Plans to raise milk procurement
Britannia Industries is looking to double turnover of its dairy verticals over the next two to three years.
While there will be a widening of its existing portfolio, plans are also afoot to increase milk procurement too.
The company, which is finalising the capex for the segment, could also explore the possibility of having a new brand apart from the existing eponymous one (Britannia) and ‘Winkin Cow’ (for milk shakes).
Dairy, where offerings are in the value-added segment, accounts for ₹500 crore of turnover annually, and remains a profitable vertical for the ₹10,000-crore Britannia Industries. Sources say the business had a margin of 20 per cent (profit before tax) in FY19.
In the first quarter of this fiscal (April to June), the dairy business was impacted adversely by an inordinate increase in milk prices.
According to Gunjan Shah, Vice-President – Sales and Head of Diary Business, Britannia plans to stay into the value-added segment where margins are relatively higher when compared to the pouched milk category.
The company will look at “backward integration” with innovations (new products) coming in via extension of its existing offerings like ‘cup-curds’ into “long-shelf life shakes”.
“The idea is to double the turnover in this category in 2-3 years. We are very sure we want to stay in the value-added space. That’s where it is margin accretive,” he told BusinessLine, during an interview.
While milkshakes in tetra packs were launched last fiscal, the other offerings it is exploring could be in the probiotics space. Moreover, it could also explore the health drink segments (low-sugar and low-fat offerings).
“Probiotics is definitely on the scanner. But not immediately,” Shah added.
According to him, the Winkin’ Cow brand of milk shakes has done “extremely well” for the company and within nine months of its launch, it is currently the No. 2 brand and competes with the likes of ‘Cavin’s’. Moreover, post launch of Winkin’ Cow, the company has been able to ramp up its distribution base by two-and-a-half times.
“We could look at having another brand for culinary experiences,” he said.
Britannia Industries MD, Varun Berry, in a recent analyst call pointed out that in the dairy business (for milk shakes), the company has “employed no capital at all” and it is all “third party manufacturing”.
Britannia is also planning to ramp up its procurement as its dairy line in the Ranjangaon facility (in Maharashtra) goes on-stream. The company has 25-30 milk collection centres in the State and collects up to 25,000 litres, a day.
“As we set-up our processing plant, the procurement will go up,” Shah said, adding that “eventually the company estimates that it will ramp up procurement to 400,000-500,000 litres a day.”