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INTERVIEW

“Cheese, yoghurts, flavoured milk growing at 20-25%”
Monday, 17 December, 2018, 08 : 00 AM [IST]
Rajendra & Ursula Joshi Food Industries Pvt. Ltd (RUFIL) was established in 2014 under the RUJ group of companies with an objective to manufacture quality food products. Rufil is beginning with forays into dairy products and efforts to bring innovative products to the market in this category. The company has set up a state-of-the-art dairy processing facility in the industrial zone of Mahindra World City Jaipur. Abhishek Joshi, CEO, Rufil, in a one-on-one interaction with Anurag More, at their facility in Jaipur, spoke at length about the Indian dairy industry and the company’s forays into the sector. Excerpts:

How has been 2018 for the Indian dairy industry?
The year 2018 had decent growth in terms of production, the industry growth was almost 5-6 per cent, but due to the increased production there was also a certain crisis initially. We launched our product in September 2017, soon after that milk procurement prices started tanking around December. The reason was excessive production of milk during winters and there was not much consumption of the surplus milk. So usually during the lean season, lot of surplus milk goes for conversion to powder, ghee etc.

The trading of powder is driven by international market prices and if the international prices are high then Indian dairy powder is exported more. But for the last couple of years, international prices are very low that is why surplus milk is being converted into Skimmed Milk Powder (SMP) and it is relatively lower in India.

Even in Maharashtra, Punjab and UP, where there are lot of powder making units, dairies had to restrict or shut down their operations because there was not much demand for powder and every unit was loaded with excess inventory. This whole thing went on for 3-4 months and put a lot of pressure on farmers and manufacturers equally. Lot of players are stocking up SMP and ghee, so it will have some after effects in this winter maybe because again production yield is expected to go up.

In 2018, milk production was about 170-175 million tonne and next year it is expected to be 180-185 million tonne. In terms of value of the business, it is growing every year at about 15 per cent.  Currently it is valued at Rs 5.5 lakh crore, and in 4-5 years it can be Rs 8-9 lakh crore. So it is growing, apart from certain crisis we had, it is a good scenario. You can see lot of activities in the industry which was earlier stagnant in terms of acquisition. Big players are entering into this segment, Heritage acquired Reliance, you have Patanjali now entering dairy sector, ITC had announced entry into dairy, Godrej also had entered, there is lot of activity going on and few international players plan to enter the growing market. Milk products are an important part of an average Indian’s daily purchases and once you have rising income levels, people will spend more money on food and therefore more on dairy products. I think 2018 has been good and 2019 might be even better.

Recently, dairy industry witnessed malpractices like adulteration. Comment.
There was huge study by FSSAI, it found that 68-70 per cent milk samples were not as per FSSAI standards, so that news spread like fire on social media, it also led to some misleading information, but this study explains all the facts in detail. What they are saying is that they collected about six and half thousand (~6500) samples from all over India and out of that what they found was 68-70 per cent were not as per FSSAI standards it means it could be unsafe, there could be adulteration in the milk, it also means that they are not labelling the products correctly if it is a packaged product and many other non-compliances were found. In India still 70-78 per cent is unorganised sector and only 20-25 per cent is organised, controls and checks are not very strong, we are relying on very old technology. Adulteration is a major concern for consumers but awareness is increasing now and the study coming out by FSSAI suggests that it is going to take steps to overcome it. We, at Rufil, take this very seriously and make sure that our products are 100% safe and without any adulteration right from the source of procurement. We hold meetings with farmers and train them about cleanliness and good farming practices, if they are aware and conscious, then it is easy to avoid adulteration. We also give them incentives to provide us clean milk and on time delivery. There are various issues which will take time to change and steps are being taken to change. Sometimes due to sudden change in weather, cattle fall ill, especially during the monsoon season and use of antibiotics and other medicines increases. But we ensure that we do not collect antibiotic-positive milk and we test for this on a daily basis.

What are the technological developments taking place in dairy sector in India?
There is lot of technological development happening in India and lots of adoption of technology which was already existing. Nowadays many farmers use milking machines for clean milk production and better efficiency. In India we don't have large farms as such, but now farmers have started keeping upto 30-40 cows. For small farms, people are using the automatic milking system with buckets, which is also a cleaner way of milking. Farmers are also getting more aware of the cost that is involved in the milking business, we encourage them to keep record of their data. We have applications now that can record farm level data in much simpler ways, and also the use of IoT is increasing such as Fitbits for cows, to monitor their health.

