Chennai: In order to fortify its dominance in the southern liquid milk and ice-cream market, India's largest private dairy, Hatsun Agro Products, is on a major investment spree.

The company has drawn up plans to invest Rs 22 crore in expanding its liquid milk and ice-cream operations. This is apart from the Rs 3 crore it spent on the new quick freeze technology to upgrade its ice-cream. The company had spent Rs 18 crore to acquire another dairy sometime back.

A major chunk of the proposed investment will be to increase the company's milk handling capacity to 1 million litres per day by 2004. Currently Hatsun Agro handles around 6.5 lakh litres of milk per day.

Says Hatsun Agro managing director R G Chandramogan: ''We will set up a 2.5-lakh-litre-per-day greenfield diary plant in Tirunelveli district in Tamil Nadu at an outlay of Rs 10 crore. Most of the investment will be made from our reserves.''

From Tirunelvelli, Hatsun Agro hopes to enter southern parts of Tamil Nadu and Kerala markets with its premium Arogya brand (standard milk). The company's other milk brand is Komatha (toned milk).

Chandramogan says Hatsun sells 5.5 lakh litres of Arogya and 1 lakh litres of Komatha every day. This translates into nearly 25 per cent of Tamil Nadu's branded milk market. The market leader is the state government-owned Tamil Nadu State Cooperative Milk Federation (Aavin) with a market share of 47 per cent.

''Month on month Arogya is clocking an average growth of 10 per cent,'' he adds. But the drought-like condition that exists in the state has resulted in an 8-per cent drop in milk procurement for Hatsun. The company pays anything between Rs 8.40 and Rs 9.50 per litre depending on the quality of the milk supplied.

In order to increase its procurement the company is now propagating the concept of two animal dairies. Initially the company promoted the concept of mini-dairies, having at least 10 animals.

Whipping up the ice-cream market
For the ice-cream business, Hatsun's new outlay is around Rs 6 crore to set up an extruded candy line at the company's 50,000-litre-per-day ice-cream plant located near Chennai. ''The new line is expected to go on stream in six months' time. Extruded candy is a recent concept abroad and we can produce stick-ice as well as cones,'' says Chandramogan.

Re-launching the ice-cream brand, the All New Arun Ice-Cream (earlier it was Arun Ice-Cream), Hatsun is now focusing on the premium segment. The brand is the market leader in South India with a share of 34 per cent. ''In Tamil Nadu our market share is 54 per cent,'' he adds.

Last year the Rs 450-crore ice-cream industry did not register any major growth, as the players did not whip up the market with promotions. And Hatsun plans to change the trend in South. As part of the strategy the company is repositioning the product as a super premium brand by making the product creamier.

''The cream content is 50 per cent more than the stipulated standards for ice-creams and other brands in the market. The total solids in our ice-cream is 42.5 per cent as against 36 per cent in other brands,'' claims Chandramogan. Step two in the re-launch strategy will be the extensive promotion campaign for which the company has budgeted Rs 6 crore.

Not a major force in the institutional segment, Hatsun sells its ice-cream through a network of 1,100 exclusive parlours (60 per cent located in Tamil Nadu and the balance spread across the other three southern states).

This fiscal the ice-cream business is expected to chip in 11.5 per cent of the expected Rs 330-crore turnover. Chandramogan says his company is not looking at value-added products like milk powder in a major way since the milk and ice-cream business is growing.