STRATEGY FOR DAIRY SECTOR

Caselet: Agri Business Case 2

Submitted By Team ‘Gangs of FMS’
• KS PREETI, 2nd Year, preeti.k13@fms.edu
• MOHINEESH Y, 2nd Year, mohineesh.y13@fms.edu
• PARISH AGGARWAL, 2nd Year, parish.a13@fms.edu
• VIKRAM SINGH KAPANY, 2nd Year, vikram.ka13@fms.edu
Agenda

ENTRY STRATEGY
INDUSTRY PRIMARY VALUE CHAIN
& BUSINESS FINANCIALS
ANALYSIS RESEARCH ANALYSIS OPPORTUNITIES
Agenda

ENTRY STRATEGY
INDUSTRY PRIMARY VALUE CHAIN
INDUSTRY
INDUSTRY
ANALYSIS RESEARCH ANALYSIS
& BUSINESS FINANCIALS
OPPORTUNITIES
ANALYSIS
ANALYSIS
Dairy Industry holds strong potential driven by expanding domestic market and export trends

700
CAGR:4.47% 585.6
600
466.5
Past Milk 500
390.8 REASONS TO ENTER
400 316.9
Production 300 206.2
256.1 Growing since
200
in India (Mn 100 past 30 years
Tonnes) 0 1
87 92 97 02 07 12
82
-1 9
87
-1 9
92
-1 9
97
-2 0
02
-2 0
07
-2 0 EXPANDING MARKET
19 19 19 19 20 20

250 229
Projected CAGR: 4 %
188
Milk
200

150 127
155
Future demand 2 LOW PER CAPITA
Production 100 to remain high CONSUMPTION
in India (Mn 50

Tonnes) 0

201
1-1
2
201
6-1
7
202
1-2
2
202
6-2
7
3 SCOPE FOR
51%
20%
17% INNOVATION
Share in 15% 13% Highest Milk
World Milk 10% producer in the 4
5%
Production 5%
5% 5% 4% world EXPORT POTENTIAL
0%

(1) Cumulative figures for the 5 Year Blocks

Highly unorganized market & low per capita consumption provide scope for new players

MARKET STRUCTURE CONSUMPTION TRENDS

Indian Dairy
Industry

Organized Unorganized
(20%) (80%)

Private Dairies Cooperative Government

(532) Societies (254) (46)

• Global per capita consumption is 108 kg per annum

• Unorganized sector has several problems including
exploitation faced by farmers and low productivity
• Per capita domestic consumption low as compared to
world average
• Entry of many new private players a positive indicator
• Middle East, South East Asia and Africa with low
• Other ventures include Sahara Dairy expected in 2013
consumption are good export targets

Source: FAO, Technopak

Agenda

INDUSTRY
ANALYSIS ENTRY STRATEGY
PRIMARY VALUE CHAIN
• Growing Industry PRIMARY
PRIMARY
RESEARCH ANALYSIS
& BUSINESS FINANCIALS
• Large Scope for OPPORTUNITIES
Organizing the RESEARCH
RESEARCH
industry
Primary Research was conducted at Mother Dairy Plant in Karkardooma, Delhi

• Maximum procurement from Private sources Images from the Plant Visit
• Quality issues with private procurement

• New Generation Cooperatives run by Sahayaks

With the
Milk Supply
Customer
Routes
• Sub-contracts for milk sourcing/packaging to Info Officer
(1) Model Dairy Karnal (2) JK Dairy, Gajraula Silos for
storage of
(3) Cooperative Societies in Rohtak, milk
Ballabhgarh, Noida Tanker
undergoing
Cleaning

Dr. Ashok Kumar Challenges in the dairy sector:

Tripathi 1. Export ban in 1991 and Government Policy
Deputy GM, 2. Unavailability of proper animal fodder KEY TAKEAWAYS
Procurement 3. Adulteration of pure milk by Private players

INCREASING
INDUSTRY
• Tetra packaging replacing powder milk in milk VALUE ADDED REVENUE
Dr. S.K. Bhalla TARGETING
deficient areas PRODUCTS HAVE SOURCES FROM
COO, UNORGANIZED
• Cost of producing & packaging UHT milk high HIGHER MARGINS UHT MILK AND
Mother Dairy SECTOR
• Milk Collection center costs around Rs 1.2 Lakh EXPORTS
Primary Research was conducted at GSK Plant, Sonepat

