Parag has two decades long experience in the rural market. What changes are you witnessing in rural consumer behaviour?
There have been two significant changes in consumption patterns, affecting each end of the spectrum. In the mass consumption category, Indian consumers are more ready to buy off the shelf. Paneer, which major cheese producers are marketing as a branded product, was traditionally home made. Secondly, with greater international exposure, rising incomes and brand affiliation; the demand for niche cheese products has increased. Cheese consumption continues to be an urban phenomenon, with processed cheese and cheese spreads accounting for about 80 percent of the total cheese consumption. Also, cheese is mostly consumed by children and is yet to be part of the mainstream adult diet on a mass scale.
Value-added dairy products are seeing very high growth rates not just in metros but also in smaller towns as well as evident from over 20 percent growth in products like cheese, dahi, UHT milk, etc. Only impediment here is the high freight cost to large geography, fractured cold chain and large number of retailers to be addressed to in the chain. Therefore, there is very large scope for further growth of value-added milk products in small towns. We only need to address these issues and penetrate the market as latent demand is very strong.
What is the current product and brand portfolio under Parag? Which contributes maximum to revenues?
Ghee was the first product that we went into the consumer segment with. Our real transition into consumer goods started in 2009 and we have evolved greatly. The portfolio today includes liquid milk which contributes around 20 percent to our topline. We supply milk in key cities of Maharashtra and South India. The next big category is cheese that contributes 25 to 30 percent to revenues. The third segment is SMP (skimmed milk powders) that accounts for 20 percent revenue share. The fourth category, new product lines UHT and tetrapak, accounts for seven to eight percent of revenues. Lastly, we have a ‘fresh’ division comprising of dahi (curd), yogurt, paneer (cottage cheese), which accounts for 15 to 18 percent.
Which Indian markets do you see as a stronghold for the brand? How is the company’s export performance?
The way dairy companies evolve is that they first become strong in the place they are located in and then expand to other markets. We are a homegrown, Maharashtra company with the plant located near Pune, so our strength is the West – Maharashtra, Gujarat. The second plant came up in Andhra Pradesh and this caters to the entire country, so in a sense we are strengthening our distribution across the country. Ideally, I would want Parag to be present in all the villages that have a population of 1,000-plus, but that’s not possible. So we are trying to get our distribution right. We have a stronghold in the West. Now we have a strong foothold in the North – primarily in UP, Delhi and hills of Himachal. Our stated intent for the next couple of years is that we want to expand rapidly in the South and North.
We plan to go big in the South as the plant is located in AP and we will have an advantage of doing a lot in the ‘fresh’ categories. The three large metros of South account for large cheese consumption markets, specifically Bengaluru and Hyderabad. We export to more than 30 countries including UAE, Philippines, Singapore, Australia, New Zealand and Mauritius etc.
What was the rationale behind introducing two brands – Go and Gowardhan? What has been your experience with the ‘Pride of Cows’ premium milk?
Gowardhan and Go, both are our primary brands that are known to consumers pan-India. Gowardhan is our parent brand that has been in existence for 18 years. It is known for traditional products like ghee, gulab jamun mix, dahi, paneer and liquid milk. The products are actually ingredients that go into preparations in the kitchen. Go, incepted in 2008, is more urban and for international market. Under this brand we launched various innovative products like shredded cheese, nachos, Tom n Jerry Cheezos, cheese spread, etc. We also entered into premium milk category three years back with the launch of ‘Pride of Cows’. More specific to Pune and Mumbai, it is a farm-to-home business model. And last year, we launched Topp Up – flavoured milk beverages in select markets.
As we move forward, if our mix today is 70:30, then it is going to change where Go will contribute most to the revenues in future. Cheese will remain the growth driver. So the focus is going to be more on the umbrella branding on Go. The new product lines, under the Go brand, that are currently at seven to eight percent are expected to grow to 20 percent in the next two years.
Parag has various verticals of distribution/sales including general trade, modern trade and institutional sales. Which contributes the most to the sales?
In the consumer business, we distribute through general and modern trade. Under institutional sales, we supply to Dominos, KFC, Pizza Hut, among others. Then there is HoReCa (Hotels, Restaurants, Catering) segment, where Parag caters to hoteliers and other restaurants. Lastly, we export to more than 30 countries in a trading model. About 30 to 35 percent of our revenues come from general trade while 15 percent is from modern trade. The balance is from institutional sales. Bulk of the institutional business is for cheese.
The company has recently unveiled its new corporate identity and logo. Why rebranding?
The strategy behind this was to bring all our brands under the new corporate identity, helping build a stronger brand connect and recall with the parent company. As a marketing organisation, we have realised the need of connecting this brand portfolio with the parent company. This builds a sense of confidence among consumers and that is what we endeavour with this new corporate identity. The updated logo and brand identity have been developed by strategic brand consultancy firm Scion. The new corporate branding system supports and reaffirms the purpose, values and culture that have been at the foundation of the company. The logo, with a splash of milk forming a star as its central graphic element, celebrates the company’s culture of passion and innovation.
What is the marketing thought behind promoting dairy tourism?
The image of Indian dairy industry in the world is very vague. Hence, we want to showcase our state-of-the-art dairy equipment and machinery to the world. Secondly, once people come and visit the plant, they become our lifetime customer. So there is a clear marketing intent behind this. We organise one-day picnics for school children where they can come to the plant and see the process of milking, tour the cheese plant and so on.