Chennai: The city-based Hatsun Agro Product, the countrys largest private dairy, has applied to the government to expand its Salem and Kanchipuram dairies to 5 lakh litre per day (lpd) and 3.5 lakh lpd from the current capacity of 3 lakh lpd and 1.75 lakh lpd respectively. The company has another dairy in Belgaum, handling 1 lakh lpd.

Hatsun Agro managing director R G Chandramogan says the proposed organic expansion will enable the company to penetrate deeper markets in Karnataka and enter newer markets like Pune. The company at present sells two brands Arokya standard milk and Komatha toned milk.

"We are also ready for acquiring dairies that come up for sale," he says. The company had bought out Ajith Dairy Industries recently. "Once a commodity item, today milk has evolved into a branded product. And that is why there is a shakeout of players at the market place," says Chandramogan.

Though branding of milk has come to stay, the product is still price-sensitive. For instance when Tamil Nadu State Cooperative Milk Federation (Aavin) increased its retail price by a rupee, its sales in Chennai got reduced. Some private players like Hatsun Agro, after holding their price line for some days, followed suit and increased their retail prices.

"Farmers are exerting pressure. When Aavin increased their procurement prices we had to match so as to retain our supplies," says Chandramogan. "Hatsun Agro pays 30 paise more to its 75,000 farmers than what Aavin pays to its milk suppliers."

About competing brands like Subam and Vaishnavi holding their price lines (Rs 12/litre), he says: "Those brands are coming from Andhra Pradesh where procurement prices are lower by a rupee or two as compared to ours. Soon, you will see them matching our MRP." In order to retain customers in its fold, Hatsun Agro has introduced a monthly milk-card system for its two brands.

Speaking about the companys ice-cream division, he says the market has matured and the division contributes just 17 per cent of the companys turnover. Hatsun Agros Arun Ice-Cream is the largest-selling ice-cream brand in the south. Unlike the milk market, competition in the ice-cream segment is fierce. Even hotel chains like Saravana Hotels have ventured into this segment.

With his supplies meeting the demand, Chandramogan is not looking at other milk products like milk powder, butter and ghee. "Hatsun Agro will close this fiscal with a turnover of Rs 215 crore; we are targeting a revenue of Rs 300 crore for the next year."