Hatsun Agro plans Rs 450 cr expansion of ice cream, dairy capacity

Company to expand ice cream output from the current 100,000 litres a day to 150,000 litres

Chennai-based dairy product manufacturer Hatsun Agro Product Ltd has said that it is in the process of investing around Rs 450 crore in 18 months from April 2016, to build facilities for its ice cream, milk and related products business.

Of the total capex, around Rs 135 crore would be invested into capacity expansion and marketing of ice creams, which it sells under the brand, Arun Ice creams. The company is planning to expand its capacity to manufacture ice cream from the current 100,000 litres a day to 150,000 litres a day.

It is also planning to have around 600-700 stores under a new model in which the retail and distribution will be handled by each store, while earlier the distribution and retail were under another model, said R G Chandramogan, chairman and managing director of Hatsun Agro. He was speaking to the press during an event, ‘Eat All You Can’, conducted by the company in Chennai to offer unlimited ice cream bars in 20 minutes for Rs 50 to promote its new range of products which has more than one flavour in a bar, using a latest technology.

Of the total stores expected, around 250 stores would be new, penetrating fresh market, while the rest of the 450 would be part of the change in model. The company has already set up around 125 stores under the new model and finding the model successful, would change more of its outlets into the new model, he added.

“The expansion and marketing plans in the ice cream business itself will require Rs 135 crore,” he said. At present, its ice cream business has presence in the five southern states and Union Territory, and it has recently expanded to Maharashtra and Odisha. There is room for more penetration within the Southern states and at present it does not have any plan to expand to North India, he added.

The company also has a brand Ibaco, which is a higher-end ice cream store, which offers product as well as the ambience for the customers to have ice cream. It has around 125 Ibaco stores at present and plans are to expand to 300 in 18 months.

Hatsun Agro holds around 35-40 per cent market share in the around Rs 1,000 crore ice cream market. It is expecting the total turnover of the company to be around Rs 4,000 crore this fiscal year and around 10 per cent of it would be from ice cream business. In the ice cream business itself, Arun Ice Cream has the majority of the business, he added.

The company is also expected to expand its cattle fodder business, which is around Rs 200-250 crore business at present. Plans are to expand the facility to manufacture around 15,000 tonne a month, as against 3,000 tonne at present. It is currently outsourcing the rest of the requirement and the expansion will help it to bring the production under its roof.