Kwality: Milking Its Strengths

With a wide array of dairy products — desi ghee, butter, milk, and of course ice-cream — Kwality has carved out an exclusive niche among private sector dairy companies. With a market capitalisation of a whopping Rs 822.4 crore in fiscal 2014-15, the company recorded a healthy yearly growth of 11.3 per cent.

In 2012, Kwality made headlines when it forayed into the direct consumer business with an all-new range of products, including packaged food, juices, water, food products, and energy and protein drinks. This strategy, to tap the consumer directly, has helped boost sales significantly.

Growth Path
Established in 1992 as a backward integration of Kwality Ice-Creams, the company earlier focussed on supplying dairy products to other business houses before going public in 1995. In 2012, the promoter of the company, Sanjay Dhingra, realised the need for business transformation from business-2-business to retail as the market and demand for fresh dairy products in India is huge.

The results were good and the company’s sales growth rate is seeing an upward trend since the past four years. In 2014-15, Kwality’s sales stood at an impressive Rs 5267.8 crore — a growth of 15.3 per cent. Presently, 30 per cent of the company’s revenue comes from the consumer segment, while a large chunk of revenue still comes from institutional buyers. “Thirty per cent was a main driver for sales in the past four years, and we only intend to reverse the ratio in the next four years,” says Sanjay Dhingra, managing director of Kwality.

Strategic Moves
Along with augmenting the procurement system, the company also strengthened the distribution network and hired professionals from various dairy and FMCG companies spanning various functions. Also, bringing in advanced technology like ERP, which helped interpret many key data and plan accordingly, facilitated the journey to growth.

The company also incorporated seven executive tracks for success — change of brand imagery, product innovation, improvising procurement, introducing technologies, improving quality and enhancing sales and distribution networks. “This helped us define the areas we needed to work on, in the process making the entire retail chain stronger. For instance, within the HR trajectory, we have hired key people in key positions from Amul Dairy, like R. S. Khanna and S. K. Bhalla, among others. Further, we gave ESOPs to all employees, making us the first dairy company to do so,” said Dhingra.

The company engaged E&Y to put in place a sustainable IT setup with an intent of reducing operational costs and risks, and positioning IT as a strategic enabler. “This setup is to respond more effectively to our growth, transformation, and aspirations”, tells Dhingra.

Farmer Connect
The company’s Farmer Connect Programmes, help educate farmers about various aspects of dairy farming such as hygienic milk production, cattle breeding, cattle feed, nutrition, medication, cattle insurance, cattle loaning and more. This helps increase milk production and also improves the yield and quality of milk: a part of quality checking.

Dhingra also describes sourcing directly from farmers, which is 18 per cent of the company’s total sourcing, and now it has been a key driver of growth. This direct procurement has allowed the company to manufacture products for the retail business as this model boosts consistent quality control.

Kwality future growth lies in value-added products such as flavoured milk, cheese, and table butter in variants, besides other dairy products. “The target is to increase the ratio of consumer and value-added products in the total sales achieved by expanding our plant,” says a beaming Dhingra.

monica@businessworld.in