How Parag Milk Foods is betting big on value-added consumer products

Facing a slump in demand for milk products from the HoReCa segment, Parag Milk Foods decided to focus on its consumer business by launching new products. Akshali Shah talks to Devika Singh about the hassles in selling milk products online, expanding its Pride of Cows range, its foray into the health supplements market, and more.

The HoReCa segment is still reeling from the impact of the pandemic. How much has the slump in demand from this segment impacted you?

The HoReCa segment contributes around 10-12% to our business. While there have been challenges for the segment in the last few months, we are hopeful of a recovery going ahead, as restaurants and hotels focus on takeaways. We have also taken initiatives to compensate for the loss of business from these segments by increasing our sales in the consumer segment.

In recent months, we have seen that although out-of-home consumption of food has declined, consumers are experimenting at home and trying out different recipes. We have tried to tap this trend by launching products such as mozzarella cheese, pizza cheese and shredded Mexican blend cheese.

We have been offering these products to restaurants for a while now. Our products are more premium than Amul, but almost on par with Britannia’s prices. They are priced at a 10-15% premium keeping in mind the differentiation we offer. This is why value added consumer products contribute around 80% of our sales, up from 68% in pre-Covid times.

Have you changed your retail strategy, or given e-commerce a push during these times?

Consumers now prefer to go to a nearby general trade outlet and buy bigger pack sizes of products to minimise store visits. They are not looking for discounts these days and, therefore, not visiting malls or modern trade stores. Hence, we are focussing on weighted distribution, and increasing our stock keeping units (SKUs) and range in these outlets. We have also digitised our back end, and are reaching out to our distributors using technology.

Even though we have been present on e-grocery platforms like Big Basket and Grofers for years, they still contribute a smaller share to our overall pie. We had also tied up with a few milk delivery players for Gowardhan; however, although these are growing platforms, they are yet to figure out ways to deal with distribution challenges. A lot of our products need temperature-control and hence, e-commerce is not an ideal channel to sell them. A major share of the sales of our health and nutrition range, however, comes from e-commerce. Most second-time buyers of these products shop online.

Being a dairy company primarily, how are you establishing your presence in the health supplements market?

Although we have faced challenges in recent months, with gyms being closed, we are the only domestic brand in this category and have started seeing recovery. Within two years,this category now contributes almost 7% to our business. It is a `2,500-3,000 crore market, which has been growing at almost 15%year-on-year, and we see huge potential here. Our products are present in 1,500-2,000 modern trade stores and nutrition outlets.

We are engaging influencers and local sportsmen to promote Avvatar, our whey protein brand, and are creating content to educate people about the benefits of whey protein. We are also carrying out sampling, as taste is an important factor here.

You recently expanded the Pride of Cows portfolio. Given the economic slowdown, how willing are consumers to spend on premium milk products?

Consumers do not mind spending more on better quality food; it is not considered a luxury, but a necessity. About 82-85% of the dairy industry in India is unorganised, but recently we have seen that consumers are moving towards packaged products, due to hygiene and safety concerns. Under our Pride of Cows range, products reach the consumer’s home directly from the farm, with minimum human intervention. We have now extended the brand after nine years by launching ghee and yoghurt. We are offering yoghurt to only 40,000 existing customers, while the ghee has to be pre-ordered.

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