Dodla Dairy Will Maintain 10% Volume Growth In Coming Years, Assures MD Sunil Reddy

Dodla Dairy Ltd. is confident of maintaining a volume growth of 10% as it readies for deeper penetration of value-added products, according to the company’s Managing Director Sunil Reddy.

Speaking to NDTV Profit, Reddy said that the company has traditionally maintained a volume growth of 10% and revenue growth of 15%, with the gap between the two either due to product mix change or inflation coming into play.

“The dairy industry does go through a cyclical change. When there is oversupply, we might see a little bit of lower offtake in the liquid volume, which will be compensated by ghee and powder. In the years forward also, we will be looking at the same numbers where although the base is increasing we will target 10% of volume and 15% of value growth,” he said.

Reddy projected that the company will maintain its margins in the range of 11–11.5% over the long term.

“In the short term, these margins will continue. In the cyclical manner of 2–3 years, we can look at it to keep it in the high single digits or low double digits as we go forward,” he said.

The top executive also explained the reason why it maintains a cap in its margin even when it focuses on value-added products and international business with lucrative margins.

“As a dairy business, we have to be careful that we do not sacrifice the farmer or the customer for margins. If we overprice the product, we might start losing the consumer base because people will find dairy to be more expensive and might bring down its consumption,” he said.

“Similarly, we cannot kill the farmer also if there is too much supply in the system because then we will lose him in the long run,” Reddy added.

He said that the company would rather go by return on capital and the cashflow it generates, and that would be the basis it looks at to keep the pricing going.

The company has been increasing its share in the value-added products category. Right now, curd is its biggest value-added product, followed by ghee, Reddy revealed.

“This year, we will clock around 32% coming in from value-added products, which will see a significant offtake coming from ghee,” he said.

The Dodla Dairy MD noted that consumer preferences are changing and companies are keeping up with them. “Earlier, people used to buy milk and make curd at home, but now they are buying curd from the market,” he said.

Reddy noted that Dodla Dairy saw a slight uptick in the sales of value-added products because the company had more milk in the system and its ghee sales also rose.

Milk prices have been stable on the procurement side with the weather pattern being stable, the top executive noted.