• Procure milk from surrounding areas such as Plant Locations in Northern Grid
Ishewal and Bhadson

• Lean Milk Procurement system through

outsourced model for transportation and
manning of collection centers
1. NABHA
• Key Challenges are high operational expenses 2. SONEPAT
in own milk production Milk Supply from
Different Channels 3. JALANDHAR

• Focus on DDA to increase farmer loyalty

1)Cryocans given to farmers for safe
Dairy
insemination
Development
2)Regular Multi-functional medical camps
Activities (DDA) KEY TAKEAWAYS
3)De-worming medicines free of cost
•Nearly Rs 1,300,000 in 2011 on DDA
BULK MILK
Shift from Milk • Own area milk increased from 20,006 MT in FOCUS ON DAIRY COMPANIES
COOLERS BEST
Collection 2007 to 30,036 in 2011 by shifting to BMC DEVELOPMENT TO RELYING ON OWN
WAY OF
Center (MCC) to
MCC BMC GET CLOSE TO THE MILK DUE TO
PROCUREMENT
Bulk Milk Rent Rs 50,000 Rs 1650 FARMER QUALITY ISSUES
OF MILK
Cost/litre Rs 0.68 Rs 0.11
Coolers (BMC)
Primary Research was conducted at National Dairy Development Board, Noida

• Successful New Gen Cooperatives experiment Activities Under National Dairy Plan
in Rai Bareilly and Sultanpur – 50 Lakh surplus
in UP

• Increased milk rates to farmer from Rs 7/ litre

to nearly Rs 30 per litre
EDUCATING FARMERS
• 2nd White Revolution to increase dairy
productivity under the National Dairy Plan SEMEN
Total Outlay PROCESSING LAB
Of Rs 2242 Cr RATION
• Farmers prefer giving milk to local “DUDHIYAS” BALANCING
• Dudhiyas provide milk to private players, but
Mr Vinod Rai,
exploit the farmers with loans
Head, Finance &
• In Bulandsheher, NDDB waived off loans of 300
Accounts
farmers, but they continue giving milk to KEY TAKEAWAYS
Dudhiyas
NEED INNOVATIVE IMPROVE
• Easy and ready loans facility to help him FOCUS ON GIVING
WAYS TO PROVIDE QUALITY OF MILK
Dr. Ananth • Advisory regarding type of feeds, artificial THE FARMER HIS
FINANCE TO THROUGH BETTER
Padmanabhan insemination, ways to increase productivity DUE
FARMERS BREEDING
Head HR • Facility to give milk in local villages instead of
traveling
Agenda

PRIMARY
INDUSTRY
RESEARCH
ANALYSIS VALUE ENTRY STRATEGY
VALUE
VALUECHAIN
• Growing Industry • UHT & Value Added & BUSINESS FINANCIALS
Products market
ANALYSIS
CHAIN OPPORTUNITIES
• Large Scope for
Organizing the • Dairy Extension CHAIN
industry services ANALYSIS
ANALYSIS
Major issues and challenges lie along the value chain which could be converted into opportunities

Processing Transportation of
Inputs for Milk Milk Chilling and Transportation Marketing &
and packaged Consumers
Dairying Production Collection Bulk Cooling of chilled Milk Distribution
Packaging products

Inputs Chilling
• Fodder Farmers Processing
• Chilling at chilling centers at villages plants • Own retail outlets
SERVICES

SERVICES

SERVICES

SERVICES
• Veterinary aid • Co-operative
• Bulk cooling centers at district level • Supermarkets
dairy plants
Production Transportation • Private dairy plants • Any retail outlet
• Large/Medium/Small scale and • Refrigerated vans & Insulated• Government dairy plants
marginal farmers Tankers

• Inadequate feeding of animals • Milk base mainly consisting

• of • Majority
Seasonality of production and of the market is still
• Low genetic potential small holders fluctuating supply unorganized
ISSUES

