Dairy player Kwality plans to invest Rs 500 cr to increase focus on retail

The dairy products player is clocking at 8-9% topline growth in the past few years

Dairy products player Kwality Ltd, which is clocking at 8-9 per cent topline growth in the past few years, is now mulling a strategic change to increase focus on value added products from being a business-to-business (B2B) company.

The company, which plans to invest close to Rs 500 crore to expand production capacities among others aims to increase the share of retail sales to 70 per cent from a current 30 per cent of its turnover in about three years.

"We were a B2B focussed company, and now we are transforming ourselves into a business-to-consumer B2C company and focus more on value added dairy products like UHT milk, flavoured milk, cheese, butter etc," said Nawal Sharma, President & Head-Business Transformation, Kwality Ltd.

He added that while the topline has been clocking 8-9 per cent growth, focus on value added products would ensure better margins. As such the Ebitda growth has been to the tune of 14-15 per cent off late.

Kwality has also roped in a brand ambassador in Bollywood actor Akshay Kumar in order to boost its brand presence to gain market share in the retail segment, and has also roped in Ernst & Young as their IT transformation partner that would help in its transition from a B2B to a B2C company.

At present B2B business accounts for nearly 70 per cent of its sales. While the company plans to invest close to Rs 500 crore over the next few years to build capacities (at existing facilities), increasing focus on retail would also mean that they would have to increase direct sourcing of milk from farmers.

The company currently procures only 18 per cent of its total milk requirement directly from farmers. "We aim to take that up to 50 per cent of our total requirement over the next three years," Sharma said.

The company has six manufacturing sites in in Uttar Pradesh, Haryana and Rajasthan and has a processing capacity of 3.2 million litres per day.

"We are using most of our installed capacity and hence we are adding manufacturing lines at our existing sites," Sharma said who added that the expansion would be funded partly through internal accruals.

"We are considering several investment vehicles, and would take a call on how to fund the expansion soon," Sharma added. Kwality posted a net sales turnover of Rs 5,724 crore for FY16 on a standalone basis.