With plans to take the Indian cheese and curds market head on, the company has touched a turnover of `550 crore in the financial year 2009-2010. Shah is the entrepreneur behind Parag Milk Foods, which deals in only 100 % cow's milk and milk products, and owns the 'Gowardhan'
and 'Go' brand of dairy products. Shah talks to DARE about his entrepreneurial journey
Genesis of Parag Milk Foods
It has been four generations since our family has been in some business which is around farming. When I ventured out to do something of my own, the dairy milk was slowly gaining traction. In 1989-91, around the time of Operation Flood, there was huge deluge of milk produce in Maharashtra, as was the case all over India. We made the best of “milk holidays” to build a global dairy products business. While there were government organizations and cooperatives in place, there was large number of farmers with cows whose produce was not getting sold, which lead to wastage of their produce. This is when I saw an opportunity in getting into this field. My father, Prakash Shah, had set up a cold storage like facility way back in 1972, providing services to the potato farmers. It is since back then that we had a mutually trusting and benefiting relationship going on with the farmer community.
I started my business in the dairy industry with 30,000 liters and currently have the numbers at 10-12 lakh liters. Over the period, we have diversified into products such as ghee, cheese, and more. We have our dairy plant and cow farm in Manchar (near Pune) which is spread over 35 acres; housing around 3000 cows and equipped with one of India’s first Rotary Parlors, which has mechanized the whole milking process and in turn ensured high quality and hygiene. We currently manage one of India’s largest cattle farm and Asia’s largest cheese plant. Our recently commissioned cheese plant has the capacity to produce 40 tons of cheddar, mozzarella and processed cheese per day.
What is the idea behind your recent foray into the cheese business?
If you look at the growth patterns – liquid milk grows at 5-7 percent, butter is between +/- 5 percent, while cheese outruns all these in terms of growth at around 40-45 percent. We have a booming market of food chains such as pizza outlets (Dominoes, Pizza Hut, and others), restaurants like Ruby Tuesday, and many other food joints that serve Italian food. All these places need a constant and heavy supply of cheese. Mostly, this requirement is fulfilled by importing cheese from other countries, because there are no local players focusing on this market.
I saw an opportunity that is lying untapped here and hence ventured out with an array of cheese based products. Our company has recently launched a very high end cheese under the brand name of GO in variety of forms like Processed Cheese, Cheese slices, Cheese Spread Plain, Pizza Cheese & Cheese powder. Internationally, there are about 350 varieties of cheese. We are determined to bring in as many varieties as possible under our brand Go.
How do you deal with your competition?
The companies such as Amul and Britannia are not really our competitors to begin with. Yes, there is some level of competition, but that is in a very limited space. We have carved a niche in the dairy business, but bringing out milk based products which are not produced by either of these players. Instead, we see competition in international brands such as Kraft and Laughing Cow, who are still to come with their products into India. I am sure that by the time they start their activities in India, we would have perfect packaging and distribution in place. Also we believe that the quality and pricing that we are providing to the Indian customers will go a long way in retaining and growing our market share in the future.
Off shoot business opportunities in your industry?
There are many. India is developing very fast, and the people in India have started living a better life and have started eating better food. Think about it. From morning to evening, you have milk based products such as milk with breakfast; curd, paneer, butter milk, lassi with lunch; cheese in sandwich or burgers that one has for snacks; and again in the night milk and other milk based products are consumed. If one calculates roughly, all this will account to 30-35 percent of your daily grocery needs.
What is the top challenge in doing business in this industry?
In this industry, the way we procure the raw material is unlike most other industries. It is a very capital intensive affair to get things going. On top of all this, it is important to keep in mind the development and welfare of the farmers you are working with. The challenge is to maintain a balance between being a for-profit business and being a company which does not neglect the welfare of the farmers it works with.
What was your first big taste of success as an entrepreneur?
This business was not open for private players and was ruled by the license raj which gave the milk procurement right only to state agencies and cooperatives. In 1991, the then Finance Minister Manmohan Singh announced de-licensing policy which included the dairy sector. This is not really a self made success that I tasted, but this is a milestone after which in 1992 we were able to set up Parag Milk Foods. And when I started this business, the sheer amount of support that farmers showed in me, is what I call as my first big taste of success. Like I mentioned before, it is on day one of my business that I had 20,000-30,000 liters of milk procured.
Also, as a youngster watching India win the Cricket World Cup in 1985, I had decided that I need to become a champion of champions like Ravi Shastri and own the car (Audi) that he won out there. When my business took off and I was able to buy the Audi, I knew I was tasting success.
Any mistake you learnt a lot from?
In 1997, there was a very fast paced growth happening in the industry. The farmers had government agencies, cooperatives, and private players to sell their milk to. This got them increasing their production, and this in turn pressurized me to keep procuring this increased yield. In some time I had a sense of all this getting a bit too saturated for my comfort. I wanted to get into by products, and here I was with loads of milk. Eventually, all this led to us withdrawing our business of liquid milk pouches from the market.
The one mistake that any aspiring entrepreneur should avoid…
I would say, any entrepreneur should never compromise on quality of their products and/or services. There are ups and downs that keep happening in any business. Never should any entrepreneur think of compromising on quality to sustain the low; it is very important to maintain it, for the entrepreneur to rise again.
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