ISSUES

ISSUES

• Exploitation of farmers
• High production costs
• Delayed payment of dues
ISSUES
• Involvement of too many • Absent quality standards• Acceptability of the consumer base
intermediaries • Adulteration and food•safety
Less penetration to the rural markets
• Gaps in information • Lack of trained and skilled worker
Opportunity Assessment exposes major entry areas like procurement from unorganized segment,
tetra packed milk and custom packaging
Importance in Synergy Market
Entry Opportunities in Value Chain value chain Potential Potential

Dairy Extension services P

Milk farming from milch animals

Procurement from unorganized players P

Hi-tech AMCs to be installed at Samridhi centers P
BMCs at village/district level P
Manufacturing & custom packaging (Tetra packs, VAP) P
Selling loose milk/homogenized milk

Refrigerated transport systems (Solar powered trucks) P

Set-up own distribution channel and start B2C business

Few of the entry areas in Dairy industry have a strong synergy with existing
businesses of Mahindra group
Source: Team Analysis
Agenda

PRIMARY VALUE CHAIN

INDUSTRY
RESEARCH ANALYSIS
ANALYSIS ENTRY
ENTRY
• Growing Industry • UHT & Value Added • Milk Processing STRATEGY & FINANCIALS
STRATEGY
• Large Scope for Products market • Transportation STRATEGY &
• Dairy Extension &Logistic are the
BUSINESS
Organizing the BUSINESS
industry services key areas of OPPORTUNITIES
growth OPPORTUNITIES
Mahindra could enter and become a key player in the dairy industry value chain backbone

Processing Transportation of
Inputs for Milk Milk Chilling and Transportation Marketing &
and packaged Consumers
Dairying Production Collection Bulk Cooling of chilled Milk Distribution
Packaging products

1. TETRA PACKED MILK

3. MANUFACTURING
2. VALUE ADDED PRODUCTS

Phase Wise Entry

MAHINDRA DAIRY WILL BE A KEY PLAYER IN
THE BACKBONE OF THE VALUE CHAIN
Phase 1 Phase 2 Phase 3

Tetra Packed Milk Value Added Manufacturing

Products 1. PIONEER IN PRODUCTION OF LOW COST TETRA PACK MILK

2. MAJOR PLAYER IN CUSTOM PACKING OF VALUE ADDED PRODUCTS

Low cost Tetra Custom Packed Value Refrigerated Transport 3. PIONEER IN MANUFACTURE OF SOLAR POWERED REFRIGERATED
packed milk Added Products & Bulk Milk Coolers TRANSPORT SYSTEMS AND BULK MILK COOLERS
Setting up plant at Jaunpur gives locational advantage from procurement and supply perspective

AZAMGARH

JAUNPUR

GHAZIPUR

PRATAPGARH

FAIZABAD

VARANASI

SULTANPUR

PROCESSING PLANT AROUND JAUNPUR

• Surrounded by Milk Surplus districts
• Absence of Big Players
RATIONALE
• Largely unorganized dairy industry
• Proximity to milk deficient markets, such as North East

Source: Press, Company Websites

More details in Appendix 1
Mahindra could overcome challenges in Milk Procurement by creating a strong pull through its
existing businesses

SOLUTION 1 KEY CHALLENGES 2 SOLUTION

LEVERAGE MAHINDRA’S
CONNECT WITH FARMERS
Lack of good quality Farmers unwilling to LEVERAGE MAHINDRA
THROUGH MAHINDRA produce and give milk due to FINANCE CONNECT WITH
SAMRIDDHI CENTERS WITH knowledge deficit financial constraint RURAL POPULATION IN
DAIRY EXTENSION SERVICES PROVIDING FINANCING

CONSULTANCY ABOUT FLEXIBLE LOANS TO

BREEDING, ARTIFICIAL PURCHASE MORE
INSEMINATION ANIMALS

RATION BALANCING FLEXIBLE PERSONAL

AND NUTRITION FEED FINANCING

HEALTH
FREEDOM FROM
MANAGEMENT OF
DUDHIYAS
LIVESTOCK
 Business Opportunity 1:
UHT TETRA PACK MILK Low cost Tetra Packs could revolutionize the milk industry