At milk collection point, quick chilling can be done, as chilling is very important for maintaining the freshness of milk, and the adoption of this system is helping a lot in improving milk quality. Lot of co-operatives are partially trying the Bulk Milk Cooling (BMC) system. At Rufil, we follow 100 per cent BMC model and once the milk is tested for quality then it directly goes to our Bulk Milk Cooler. In couple of hours, the milk is chilled at the source itself, and the freshness and quality of milk remains intact. Now there is technology available that can chill the milk in cans within seconds and this will be useful for VLC level collection.

At the processing centre level, automation of processes is a big step forward. Then cold storage is another big challenge that needs to be solved using new innovative solutions. Government is pushing to improve the cold chain across the whole dairy and food sectors since around 30 per cent of food produce is wasted in India due to lack of proper cold chain.

What are the trends you have observed in the dairy industry?
One of the trends is consumers are becoming more health-conscious. Traditionally Indian consumers are price-conscious but now people are more value-conscious. Now value addition in terms of better health benefits, better packaging, use of natural ingredients etc. is on the rise. Therefore value-added products such as cheese, yoghurts, flavoured milk etc. are seeing a growth of 20-25 per cent year on year. In India, a large population being vegetarian, means its food intake is usually deficient in protein. Some studies also show that lot of people are anaemic. Value-added products will surely play an important role in meeting those deficiencies. The industry has realised this already and it is working towards it.

Apart from this, the share of organised sector is increasing in this dairy processing sector and it is expected to touch about 30 per cent in few years.

Another recent development we are seeing is the ban of plastic in few states. We need to curtail the use of plastic in our products and the industry is already looking for alternative packaging options. Even the consumers are becoming more environment-conscious and this trend is going to increase further.

One more trend we are observing is that few soft drink players are entering into the dairy sector.  What I would like to see is chhaas replacing today’s cold drink. We already call our chhaas as the original soft drink.

Demand for A2 milk is on the rise in Indian market. Does your company offer A2 milk?
A2 milk is a very interesting story. I think it started in New Zealand, where some scientists did some research on the type of protein structures found in the milk. They tried to push for A2 type milk as better milk, but even the food safety authorities of New Zealand or few European countries have not accepted the A2 story. It is still very inconclusive and there is no clear unbiased scientific evidence whether for the hypothesis or against the hypothesis (the New Zealand food safety authority rejected the claim by the company). I believe we have many other problems in the country with dairy and we should try to rectify them first. I feel it is more of a marketing thing to say that only A2 milk is good. I think we should focus more on serving adulteration-free, antibiotic-free and hygienically made milk which is what we aim for at Rufil and our focus is not on A2 milk.

What makes you different from other players?
I think, in dairy industry there could be many differentiating things, one can be different in terms of procurement, products, pricing, packaging etc. Rufil is strong in procurement side and that is our strength and big differentiator. Hundred per cent of our milk is directly procured from our own source and the model which we have deployed for milk procurement is unique in itself because we have installed adulteration checking machines at each centre. Our milk is 100 per cent chilled at the source and this whole robust procurement system is the backbone of our good quality milk and milk products. Currently we have seven centres and we are planning to scale up to another seven centres in next one year. We work with our farmers and hold sessions with them to solve their problems. At the plant, we focus a lot on maintaining hygienic conditions so our final products are much better in quality and taste. In terms of our product portfolio we plan to focus on value-added products.

Any plans to launch new products?
We are planning to launch yoghurts, and our internal R&D is going for it. We are also planning to launch ice creams by next summer and apart from that we are planning to launch paneer and some more milk-based beverages in next five to six months.

Brief us about your expansion plans.
We have 30 distributors right now and selling 14,000 litre of milk daily and we plan to take it up to 30,000 litre per day by this summer. By end of 2019, we plan to cover most of Rajasthan. We would also look to establish our presence in NCR and Delhi.

How much will you be investing for the same?
We have already invested about Rs 40 crore in this processing plant and procurement infrastructure and we plan to invest additional Rs 10 crore for our expansion plans in the next one year.

What kind of research and development takes place in your products?
We are currently doing research on yoghurts and ice cream and soon you will see some interesting products coming out in the market from the house of Rufil.
 
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