After the pandemic, consumers have moved rapidly towards packaged food products in view of safety, hygiene and cleanliness. Also, the trend is shifting more towards people preferring to buy value-added products like paneer and curd in packaged form rather than loose, says Sunil Reddy Dodla, MD, Dodla Dairy.
Firstly congratulations on the listing. The funds are being used for co-borrowing and capex. What are the key value propositions of the company’s product and after the IPO, what are the plans for growth ahead?
Going forward, capex will be used to enhance our procurement to match our sales requirements. After repaying our debts with the money that we have raised from the public, and increasing procurement, we will also be keeping our eyes open for future acquisitions. So procurement will be the immediate enhancement we will do in terms of capex.
How do you see the competitive pressure in the sector? What is your current market share and how do you expect to gain further?
There was a large shift happening in real-time from the unorganised to organised sector. We also have the unorganised sector, comprising loose milk vendors and there the shift was happening on two grounds. One, the consumer being aware of what was happening with the product and secondly, the vendors themselves found it difficult to pick up milk in the morning and deliver it. After the pandemic, consumers have moved rapidly towards packaged food products in view of safety, hygiene and cleanliness. Also, the trend is shifting more towards people preferring to buy value-added products like paneer in packaged form rather than loose. There are also more people buying packaged curd.
Going forward, the shift is happening not only in the metros but also sliding down to the tier two and three cities and even the smaller district headquarters.
The value-added products roughly account for a quarter of the sales. Do you strive to increase the contribution from value-added products? How do you see the mix changing going forward?
It will be difficult to predict the pace at which it will grow, but definitely, people are preferring to have good quality food. We lost our summer this time due to the pandemic which affected ice-cream sales. Ice cream is not a food but is bought on impulse. I think the shifts will happen. Dairy-based beverages, especially fermented beverages will see increased demand as we go forward.
As these things happen, we will hit upon other categories which will also rapidly start to expand as we go forward. Timing is a little difficult but definitely, they will be expanding as we go forward. Historically also we have been expanding and as we go forward, we will see an increase in the value-added growth volume.
How has the demand been for value-added products like ice cream and dairy drinks post the slow unlocking after the second wave?
The comeback has been pretty swift and within 15 days of the lockdown being lifted, we saw demand moving up. Once business is back to normal, growth numbers will very quickly reach pre-Covid status.
Quick service restaurants (QSR), hotels restaurants, café (HoReCa) have been under pressure in the last year. Do you see a recovery once you have the open up trade coming in?
We are a predominately B2C player. Our HoReCa presence was very small — 3% to 5%. Even in the peak lockdowns, we were able to continue our sales and our volume drop came mostly in impulse purchase buys like ice-creams and other products and not from milk. In milk, we retained a pretty steady volume although we had restrictions continuing in certain areas. Therefore, we would have lost another per cent or two but HoReCa for us is a -very small segment of operations. Therefore, HoReCa swinging back will not have a major impact for us.
In terms of growth what can we expect from the company in the next couple of years?
I will not be able to give a number specifically because it depends on Covid and Covid-based scenarios. But we will continue to be on the track of the growth we were getting in the last three-four years. We will be able to maintain the same growth trajectory and it might be better if we make an acquisition at the right price.