1 PROBLEM AREAS 2
Milk Deficient Areas
UHT Milk not MASS PRODUCED LOW COST UHT
LOW COST TETRA PACKAGING such as North East
produced due to high MILK WITH SHELF LIFE OF 120
WITH LONG SHELF LIFE where transportation
costs DAYS
is an issue

Pillow shaped Tetra packaging • HUGELY SUCCESFUL IN EGYPT

• In a Loose milk market,
Lesser cost of production than Juhayna Dairy grew to 894
Tetra Brick packaging Million packs from 0.
TETRA FINO
Easy transportation to far flung
ASEPTIC areas
PACKAGING Available in all packet sizes from DISRUPTIVE INNOVATION
100 ml to 1000 ml
THROUGH PACKAGING
New technology, set to
revolutionize UHT in India
 Business Opportunity 1: Technology innovation in UHT milk would bring cost down and
UHT TETRA PACK MILK increase penetration

1 PROBLEM AREAS 2
Milk Deficient Areas
UHT Milk not MASS PRODUCED LOW COST UHT
LOW COST TETRA PACKAGING such as North East
produced due to high MILK WITH SHELF LIFE OF 120
WITH LONG SHELF LIFE where transportation DAYS
costs
is an issue

• Custom packaging of Milk

for Dairies and other
• SOLAR POWERED DAIRY • OneStep Aseptic technology
PLANTS SETUP IN companies
CALIFORNIA • Revolutionary UHT processing
• Milk Deficient States such
• High cost savings • REVENUE
Cuts operationalPOTENTIAL
costs by 50% REDUCING
CLIENT • Capital Costs reduced by 30%
as North East India, Orissa, OF Rs 942 Cr COSTS
PROFILE Jharkhand ANNUALLY THROUGH
DISRUPTIVE•INNOVATION
Defense and Army • Use of solar power sources TECHNOLOGY
• Export to Milk Deficient
THROUGH • Hybrid solar power steam
generators for heating INNOVATION
REVOLUTIONARY LOW
countries purpose
COST UHT MILK
Source: Attached Excel Sheet
 Business Opportunity 2:
VALUE ADDED PRODUCTS Custom packaging of VAP offers huge potential

1 PROBLEM AREAS 2
Lack of a large, CUSTOM-PACKAGING OF HIGH
MANUFACTURE OF HIGH
QUALITY VALUE ADDED
Low margins in pure organized player in QUALITY VALUE ADDED
milk production Value Added PRODUCTS FOR OTHER
PRODUCTS
Products space COMPANIES

PRODUCT PORTFOLIO CLIENT PROFILE

Cooperatives
1. CHEESE
2. BUTTER REVENUE ESTIMATED
3. GHEE
Other
Fast Food
DairyCompanies
Players
AT 20% OF MILK
FMCG Companies
Defense
selling Dairy products
4. YOGHURT Institutional Market
MARKET SALES
5. DAIRY
WHITENER
6. SKM
7. LACTOSE
Major export target regions are Middle East and South East Asia

EXPORT LOCATIONS EXPORT PRODUCTS

Consumer Packs

UHT Milk Ghee

China Butter Paneer

Shreekhand Ice Cream

USA Bahrain Nepal Japan
Afghanistan
Hongkong
St. Maarteen Qatar UAE Bangladesh Philippines Flavored Milk Fresh cream
Thailand
Kuwait
Sri Lanka Malaysia
Brunei Singapore
Sweets Lassi
Kenya

Australia Buttermilk

New Zealand
Bulk Packs

KEY TAKEAWAY: THERE ARE 21 VIABLE EXPORT LOCATIONS Milk Powder

More details in Appendix 2, 3, 4

 Business Opportunity 3: Domestic manufacturing of Solar powered refrigeration
MANUFACTURING equipment holds great potential in light of increasing demand
Milk Production Estimates (India) (Mn Tonnes)
250 229 • Milk Production increasing at a CAGR of 4%
:4 %
200 CAGR 188 • Milk collection centers to increase manifold
155 • Milk chilling units required in large quantities
150 127
• Refrigerated milk transport systems required
100
50
0
OPPORTUNITY FOR MANUFACTURING
-1 2 -1 7 -2 2 -2 7
11 16 21 26
20 20 20 20

