Heritage Foods is placing a strategic focus on premium dairy offerings, aiming to capitalize on the burgeoning industry. As the second-largest FMCG firm on The Next 500 list, the company is directing its attention towards value-added products such as curd, paneer, cheese, and cold coffee to meet the increasing demand for convenience and freshness within the domestic dairy sector.
CEO Srideep Kesavan reported that sales from the company’s value-added product portfolio experienced a robust 34% year-on-year growth in FY23. Heritage Foods introduced 14 new value-added products across four categories, including innovative milkshake and ice cream flavours. Kesavan noted that the company is on track to achieve an 18.7% growth in FY24, aiming to surpass revenues of ₹3,800 crore by year-end, with a significant contribution from value-added products. Consequently, Heritage Foods has climbed to the top 10 positions in The Next 500 list, rising from 13th in 2023 to 9th in 2024.
Established by former Andhra Pradesh chief minister Chandrababu Naidu in 1992, Heritage Foods has expanded its presence through branded stores called Heritage Happiness Centres and milk booths known as Heritage Parlours. The company has also strengthened its reach through quick commerce channels such as Zepto. Presently, Heritage operates 250 Heritage Happiness Centres and over 850 Heritage Parlours across India, along with collaborations with 27 organized retail chains and 16 e-commerce platforms.
Apart from focusing on value-added products, Heritage Foods is enhancing its procurement and distribution capabilities while aiming for deeper penetration into metros and Tier-II cities. The company aims to achieve revenues of ₹6,000 crore within the next three to four years, up from ₹3,427 crore in FY23. In FY23, Heritage Foods added 20,000 farmers to its network through 1,600 new procurement centers, emphasizing the importance of proximity to chilling centers to maintain milk freshness. The company expanded its chilling capacity to 2.2 million liters per day in FY23, up from 2.1 million liters per day in FY22.
Kesavan anticipates a significant shift in consumer behaviour towards health and nutrition, which is expected to drive the consumption of dairy products in the country. Consumers are increasingly favouring products high in protein and calcium, resulting in the growth of the dairy market. Kesavan highlighted the potential for growth through the incorporation of dairy products into new occasions, such as adding paneer to meals or opting for cheese vegetable sandwiches.
Other dairy companies, including Mother Dairy and Parag Foods, are also expanding their premium product offerings to meet evolving consumer preferences. Strengthening the farmer network remains a cornerstone of Heritage Foods’ expansion strategy. The company, which collaborates with 2.5 lakh farmers across 11,000 villages in nine states, introduced the Vet+ app in FY23 to provide farmers with essential information on farming techniques, weather updates, and financial transactions.
However, Kesavan acknowledged that the dairy business presents challenges, particularly due to insufficient cold storage capacity in the country. Expanding distribution networks requires partnerships with distributors equipped with cold storage facilities, posing a significant hurdle to growth in the sector.