Godrej Agrovet eyes diverse buys to milk dairy sector fully
Rashmi Pratap, The Hindu BusinessLine, 11 September 2016
Godrej Agrovet, the agri-business arm of the safes-to-soaps conglomerate, is looking at an integrated play in India's ₹4.3-lakh crore dairy industry.
From cattle genetics to feed and milk procurement to processing, Agrovet is gearing up for a full play in the dairy chain in a country where demand for milk products is rising at about 22 per cent annually.
"We are looking at being an integrated player in the dairy segment in the long run," Agrovet MD Balram SinghYadav told BusinessLine.
Agrovet already owns 52 per cent stake in Hyderabad-based Creamline Dairy, giving Godrej an access to the lucrative sector.
Upping the value chain
It is open to more acquisitions to boost presence in the dairy industry.
Currently, the dairy chain involves multiple players – those working on cattle genetics, enriched cattle feed, milk procurement and processing.
"The value chains will eventually become integrated. It could be closely knit integration, where one player will own everything, or loose integration where major players will work with other companies," says Yadav.
Cattle feed biz
Agrovet itself is India's largest seller of animal feed, through which it has forged connect with lakhs of dairy farmers.
The domestic market for cattle feed is pegged at 145 million tonnes of which only 7 million tonnes is in the organised sector.
"We have about 10 per cent of the organised market share and have been growing at 12-13 per cent annually for the last five years," Yadav points out.
"We are growing at the pace of the market, but our effort is to grow at a faster pace. One of the key triggers today, we feel with cattle feed, is milk and that is our long-term story also," he adds.
The key to success in the dairy segment is procurement and that is something Godrej seems to be comfortable with given its proximity to farmers through its cattle feed and allied services.
"A diverse sourcing network is crucial to the success of the industry given the short shelf life of milk. Direct procurement by farmers backed by infrastructure is thus an imperative," research firm Crisil said in a report last December.
Creamline currently procures 6 lakh litres milk per day and has a dedicated cold chain.
"They have a robust system in place. We are not looking at upping the stake as Cremaline is cash rich and does not need any money," Yadav clarifies.
But for the success of Agrovet's long-term milk story, Yadav is open to further acquisitions. "Inorganic growth is a possibility in about two to three years."