Processing Transportation of
Inputs for Milk Milk Chilling and Transportation Marketing &
and packaged Consumers
Dairying Production Collection Bulk Cooling of chilled Milk Distribution
Packaging products
Milk Collection

Manufacturing Bulk Milk Coolers

Manufacture ?
• Backward Integration of Mahindra Dairy
Chilling and Bulk • Self Sustainable in Chilling and Transport

Why
Cooling
• Decrease long term costs as rentals
• Sale to other clients

Transportation of Manufacturing Refrigerated

Chilled Milk Transport Systems
 Business Opportunity 3:
MANUFACTURING It helps attain self sustainability and cost efficiency

1 OPPORTUNITIES 2
Manufacture
ATTAIN SELF SUSTAINABILITY Manufacture Bulk LOW COST SOLAR POWERED
Refrigerated REFRIGERATION SYSTEMS
AND REDUCE COSTS Milk Coolers
Transport Systems

• Financed 75% through loan at 12% interest

FINANCIAL
Extensively used for cooling milk ASSUMPTIONS (NABARD)
Reduction in souring and curdling
at the collection point • Capacity Utilization to reach 100% by fifth year
of milk
• Milk Co-operatives

ADVANTAGES
Maintain the quality of milk for a Chilling at the main dairy can be
BULK MILK • Milk
CLIENT longer period of time
Unions
BMC avoided 2000 litres 5000 litres
COOLER
PROFILE Total Cost Flexibility in collection
Rs. 7 lakh Rs. 18 lakh
time
CHARACTERISICS• Organizations liketoGSK,
Hygienic and Easy use
Repayment results in more7volume
years collected 6 years
Nestle that procure milk
IRR 35% 43%
Available in various sizes ranging Reduces frequency of transport
from 500lts to 15000lts to main dairy reducing costs
Source: NABARD
 Business Opportunity 3:
MANUFACTURING It helps attain self sustainability and cost efficiency

1 OPPORTUNITIES 2
Manufacture LOW COST SOLAR POWERED
ATTAIN SELF SUSTAINABILITY Manufacture Bulk
Refrigerated REFRIGERATION SYSTEMS
AND REDUCE COSTS Milk Coolers
Transport Systems

TESTED IN USA
• Manufacturing
costs reduced by • Roof Mounted
half PhotoVoltaic solar panel
• Performance
modules
efficiency • Thin-film
increased by 27% REVOLUTIONARY
• Light-weight
CHANGE IN
• Reduces noise level of
USAGE OF
refrigeration system
DISRUPTIVE INNOVATION THROUGH • Saves upto 1000 litres of TECHNOLOGY
REVOLUTIONARY TECHNOLOGY diesel fuel annually*
• Achieves a reduction in CO2
Source : SolarServer Magazine, 2010 emissions of 2.5 metric tons*
Agenda

PRIMARY ENTRY STRATEGY

INDUSTRY VALUE CHAIN
RESEARCH & BUSINESS
ANALYSIS ANALYSIS OPPORTUNITIES
• Growing Industry • UHT & Value Added FINANCIALS
• Large Scope for Products market
•
•
Milk Processing
Transportation
1. Low Cost UHT Milk FINANCIALS
FINANCIALS
Organizing the • Dairy Extension 2. Value Added
&Logistic are the
industry services Products
key areas
3. Manufacturing
With a Capital Expenditure of around Rs 138 Crore, a profitability of 18.8% can be expected over 5
years

SOURCES & USES OF FUNDS REVENUE PROJECTIONS

Forecasted Revenue and Net Profits (INR Crores)

Internal
1400 1342
Sources = 1278
Rs 34
Crores 1096

Capital 1050
928

Expenditure
(Rs 138 700

Crore) 385

Bank Loan 350 260 278

174
216
= Rs 104
Crores 56
0
13 14 15 16 17
20 20 20 20 20

Average Profitability = 18.8%

More details in Appendix 5
 Disruptive evolution by Mahindra Dairy will quicken mass adoption of new packaging and
position Mahindra as leading player in Global dairy arena

