Parag Milk Foods - FMCG company just in Name or Deed?

(Pratik Chandak) #86

Its really good that in north they are making their presence feel… I think in north they don’t have much exposure… but they are expecting it to icrease… waiting for Sonipath plant to be functional fully…

(Dr. TarunDS) #87

am based in delhi.
there was no presence of gowardhan an year back but now i could see curd and paneer at local stores frequently though stocks are loaded with amul or mother dairy.
grofers & big basket selling paneer, tetra pak milks, cheese, butter and ghee. whole range of products is not available though as i wanted to try other prodcuts like the milkrich dairy whitener etc but its not available.
have tried most of the products but dont ustd how their products will make a mark as people have deep habits of their daily grocery brands eg mother dairy & amul here.
also, in my area ie central delhi i can see almost evey 3 bus stop having their advert bout launch of their cow milk in delhi.
execution will be the key now.
same was the case last year with Kwality ads with akshay kumar but i didnt think they made any dent in the hypercompetitive market
disc: invested with a small position.

( #88

Hi tarun,

Not sure exactly where in central delhi are you based but I am in North delhi and seeing Gowardhan brand of Ghee & Cheese for over 2 years selling in Reliance Fresh. Its wasn’t widely available earlier but in recent months it’s ghee is available with local kirana stores too. I have used their cheese and ghee and very satisfied with it.

Disc: Not invested but tracking along with Prabhat Dairy.

(shikhar mundra) #89

their inventory on book in roughly 1/5 of sales. i can understand value added products involves keeping a higher invenotry on books , especially ghee and cheese have a cash conversion cycle of 95 days. But how is the work in progress inventory of 200 cr on books as of March 18 , with a sales of under 2000 cr. Roughly 36 days of sales is in WIP, i dont think milk products take that much time to convert. Also they have roughly 200 cr as finished goods inventory, cant understand why they will keep one month worth of perishable items with them after manufacturing , why not ship them to their distribution channel every day?
But to be fair other players like Prabhat which have value added products portfolio much lesser to overall sales , compared to Parag have an inventory of one month on balance sheet. Hence it does not look as an abnormality in case of Parag.

Disc - Tracking , not invested

(shikhar mundra) #90

pride of cows wont be a much revenue accretive segment for them. they have their own 2500 cows in their bhagyalakshmi farm , which are running now at full capacity. The milk from these specially bred cows is sold as special pride of cows milk. Hence they are not that aggressive in this division. This division hardly contributes 3 % to sales.

(ASPN) #91

Oh yes, I have got a similar feedback from a friend based in Pune (who works in dairy industry). According to him, they sell about 2500 lit per day of Pride of Cows Milk in Pune and about 7k-8k in Mumbai from Bhagyalaxmi Farms. However, he was not sure if this entity is a part of listed Parag Milk Foods. So need to cross verify this.

Disc: Tracking position

(vipsy) #92

My point though is not for the revenue loss of PoC, but retaining, up-selling other products to customers.
In 2.5 years, they have only tried once when they gave some premium cheese to sample for free. Even though they have my email, phone number and home address, and someone comes to home dailly, never they tried to use this channel to sell more products. Though I also like they not being over intrusive as customers, but still feel they could use PoC customers and make them loyal to other brands too.

(vipsy) #93

Bhagyalaxmi Dairy Farms is a wholly owned subsidiary of Parag Milk. They mention this in their AR.

(Mridul) #94

Shikhar, this is predominantly due to cheese ripening process, which takes long time. It ain’t that cheese gets ready in 2 days and then selling takes time. Cheese manufacturing in itself is a long process with cheese after manufacturing step being left alone for taste to develop. That i believe comes under WIP.

All these things have been explained very well in concalls. One should read those to get better understanding of dairy products and respective inventory management.

(Pratik Chandak) #95

@Mridul, could you share that concall (or may be reference to the time when it was conducted) where this is mentioned? It would be of great help…

(Mridul) #96

Pratik - Excerpt from Q1FY17 concall.

(Bheeshma Sanghani, PhD) #97

Hi mridul

While don’t follow parag foods, I am not so sure that processed cheese needs to be aged or ripened. The emulsifying salts added are to arrest the ripening process and not enhance it. I had read a book on kraft a few years ago and if my memory serves me right processed cheese doesn’t need to be aged. Could be wrong though, thought it would be worthwhile mentioning


(Mridul) #98

Hi Bheeshma…

Sure, processed cheese may be consumed directly.

Though, Parag got lots of variety (80 SKUs in cheese). Cheese forms almost 600 cr of annual sales here.

They got processed, cheddar, mozzarella, natural/gourmet and more. So for instance, cheddar required good deal of ripening. Gourmet requires almost 3 months of ripening. So, work in progress inventory would depend upon the product mix in cheese category.

Here is one of the products listed on their website -

(shikhar mundra) #99

Just spoke to their IR team. They say ageing of cheese takes time 2- 8 months depending on the variety of cheese.Hnece this explains some part of WIP in inventory. Also they prefer to use butter to make ghee instead of making it directly from milk. If they make ghee directly from milk it will result in formation of skimmed milk which is a low margin business for them. hence they keep a lot of inventory of butter as WIP which is used for making ghee whenever the demand arises.

(Rudra Chowdhury) #100

Hello Bheesma,

I would suggest to spend some time to go through this video (shared earlier too in the thread) to understand the cheese curation process. Nothing quite helps as much as seeing this yourself :slight_smile:

Fun Fact : Oldest Commercial Cheese was curated for 40 years!!! Link

(Nirmal) #101

Available at D mart store in a tier 4 city like ichalkaranji.was pleasantly surprised to see the products along with amul


(Karan Sharma) #102

Availability of Parag Milk products at modern retail stores is no question. However apart from the big chains like Dmart, Big Bazaar, Spencers their availability in kirana stores and small departmental stores is a question mark even till date. In Kolkata I have been seeing products by them since last two years at the big retail outlets. However, in over two years that penetration has not been able to break the barriers at standalone departmental shops and kirana stores where only Amul is available. Also what has changed in over two years is presence of multiple brands in the VADP segment. I have noticed more than 3-4 international brands along with presence of companies like Veeba & Wingreens which are doing much better in cheese based spreads. Also the product portfolio of Amul has widened over the last two years. Hence, I believe even though the opportunity in this segment is great but the competition from other players is really big, at least at the modern retail chains. This is feedback from Kolkata. The situation in other cities could give us a consolidated picture for the same.


In Pune, very small Kirana shop also has Parag products.

(Pratik Chandak) #104

Even in Mumbai… almost all the shops has their products… specially cheese and ghee… but milk visibility is almost negligible… couldn’t see their milk… mostly out of stock and reason is definitely not that they are in demand… supply of milk is weak… and as much as I could gather the information, they provide the discounts to shop keepers… and it has higher margin than amul products… so even shop keepers prefer it to sell…

(Bhambri3) #105

Anyone who has gone through this report, can you hilight the issues mentioned, thanks