Britannia set to re-enter milk business

India's largest baker, Britannia Industries, staging a comeback into the packaged milk business, four years after it exited this segment.

The company, which closed last fiscal with a top-line of close to Rs 3,500 crore, has recently  introduced UHT (Ultra High Temperature) milk in regular and 'Slimz' format, which is a zero fat and zero cholesterol milk in Mumbai, Delhi and Bangalore markets for starters. UHT Technology helps preserve and retain all the goodness of milk and has a shelf life of 120 days.

Britannia’s move to make a comeback into this segment comes close on the heels of Britannia buying out New Zealand-based Fonterra in the dairy business. Britannia is expected to invest close to Rs 200 crore for this re-entry besides strengthening its other dairy products business. "Our investment is determined by the categories we wish to enter, which we continually evaluate. Capex is therefore, a reflection of the opportunity we select to pursue," a spokesperson for Britannia added.

 

While the company early this month has launched this product, industry sources indicate that it is also planning to foray into ready-to-drink flavoured milk segment shortly targeted at the youth.  The spokesperson while not commenting on the flavoured milk segment said that its  strategy of securing profitable growth through differentiated products remain unchanged.   Industry estimates indicate this market is valued at close to Rs 750 crore. Amul, the Gujarat-based milk cooperative, is the largest player with around 70 per cent market share. Besides Amul, Mother Dairy, Nestle and Amrit Food are some of the significant players in the flavoured milk category.

Britannia had been operating its dairy business since 2002 through a joint venture with Fonterra and has garnered good market share in the cheese, butter and curd segments. Britannia’s dairy business has a topline of close to Rs 150 crore and has been reporting losses. According to industry information, this business has total liabilities of Rs 70 crore and assets of Rs 90 crore.
 
Britannia had entered the milk market during 1997 and during 2004 exited this segment as milk prices rose and its sourcing was not as streamlined as it was aimed to be. The main problem, according to industry analysts, was that Britannia was sourcing milk from dairies, which used to source milk from various farmers, adding to cost overruns and not being insulated from price fluctuations.

Britannia’s move to re-enter this segment come nearly a year after its erstwhile French shareholder Danone along with its Japanese-firm Yakult is also investing around Rs 150 crore to enter the fermented probiotic milk drink.