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As urban Indians begin to discern their mozzarella, gouda and parmesan from other types of cheese, Amul is staring at competition growing stronger. One of the biggest Amul-challengers is the Pune-based 1,000-crore Parag Milk Foods (Parag), which owns the dairy brand, Gowardhan. It has launched six new flavours, taking after international palates, under Go Cheese, which is the sub-brand of cheese retailed by the company. Parag had seen an infusion of Rs 155 crore from the Private Equity (PE) group of IDFC Alternatives last year and had clocked a revenue of Rs 880 crore.
With its portfolio boasting of tubed cheese spreads, cheese powder, cream cheese, wedges and cheese sauce, its latest product extension has been on the behest of B M Vyas. The independent director and consultant to Parag is no outsider to the cheese market. He has spent almost four decades at the Gujarat Co-operative Milk Marketing Federation (GCMMF), which markets milk and milk products under the Amul brand. Vyas spent 17 years as its managing director.
Devendra Shah, the promoter and chairman of Parag pulled off a coup by not wasting time in bringing Vyas into the folds of his company, when he left GCMMF. Shah says, "Indian consumers today want international flavours like jalapeno and paprika, and we have also attempted to launch these new flavours with an 'Indian touch'. It was actually Vyas' idea to come up with such flavours."
However, Amul has been on its feet too, launching three new flavours to take its cheese spread variants to six. However, it might have to brace for the duo's plans at Parag to go full throttle with the cheese portfolio. Shah explains, "We have an extensive range of products in the cheese space, no other company has a similar range, including cheese squeeze tubes. We want to grow the cheese segment by 20 per cent annually."
The cheese market in the country is estimated to be around Rs 1,250 crore, selling around 26,000 tonnes per annum, slated to grow at 20 per cent, according to Rabo India Finance. Parag currently sells around 8,000 tonnes per annum, which is around 31 per cent in volume share. With new launches, Parag expects to increase its cheese sales by 2,000 to 2,500 tonnes per annum.
Although, Amul did not provide volume figures of its cheese sales, R S Sodhi, managing director of GCMMF claims that Amul is the market leader by a large margin, with around 65 per cent market share. There seems to be no national player to claim the second spot in terms of market share. The space is so rife with competition that Sodhi says, "There are many players who claim to enjoy the second spot. We are not concerned about that, we are by far the number-one in cheese in India."
Amul has drawn up plans to expand its cheese production capacity to boost volumes in order to hold on to its lead. From a current 40 tonnes per day, it aims to treble the capacity to 120 tonnes per day, over the next two years.
However, Parag has been ramping up to seal its claim for the runner-up for now. "We have completed our expansion work sometime back, and going forward, we want to focus on coming up with new products in the segment," Shah explains. Parag's turnover from cheese is around Rs 260-270 crore now.
"Parag is a strong brand in Mumbai and has a good brand recall. They also have a professional management and PE players have picked up stake in the company. In western India, the company has established distribution chains which will definitely help it. However, Amul has a very strong network across the country. Its pan-India presence makes it the market leader," said D N Mukherjee, an analyst with India Ratings & Research Ltd.
How fast Parag is able to scale up its production and distribution will determine its challenger-creds. Harish Bijoor, brand strategy expert and CEO of Harish Bijoor Consults says, "In the Indian cheese market, Amul is the Goliath and everyone else is David. It would take five-six Davids to shake up the Goliath, and Parag is definitely one such strong contender. But, the task is daunting because of three reasons: Size, spread and distribution."
Shiva Mudgil, assistant vice president, food & agribusiness research and advisory, Rabo India Finance, says that cheese is sold primarily through organised channels and hence, growth of organised retail and food-services sector will drive up demand. However, given the lack of these and a cold chain in smaller cities, consumption is being led by metros and a few tier I cities. Till the rest come up to speed, processers might have to develop a multi-channel strategy spanning own brand, private label for food-retailers, toll manufacturing for branded players and partnering food-services brands.
Concentrating only on niche spaces such as flavoured cheese in an unevolved market can get tricky. Bijoor warns that no company with the ambition to lead a category can focus on building its image only as a differentiated products player. "That way it can only operate in the niche segments. One cannot ignore the mass market," Bijoor adds.
Parag is already expanding beyond its stronghold in Maharashtra and Gujarat, from which it gets 60 per cent of its revenue. It has started working on its reach in southern India where there are strong regional players and national players such as Britannia. The company's Chittoor plant in Andhra Pradesh that processes 800,000 litre of milk per day is being expanded to produce 1.3 million litre per day to feed its cheese factory.
Vyas' mandate, meanwhile, will be to develop the distribution system of Parag, especially in the southern states. The man who had played a pivotal role in marketing Amul's mozzarella cheese, among others, to the Indian housewife, is the right lieutenant for the task for Parag.
