India is the largest producer of milk with gross annual output of milk touching nearly 130 million tonnes. Though the co-operative milk producers led by GCMMF’s and NDDB’s Mother Dairy brands dominate the market place especially in North and West India, it is the private sector dairy farms who rule the roost in the South. According to an Assocham study on the dairy industry, Andhra Pradesh is the fastest growing producer of dairy products although Gujarat is still the leader of the `60,000 crore industry. Packaging South Asia talked to V Maheswaran, general manager – sales and marketing of Nichrome India at Chennai to learn about some of the market dynamics of the private sector dairy business in South India.
Hatsun Agro expands
“We do not have much presence in dairies run by co-operatives, but in South India we have 80% market share amongst private dairies with more than 50 high-speed servo-driven machines for milk processing and packaging of milk products,” says Maheshwaran. We are suppliers to a dozen private dairies in South India including Hatsun Agro, the largest private sector dairy firm with over a dozen plants in three southern states of Andhra Pradesh, Tamilnadu and Karnataka. It sells its milk, butter and dahi under the Arokya brand and ice cream under the Arun brand.
The `2,000 crore private dairy has recently launched the ibaco brand of ‘make it yourself’ ice cream where the customers choose scoops to make unique ice creams with coffee or tender coconut flavors amongst others. Hatsun has opened more than 100 ice cream parlours in Tamilnadu and Andhra Pradesh. A major expansion of its Tirunelveli unit in south Tamil Nadu, has increased its capacity by 30,000 litres a day of dahi and 2.5 lakh litres of milk. “Hatsun Agro is our biggest client in the dairy milk business and we have supplied 22 Filpack Servo 10K high-speed units to them for the packing of milk and milk products,” says Maheshwaran.
Investors pick up stakes in private dairies
the Suguna dairy in Tamilnadu
The second-largest private sector dairy in the south — Tirumala, headquartered at Hyderabad and with operations in Andhra Pradesh, Tamilnadu and Karnataka was sold to Lactalis, the world’s largest dairy group in 2013. The US$ 275 million (`1750 crore) deal to buyout its 100% stake was facilitated by the Carlyle private equity group who first invested in Tirumala in 2010. This is the first investment of the French dairy major in India and shows that the dairy industry is mature enough for PE funds to exit and disinvest to global dairy giants at a healthy profit.
Another large deal under consideration is the `400 crore (US$ 65 million) buyout of Creamline Dairy which would witness the exit of early investor Godrej Agrovet who bought 26% of the equity capital of the company in 2005. Creamline Dairy, with a daily capacity of more than 7 lakh litres, has 30 chilling plants and FY 2012-13 revenues of `700 crore. Tata Capital and Motilal Oswal Private Equity have teamed up to bid for around 60% stake in the 28-year-old Hyderabad-based Creamline Dairy Products. Infrastructure Development Finance Company’s `157.4 crore (US$ 29 million) private equity investment in Parag Milk, the `100.4 crore (US$ 18.5 million) investment by Abraaj Capital and Rabo Equity in Prabhat Dairy, and Cargill Ventures’ `108.5 crore (US $20 million) fund infusion in Dodla Dairy are also expected to mature later this year..
