Brands on the milk trail

Vio, Cream Bell, Cavin's, Milky Moo, Keventers, Topp Up and now Sona are ratcheting up the choices for flavoured milk for Indian consumers, but is there room for all?

The opportunity has dazzled many. In recent months, many research firms have been talking up the potential of the Indian dairy market; the industry will clock 15 per cent CAGR between 2014 and 2020 said one, organised dairy which currently comprises just 20 per cent of the total market will grow the fastest at 25 percent till 2020 said another. Companies have rushed in, with many going in for flavoured milk products that are fast emerging as a popular alternative to sugar-heavy fizzy drinks. Multinationals such as Coke (Vio) and Pepsico (plans to launch a milk based beverage in the country) are in the fray. Pepsico's bottler RJ Corp has said it is betting big on dairy and value added milk products. Amul and Mother Dairy are old hands in this space; Keventers has relaunched its old brand while Milky Moo, Cream Bell, Parag's Topp Up and CavinKare's Cavin's have all jumped in. And the latest to hitch its brand to the flavoured milk wagon is Sona Dairy; set up by the former owners of the Kwality brand in the South (before Hindustan Unilever bought the brand).

To cut through the clutter, the new brands have to win the trust and taste test say experts. Flavoured milk brands are largely consumed by children whose parents buy these as an alternative to sugary beverages. The trust factor plays a big role in their purchase decisions. Children who consume these products are particular about taste and companies will therefore need to be careful about their formulations. To add to the problem, the market is highly fragmented with a large number of regional brands holding sway. To make a mark, emerging brands will need to be noisy, innovative and flexible with their marketing strategies.

Drink for health

Devarajan Mohan, joint managing director, CavinKare said that for his company, the flavoured milk business has grown by around 40-45 per cent as against industry's growth of around 3-5 per cent. Traditionally, he said the big players have been regional brands with low-cost operations. But that is changing as demand grows. Mohan said, "Today customers are becoming more health conscious and kids want more taste."

Rajiv Khanna set up Kwality Milk Foods in 1996 and he too is buoyed by the promise. He said, "The company has a milk handling capacity of around 2.25 lakh litres of milk per day. It has a composite milk processing plant for value-added dairy products sold under the label Sona." The label is being extended to flavoured milk, which will be sold across the country.

Khanna says that Kwality - a brand name he is allowed to use for his company but not his products - has invested Rs 10-12 crore in new products over the past year or so and made a cumulative investment of around Rs 30 crore so far. The company's dairy facilities are currently under-utilised and given the opportunity, it was the right time to jump in. Sona flavoured milk will be available in Tamil Nadu first, then Andhra Pradesh and Karnataka and gradually the rest of the country.

Srikumar Misra, founder, managing director, of Odisha-based Milk Mantra whose products are available under the Milky

Moo brand spoke to Business Standard earlier and said that the flavoured milk or milkshake market that has attracted so many is still nascent, about Rs 1,500-1,600 crore. Mohan puts it at around Rs 700-750 crore.

The point, however, is that this is still a small portion of the overall dairy industry and can so many brands survive within such a thin slice? The new players are not deterred by size they say, as they have trained their eyes on the growth potential. According to a recent report by research agency PhillipCapital India, the industry in India was about Rs 500 crore in 2010. It grew to Rs 1,300 crore in 2014 and the firm estimates that by 2020, the industry will hit Rs 4,800 crore.

Trust, taste and visibility

Building a brand in this category however is an uphill ride. According to Misra, nothing had gone to plan until he invested in a mass brand campaign with full page advertisements in leading newspapers. What he was trying to say was that branding was an expensive even if necessary condition for survival.

Brands in this category have to spend more to build trust. Parents are warier since this is a product that will be consumed by children. According to international research firm, Technavio, flavoured milk is being increasingly brought into school meal plans in countries such as US and India. It is also being recommended by doctors as a nutritious alternative. While this is driving growth in this category, it also places a huge burden on the brands.

The other challenge is cracking the taste test. Mohan says, "It is a tricky product, cannot be developed easily." His company is therefore focusing on taste and formulation and packaging that will ensure the product has a shelf life of six months without preservatives.

Globally the market is extremely dynamic reports Technavio where vendors are constantly coming up with new products, new flavours and innovative packaging options. Khanna agrees but he says that Kwality is no stranger to innovation. In the ice-cream segment before HUL bought them out, he says they were the first to introduce three-wheel pull-carts with freezers. Competition was stiff in those days too, but Kwality managed to fight back stalwarts such as Dasaprakash and Joy, by constantly reinventing the brand. It may be a good time to dust the cobwebs off those old strategy handbooks now.