these markets for at least a year or two. For example, during the COVID-19 pandemic During the epidemic, we invested nearly $Maharashtra Rs 100 Crore. In the north, we acquired a dairy business from Reliance Retail Ltd (RRL) in 2017-18. I don’t think we’re going to be making greenfield investments in these markets right away. If our growth trajectory remains strong, we will need to expand capacity in the coming years,” Kesavan said.

The Indian dairy market is estimated at $According to market research firm IMARC, this number will reach $13 trillion by 2023. The liquid milk market accounts for approximately 61% of the dairy market. Traditional value-added products account for 34% of the market share, while emerging value-added products (dairy drinks, cheese, flavored yogurt) contribute the remaining 5%.

However, due to its fragmented and unorganized nature, the dairy industry is dominated by regional players. This is because the industry relies on sourcing milk from local farmers. Several large players such as Amul, Nestlé, Mother Dairy, Karnataka Milk Federation’s Nandini brand are competing in the market. Last year, Nandini entered the Delhi-NCR market with its dairy products.

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Kesavan said Heritage Foods will launch and expand value-added dairy production capacity. Fresh milk accounts for 59% of the company’s revenue. However, most of the investment in the past few years has been in value-added dairy products.

“That’s where we’re building our capacity for growth,” he said.

The Indian dairy market is shifting towards value-added products such as curds, cheese, yogurt, flavored milks and probiotic drinks to meet growing consumer demand for health and convenience, coupled with rising discretionary spending. According to industry estimates, such value-added products are expected to grow at an annual rate of 14% to 19% over the next five years.

In the September quarter, the company announced setting up a new ice cream manufacturing unit in Telangana with an investment of $204 crores. Also invested $The Karnataka flavored milk production line is worth Rs 45 crore. “Value-added products are our fastest growing category (33% of the business). Other areas where we see huge potential are protein and probiotics,” he added.

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Kesavan said demand for dairy products remains strong despite an overall slowdown in consumption. However, in the context of rising raw material prices, price increases are “imminent.”

“We started raising prices in April 2023. Every year, prices need to increase by at least 3-4% to adjust for inflation; but that is not happening. At the risk of affecting the volume growth momentum, we will have to raise prices. It must be Decide on the timing because you don’t want to raise prices when consumption is weak,” he said.