Solar Power Disruptive Evolution

UHT

Solar Powered
Export Refrigeration
UHT FINO Milk Trucks
Leadership
Technology

Packet Milk

Normal Evolution
Bottled
Loose Milk Mass
Milk Adoption of
UHT

Homogenization

Pre 1950s 1960s 1970s 2013 2018 2020 Time

THANK YOU!
APPENDIX – 1 : Processing Plant Technology

COMPANY GEA PROCESSING ENGINEERING LTD, SIEMENS INDIA

• Simatic PCS 7 System with advanced engineering tools for Dairy
Industry

• Dairy Functional Toolset tailored specifically to dairy operations

• Safe material transfer, reliable tank management, traceable material

movements, and consistent product specifications.
SPECIFICATIONS
• Online instrumentation and powerful pump drives ensure that the
correct quantity and quality of material are provided at each process,
be it cleaning and separating skimmed milk and cream, setting the fat
content, pasteurization, homogenization, sterilization, or cooling

• Successful implementation at Boisar, Vasundhara Dairy for a 400,000

lt plant
APPENDIX – 2: Export – Quality : BIS Certifications and standards

TESTING
DAIRY PRODUCTS DAIRY EQUIPMENT STANDARDS
S.No Dairy Product Certification S.No. Dairy Equipment Certification For determination of:
1 Burfi IS-5550-1970  1 Aluminium Milk cans IS: 1825 - 1983 Moisture
2 Butter Oil (Butter fat) IS: 13689 - 1992  2 Stainless steel vats IS: 2336 - 1963 Fat
3 Butter Pasteurized IS: 13690 - 1992
 3 Insulated milk storage tanks IS: 2688 - 1974 Total Solids
4 Casein (edible Quality) IS: 1167-1995
Cheese Natural processed,  4 Steam jacketed ghee pans IS: 2829 - 1979 Protein
5 processed cheese spread and soft IS: 2785 - 1979  5 Settling tanks for ghee IS: 4743 - 1968 Ash
6 Cheese Powder IS: 9584 - 1980  6 Milk pipes and fittings IS: 3382 - 1965 Lactic Acid
7 Cream Sterilised IS: 4884 - 1968  7 Batch pasteuriser IS: 2689 - 1964 Sucrose content
8 Dahi IS: 9617 - 1980 Titrable acidity
 8 Aluminium alloy milk cans IS: 1825 - 1975
9 Dairy whitener IS: 12299 - 1998
10 Ice cream IS: 2802 - 1964
11 Ice cream cones IS: 7187 - 1989
12 Ice cream mix dried IS: 7839 - 1975 PRODUCTION PROCESS
13 Khoa IS: 4883 - 1980
14 Lactose Commercial IS: 1000 - 1989 • Buildings where the milk is received, processed, bottled,
15 Milk flavored IS: 4709 - 1968 stored and where equipment is cleaned and sterilized
16 Milk Powder IS: 1165 - 1992
• Surroundings and waste disposal
17 Milk - foods malted IS: 1806 - 1975
• Personnel Health and cleanliness
APPENDIX - 3: Exports: Factors affecting exports and Measures

Factors Affecting Export Potential of Dairy Products

20 19 PREVALENT QUALITY ISSUES
16
16 14 Lack of Qualified Quality professionals
Operational
OPERATIONAL
12 11 in the Dairy sector leading to haphazard
9 9 in % Aspects
ASPECTS
7 7 implementation, less R&D
8
4 4
4
Lack of cleanliness (shortage of water)
0 Infrastructure
INFRASTRUCTURAL Lack of education and understanding of
t t Related
u
s
ct ard
s
tion ules tion ints logy edi por hers ASPECTS hygiene factors
c a r
d d d
ro tan odu che orm nst chn of C Su
a r o p Ot Inadequate power supply
P r
of S
al of P ery
S f
I n ty c
o
e Te ost ting
t y n f i t c e
u ali atio ost eliv ck o
p ac qua a rk
Cost incentives required for maintaining
Q ern C D La Ca a d e M MAINTAINING
n t n STANDARDS standards like ISO 9001, 2000, HACCP
I I

