Nestle gearing up to make Punjab milk war triangular
Swiss food giant Nestle, one of the major milk procurers in Punjab, seems wary of the growing competition in the state.chandigarh Updated: Apr 27, 2015 08:30 IST
Swiss food giant Nestle, one of the major milk procurers in Punjab, seems wary of the growing competition in the state.
With the country’s largest milk cooperative, Amul, launching its operations in the state, even Punjab’s indigenous milk brand, Verka, feels threatened. Nestle may not be open about its anxiety but it is focussing on affirming connect with its milk suppliers, for which it has launched 145 projects of water supply and sanitation in the villages of Punjab, Haryana and Rajasthan; besides running dairy development programme for rural women.
Its 50 veterinary doctors help villagers in the rearing of cows and buffaloes. “It’s known to be sarkari-like organisation, but things are now changing in Nestle. The company doesn’t want laggards,” said a Moga-based senior executive of the company. Nestle’s Moga plant is oldest of its eight in India and largest in terms of the manufacturing of baby food, powdered milk, condensed milk, ghee, noodles, and tomato ketchup.
It procures an average of 11 lakh litres of milk every day from 33 districts of Punjab, Haryana and Rajasthan, of which about 70% share is from Punjab. Amritsar, Gurdaspur, Bathinda, Batala, Moga and Muktsar in Punjab; Karnal, Sirsa, Yamunanagar and Rohtak in Haryana; and Jaipur, Bikaner, Suratgarh, Rawatsar, Suratgarh, and Pallu in Rajasthan are its procurement centres.
JS Punjrath, head of the Amul operations in Punjab, is all for competition with Nestle. “Amul and Verka are co-operatives that work for the benefit of dairy farmers but Nestle is a private, profit-making company, which prices its products very high,” he said. The top executives in Nestle said they wouldn’t comment on it but they would do everything to keep the company’s glory achieved in the Punjab campaign since 1961, which coincided with the launching of Verka and the expansion of Amul out of Gujarat.
Nestle claims its pricing match the international standard of its products. It seems to be feeling the heat after Amul announced the launching a milk plant in Khamano, to focus on Nestle’s strongholds of Ludhiana and Moga for the procurement of milk. “If Amul comes to all of Punjab, it is going to be aggressive business, since it is a strong player in the country with a huge paying capacity that is better than us. As milk is our basic requirement, we have to match their strength,” a senior executive in Nestle said on the condition of anonymity. Amul plan to invest Rs 2,000 crore over the next five years.
Nestle pays dairy farmers up to rs 520 per kilogram fat in the peak milk demand season of summer, and `440 per kg fat during the lean season. Amul offers them Rs 550 per kg of fat and Verka pays them Rs 520 per kg of fat. “We may have best relations with the farmers, but at the end of the day, what matters is the price offered to them,” said the Nestle executive.
He was confident that Nestle’s technological edge and quality standards would help it keep its domain. The company claims to have built its connect with farmers over 50 years.
Nestle procures about 4.5% of the total milk produced in Punjab, and Verka procures about 5.5%. Of an average of 253 lakh litres produced in Punjab, 45% is available for commercial market. Amul’s milk procurement targets may be miniscule.
Nestle’s Moga plant has a world-class laboratory that can detect banned antibiotics and pesticides to the extent of parts per billion (PPB) and parts per trillion (PPT), against the Indian test standard of parts per million (PPM). “These tests give us the best raw material and our consumers get uniform quality worldwide, whether they buy in India or Switzerland. This is our biggest strength,” said factory manager Satish Srinivasan.
Being in profit
Nestle’s India operation made a net profit of `1,185 crore in 2014, up from Rs 1,117 crore in 2013. Net sales for the entire 2014 grew by 8.2% to Rs 9,806 crore. The company follows the January-to-December financial year. Apart from Moga in Punjab, Nestle has plants at Tahliwal in Himachal Pradesh; Smalkha in Haryana; Pantnagar in Uttarakhand; Ponda and Bicholim in Goa; and Nanjangud and Chiladi in Tamil Nadu.
What they pay to producers
Amul Rs 550
Nestle Rs 520
Verka Rs 520
All prices are for per kilogram fat
11 lakh litres
Nestle’s milk procurement every day from 33 districts of Punjab, Haryana and Rajasthan, of which about 70% is from Punjab