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Mahindra to milk dairy business, connects with farmers

M&M is already a strong player in the agro-business with its tractors and farming equipment, while Mahindra Shubhlabh is the largest grapes exporter. The conglomerate now aims at grabbing a slice of the Rs 3-lakh-crore dairy industry.

business Updated: Jun 01, 2015 00:29 IST

The auto-to-aerospace conglomerate Mahindra Group is all set to roll out its dairy business in the next few months, starting with milk and milk products, as it looks to expand its agri-business and grab a slice of the 3-lakh-crore dairy industry. The company will not be buying cattle, but will source milk directly from the farmers.

“We are starting our own setup in Indore, Madhya Pradesh, from where we will pickup milk. The initial plan is to look at outsourcing the processing part and once we are able to get our supply chain right, then we will do the next jump, that is investing in our own plant,” said Ashok Sharma, president and chief executive, agri, Africa and South Asia operations, Mahindra & Mahindra.

Apart from milk, it will also focus on value-added products like dahi (curd) and butter milk. Starting with Indore, the company plans to expand the business to other regions in phases.

India’s dairy business is highly competitive with many well-entrenched national and regional players. Sharma believes its key to success will be to ensure good quality of supplies, which the company has ensured by directly working with farmers.

M&M, the world’s largest tractor maker by volumes, is already a strong player in the agri-business, supplying seeds and technical inputs to farmers, through Mahindra Shubhlabh Services. It is also working directly with farmers to procure grapes and Mahindra Shubhlabh is the largest grapes exporter. In the domestic market, M&M has a branded fruits business under the brand Saboro.

For starters though, the company will sell milk through wholesale channel, before launching a retail brand. “In the beginning, we will do generic trade of milk. Once we have reached a certain scale, then we will introduce a brand,” said Pawan Goenka, executive director, M&M.

Strong growth in the dairy business in the last few years, and huge future potential given a large-scale unorganised milk procurement chain, coupled with M&M’s already strong linkages with farmer, is driving the company’s expansion.

M&M was earlier looking at acquisitions to enter the dairy space, but decided to go solo to start with. “We have our eyes open for M&A (mergers and acquisitions). But we didn’t find a suitable buy. So right now we are developing on our own. If we get a good opportunity we will be open to buying,” said Goenka.

“The organised dairy sector in India has experienced strong value growth of 15% per annum over the last five years,” a report by Rabobank International had said.

First Published: Jun 01, 2015 00:17 IST