Dairy companies invest big to milk gains from rising demand
HYDERABAD: The explosion in demand for high-profit yielding value-added products is giving dairies an impetus to spend heavily on expanding their cold chain infrastructure, both in sourcing as well as distribution.
This was not possible earlier with the low-margin liquid milk segment that dominated the product portfolio for dairy companies. Companies are now spending nearly a third of their capex in cold chain and the investments are growing at the rate of 15% year-on-year.
Chennai-based Hatsun Agro Products BSE -2.05 % has announced a nearly Rs 170-crore investment in setting up of cold-chain infrastructure.
Similarly , Hyderabad-based Dodla Dairy has more than doubled his investment this year to around Rs 15 crore in cold chain.
Other dairy companies like Amul, Kwality and Prabhat are also making significant investments.
Mumbai-based Prabhat Dairy’s managing director Vivek Nirmal said: “We are investing nearly 30-40% of our capital expenditure in setting up bulk coolers and adding several chilling centres.This coming year, we plan to add another 100 bulk milk coolers at our collection centres to maintain the microbial content.“
However, he declined to divulge the absolute investment figures. While the in vestments in this space have been happening for about a decade and half, their scale was restricted by the lack of capacity in dairies -both in terms of production and investments.
Nitin Puri, president and country head (food and agribusiness) Yes Bank, said, “The explosion in demand for high-profit yielding value-added products have given dairies the capacity to invest heavily in cold chain in the past couple of years, whereas earlier, it was not possib le on a large scale from low-profit yielding liquid milk business.
This would bring in higher revenues for dairy players, which would propel their growth and expansion, as well as increase the size of the organized dairy“.
Experts say that the share of value-added products is currently 40% in the dairy product portfolio while liquid milk holds 60% as against five years ago when the share of value-added products was 25% in the overall dairy segment. They say it is likely to cross 50% in the next five years.
Älso, “with stricter food safety regulations from the Food Safety and Standards Authority of India (FSSAI) and increasing checks, dairies are focusing on this space to maintain the quality and keep a check on adulteration,“ said Puri, adding that the dairy industry’s investment in cold chain is increasing at 15% year-on-year.
Dodla Dairy managing director D Sunil Dodla said: “As companies are expanding and increasing their capacities, and there is a consolidation happening, they are also setting up cold storages for products like cheese, flavoured milk along with the processing plant, which is driving the demand for cold chains.“