Mid-Sized Dairies Are Pumping More Funds Into Advertising

According to Sagarika Mukherjee, analyst with Antique Stock Broking, with 18% of the global milk production flowing out of India, the country is easily the world’s largest milk producer followed by the US, China, Pakistan and Brazil.

While the existing large dairy cooperatives like Amul and Mother Dairy announce major expansions, the influx of international dairy magnates like ITC and PepsiCo into the domestic dairy sector has created a nervous wave amongst local mid-sized dairy firms. As a result, there has been a significant boost in the amount of money invested by the latter in advertising campaigns to pull up their reach and sales.

Roping In Numbers

Speaking in number, a bunch of these mid-sized private dairies are planning to double their expenditure on ads from 1% to almost 2% of their sales by FY18, according to analysts. “The average industry spend on marketing and advertisement would be around 1 per cent, which is likely to double in the next couple of years,” said Shradha Seth, analyst with Edelweiss Securities.

“As the market is growing, companies are also increasing their ad spend, majorly focusing on value-added products rather than commodities like ghee or skimmed milk powder, to boost sales and position themselves as a retail or FMCG player and not just a dairy player,” said an analyst with a Mumbai-based brokerage covering listed dairy firms.

In an attempt to increase their foothold, companies are stepping into major collaborations. Like Mumbai-based Parag Milk Foods tying up with schools by sponsoring musical shows and even hiring popular Chef Ranveer Brar to promote its brand. Medium dairy players like Prabhat Dairy have of late increased advertising on regional (Marathi) television channels. Hyderabad-based Dodla Dairy and Heritage Foods too were seen significantly mounting their presence offline and online.

Stepping Up The Sales

J. Sambamurthy, head, dairy division of Andhra Pradesh chief minister N Chandrababu Naidu-founded Heritage Foods, said, “We will be doubling our marketing and advertisement spend to 2 per cent this year given the intense competition. We also plan to constantly cultivate our brand to engage our customers to avoid consumer shift from one brand to another.”

“With dairy companies flushed with money raised from public offers and private equity players, it becomes imminent for them to grow rapidly and hence higher spending on marketing,” said Sunil Dodla, managing director, Dodla Dairy.

“We are promoting a mix of high margin value-added items along with other products so that our increased marketing spend doesn’t impact our revenues,” says Devendra Shah, Chairman and Managing Director of Parag Milk Foods.

“We are putting up small display kiosks at shops with our product samples to attract new dealers apart from reaching out to a large base of customers,” said Sambamurthy of Heritage Foods.

The thrive by small and mid-sized dairies to up their sales has inadvertently resulted in marketing agencies like J. Walter Thompson (JWT), Madison, Helios and Group M cashing in on the competition in the dairy sector.

Digital Age

Apart from making their presence felt on the market shelves, a sizeable number of mid-sized dairies are also increasing focus on digital advertising. People closer to the dairy industry have revealed that the reach of online media has surpassed all geographical boundaries, resulting companies to reach out to a huge user base in tier-II and tier-III cities and rural areas at comparatively lower costs.

And with the Government pushing for a modernized and “Digital India”, we don’t see why the companies’ online presence would not reap maximum sales benefits.

All quotes from ET Retail.