Parag Milk Foods enters fresh cream market with Go brand

Claims to be the 1st organised player with a cow-milk based fresh cream product; IPO likely in 4-5 months

One of the leading private dairies in India, Maharashtra-based Parag Milk Foods Ltd, that launched its fresh cream under the brand name Go, is eyeing household penetration in this largely unorganised segment, apart from institutional sales to drive growth.

Parag, which claims to be the only organised player which would have a fresh cream product made from cow milk, feels that it could break into the household segment which comprises the larger part of the market riding on a differentiated taste as well as health benefits of cow milk.

Fresh cream is a largely unorganised market, with over 85-90% of the market lying in the unorganised segment. The size of the organised market, which is dominated by institutional segment, is estimated to be around Rs 1270 crore, and it is growing at a CAGR of 17% between 2007 and 2014. Nearly, 80% of the organised market is driven by institutional sales.

Devendra Shah, chairman and managing director of the Rs 1500 crore dairy company that is also eyeing to go public in about four to five months time said, "There is huge potential in the fresh cream segment in India as only 20% of the market is organised. There is huge potential to be tapped."

The northern region remains the the biggest market for fresh cream with 37% share in total consumption. It is followed by the western & central region with a 26% share, southern region with 23% and lastly the eastern region accounts for 14% share in consumption.

In another significant development, Parag has also recently filed a draft red herring prospectus (DRHP) with the market regulator for its initial public offer (IPO).

Shah did not wish to share the size of the IPO as of now, but added that it is likely to hit the market in around four to five months.

Parag has plans to expand its cheese capacity from a current 40 tonnes per day. The cheese market in India is estimated to be about 29,000 tonnes per annum valued at about Rs 850 crore and is clocking a 25% growth rate. Maharashtra is the largest consuming state with about 30% share in country's total consumption followed by Gujarat at 22%.

Parag currently has a 2 million litres per day processing capacity at its two plants Manchar (Maharashtra) and Palamnar (Andhra Pradesh). It procures milk from 23,000 farmers. In FY15 its average milk procurement stood at one million litres per day, growing at 16.5% since 2006.