Parag Milk Foods plans to launch a slew of products next year and increase its annual advertising and sales promotion (ASP) spend by more than five times to Rs 50 crore from a mere Rs 8 crore now. Its chairman Devendra Shah tells FE?s Shubham Batra that the company plans to mark its retail foray in FY11 by opening 10 flagship stores in the country?s top 10 towns with an investment of Rs 20-25 crore.
Gowardhan as a brand has never been advertised so much. Why?
We are the third largest dairy products maker in the country and whatever we are today, it is without advertising our product. Earlier, we did not have the capacity but now we feel since we have seen investment from various sources (Motilal Oswal?s venture capital arm invested about Rs 60 crore in the beginning of this calendar year in the company) and have a host of launches lined up for next year, we would go ahead and spend much more than what we do right now. For the current year, we have a budget of Rs 8 crore for our ASP, but we see it rising to Rs 50 crore for next two years.
Give us some details on your foray into the retail market.
For the current year, we want to stay focused on expanding our distribution across all modern retail outlets. However, next fiscal onwards, we plan to have around 10-12 flagship stores in the top 10 cities of the country, with the first store in Bangalore. These stores will be company-owned and managed. Further on, in the next two years, we plan to set up 150 stores (mainly franchises) in 100 towns and cities. We have earmarked an investment of Rs 20-25 crore for the same.
Can you discuss the launches that we can expect in the next one year?
We have a slew of launches lined up. We have a product called ?pride-of-cows?, which is based on farm-to-house milk concept. We are going to invite people to taste our milk which will directly come from our farms in Manchar, Maharashtra. We plan to pilot the project with 5,000 families of South Mumbai and later take it pan-India. The milk will be distributed in pet jars of one litre and will be sold at Rs 65, hence catering to the premium segment. We are exhibiting the products in Mumbai in the first week of December.
Next on our radar is the cheese tube that is mainly for children. Each tube will weigh 100 grams and will cost Rs 45. This will be launched in January under the brand Go. Go?s target audience is children between the age of 4 and 14 years.
Can you give us an update on the financial position of the company?
Last year, we had clocked a turnover of Rs 550 crore. We expect a 35% growth over last year and should have a topline of about Rs 750 crore.
On an average, the company garners operating margins of around 6-7% in the dairy business.