Parag Milk Foods to launch flavoured cheese slices soon

The company plans to hit the market with five flavours of cheese slices soon

Parag Milk Foods is set to launch flavoured cheese slices this week.

"We have successfully piloted five flavours of cheese slices and these products will be placed in the market over the next one week. We are coming up with five new flavours in slice cheese," says Bharat Kedia, Chief Financial Officer at Parag Milk Foods. "No other dairy company has flavoured cheese slice in the market currently and that too suited to the Indian palette."

The company has roped in celebrity chef Ranveer Brar to advertise these products.

Parag sells its cheese products under the "Go" brand. With a market share of 32 per cent, Parag is second only to Amul in the cheese category. Amul enjoys a 40 per cent market share in this category.

Parag has the largest cheese manufacturing facility in India with a capacity of up to 40 million tonne (mt) per day and the company plans to further expand it to 60 mt per day this financial year.

Given that the Indian cheese market is expected to grow at a 25-30 per cent compound annual growth rate over the next few years. The market is dominated largely by organised players and is currently about Rs 1,200 crore. Analysts expect the company's cheese revenues to grow 19 per cent over FY16-19 per cent to Rs 600 crore. Cheese currently contributes about 20 per cent to Parag's revenues.

Abneesh Roy, analyst at Edelweiss Securities, says, "I think its a good idea because cheese has been a high growth category over the last few years, but innovations have been far and few. Indians love spices and such innovations so this product could get a good response. Globally, such flavoured products are quite big. Companies need to keep doing these innovations to grow ahead of the market."

Parag, like most of its peers such as Amul, Prabhat Dairy, Britannia, etc, has been focusing on the high-margin cheese segment. In the June 2016 quarter, Parag launched Go Cheese wedges- herbs and spices at pan India level which did receive good response. 

Another product segment that will grow at a healthy pace for Parag going forward is the whey segment. Whey is a by-product obtained while manufacturing cheese. The company does further processing to sell whey as a branded product and currently sells it only to companies such as Nestle. Parag now aims to take whey products to retail consumers. 

"We are working closely to convert our institutional whey products to consumer whey products. We have lined up a whey protein beverage launch over the next 2-3 quarters," added Kedia. 

Parag's focus on value-added products is a positive as these generate gross margins ranging anywhere between 25 to 40 per cent. The management has guided for 14 per cent revenue growth over FY16-19 and targets net profit margin of atleast 5 per cent or more by FY19 from 2.8 per cent in Q1. While this guidance appears strong, the intensifying competition in the dairy segment across products is a key monitorable.