No plan to merge Amul with 5 other cooperatives: MD
This is the third hike in the fresh milk prices this calendar year itself. What trajectory can we expect with milk prices going forward because we are hoping that perhaps this is the end of the up cycle and there will be some cuts coming in later. What is your view?
The price hike of Rs 2 a litre is only for the high end full cream milk. People mostly consume Taaza Toned or Cow where we have not increased the price. You are asking about price trajectory, let me give you some data.
In the last one year, MRP increase has been only 9% in all varieties except full cream where it is 12% to 13% vis-à-vis price paid to the farmers have increased by 15%. If you compare the input cost increase, dry fodder cost has increased by more than 60-70%, green fodder by 40-50% and cattle feed price has increased by 20-22%. We have reached farmers earn more so that they can feed more to their animals. Now we could increase only 15% of the cost procurement price to the farmer, they need more.
What is happening to demand sentiment on ground given that inflation has been pinching everyone’s pocket? Do you think a price hike at this time would further impair demand?
I have been in this industry for the last 40 years and the volume growth which we are getting in the first six months is unprecedented. It is a double digit volume growth across all categories. In the first six months, our turnover has increased around 32% and the price increase is because we started late. The impact is only 8% to 9% and so the balance 20-22% increase has come because of volume and it is not with Amul.
I have checked with everybody, everybody is selling more. The reason is simple, consumers have realised during Covid that they want more nutritious food, pure natural food but from affordable brands. That is why the brands which are available and are trustworthy are selling more.
Farmers are definitely under pressure because of the increase in cost of feed and input prices and in the last two years during Covid, the feed cost has increased. At that time also we could not increase the price of milk. You may be comparing the increased price of milk in the last one year but in the last three years, prices have increased 6-7% or even less than that. So farmers are under pressure. I feel with the coming time, farmers are going to benefit from this increased affordability of consumers to pay for milk or any other food prices.
What about the festive demand versus what you saw pre-Covid? How is it across all segments and geographies?
Festive demand is tremendous. During any festival in India, demand for milk or milk products used to increase but if it used to increase by x, this time it is 2x. The reason is simple. In the last two or three years, we could not celebrate Diwali, Dussehra or other festivities. Now it has come after three years and so people are spending more, buying more, enjoying more.
Similarly, out of home consumption or HORECA consumption is also now much more than pre-Covid times. We are seeing tremendous demand from restaurants, hotels, caterers because everybody is having marriages and parties. So demand from consumers, HORECA segment and consumption itself – have increased and that is giving the volume growth.
Could you give us some details in terms of how the rural versus urban demand sentiment is panning out?
Nowadays, in packed food items which are affordable and common man, I do not think you can differentiate the urban and rural. In a lot of rural areas, milk is also consumed packed. The increase in demand is very good but one trend which we have noticed is that volume growth is coming more from tier-2 and tier-3 cities, semi rural or rural areas more because thers the shift from unorganised or unbranded to branded is maximum.
How is the performance of the chocolate segment going? What kind of growth are you seeing?
No doubt, dairy is growing across all the categories but new areas where shift has recently taken place from unbranded to branded is one is the sweets, then paneer and also cream, where we are finding tremendous growth.
I think Indian sweets is going to get tremendous growth not only on a volume basis but also overall proportion to the other businesses.
Coming to non-dairy segment we have entered a number of segments like frozen potato, French fries and a lot of other potato based or dairy based ready to eats. We have just put up a new plant and it already at 100% capacity. For chocolates, we put up a very modern, very big plant three years back thinking we will utilise the capacity in the next five, six years but already that capacity is over. Now we are doubling the capacity because in chocolates we are basically in the very niche segment of high cocoa content chocolates which are called dark chocolates. Consumers especially the teenagers and elders are shifting towards the high cocoa content chocolate.
We understand from reports that Amul will be merged with five other cooperative societies to form a multi state cooperative society. What is the update on this front and how will it impact business?
No, no, I think that some reporter has misreported. There is no such talk of Amul merging with any other cooperatives. There is no such initiative, talk or anything. Rather Amul along with four, five other cooperatives are joining hands to float a new multi-state cooperative to sell organic products or some other export but that is going to be a different cooperative. It is like Amul investing in some other organisation where we find our purposes common with other cooperatives.