• Adopting Codex or modifying PFA to match Codex KAIZEN TECHNIQUES

IMPROVE • Ensuring Quality products for international markets assuring international 1. Reduce Power
QUALITY standards Consumption
• Adopting GMP GHP GLP & HACCP and following TQM, TPM & Six Sigma 2. Reduce losses
STANDARDS
3. Reduce Inventory
• Adopting international food laws, environmental standards
4. Reduce Timeover
Appendix – 4: KAIZEN techniques: Process re-engineering

KAIZEN Demo Action steps for implementation Impact

Modification of cold storage Power

1 • Dividing the cold storage into 4 chambers with flexible glass insulated partitions
Consumption
• Only required chamber needs to be refrigerated and rest could be kept at ambient temperature
• 0.3 per litre saving in power consumption

Prevent spillages and leakages at various points Handling loss

2 • Training of staff involved in handling
• Standardizing operating and handling practices of Milk
• Margin to increase from 0.3/litre to 0.45/litre

Increasing the frequency of distribution

Inventory
• Supply of milk to hotels, offices, restaurants etc… during day time
3 • Small trucks could be used for such players

Reducing set-up and productivity loss Changeover

• Using SMED (Single Minute Exchange of Die) technique used by Toyota
4 • Change time could be reduced to 10 minutes from current 10.5 hours time
• Useful in cases where set-up changes are needed for half toned and full toned milk
Appendix – 5: Financial Projections (a)
Income Projections
S.No Particulars Unit Years
      I II III IV V
1 Milk processed litres/day 420000.0 480000.0 540000.0 600000.0 600000.0
2 Yield per day            
i) Tetra Pack Milk litres /day 394500.0 450857.1 507214.3 563571.4 563571.4
ii) Cream (50% fat) litres /day 24000.0 27428.6 30857.1 34285.7 34285.7
iii) Saleable cream (25% of iii approx.) litres /day 6000.0 6857.1 7714.3 8571.4 8571.4
Iv) Ghee Kg/day 8640.0 9874.3 11108.6 12342.9 12342.9
               
3 Income per day            
i) Tetra Pack Milk Rs. /Litre 17752500.0 21303000.0 25164168.8 29358196.9 30826106.7
ii) Cream Rs. /Kg 1350000.0 1620000.0 1913625.0 2232562.5 2344190.6
iii) Ghee Rs./Kg 2073600.0 2488320.0 2939328.0 3429216.0 3600676.8
               
4 Total Income/day Rs. Lakhs 21176100 25411320 30017122 35019975 36770974
               
5 Total Income per year Rs. In Crores 385.4 927.5 1095.6 1278.2 1342.1
               
Expenditure Projections
S.No Particulars   Years
      I II III IV V
                
1 Milk processing per year (Litres)   76440000 175200000 197100000 219000000 219000000
2 Raw material - milk   1681680000 4047120000 4780660500 5577437250 5856309113
3 Commission on milk collection   76440000 183960000 217302750 253519875 266195869
4 Transportation charges   76440000 183960000 217302750 253519875 266195869
5 Power and fuel   152880000 367920000 434605500 507039750 532391738
6 Packing material   152880000 367920000 434605500 507039750 532391738
7 Chemicals & detergents   30576000 73584000 86921100 101407950 106478348
8 Salaries and wages   51309041 102900000 113190000 124509000 136959900
9 Repairs & maintenance   22932000 55188000 65190825 76055963 79858761
10 Overheads   55036800 132451200 156457980 182534310 191661026
11 Milk distribution cost   275184000 662256000 782289900 912671550 958305128
12 Mini Samridhi Center running cost   48000000 50400000 52920000 55566000 58344300
               
  Total Operational Cost (In Crores) 262.3 622.8 734.1 855.1 898.5
Appendix – 5: Financial Projections (b)
Income Statement (in Rs Crores)
    Years
Sr.N Capital Expenditure Required (in Crores)
o. Particulars I II III IV V
             
Land and Site Development 14.67
1 Income 385.41 927.51 1095.62 1278.23 1342.14
2 Operational cost 262.34 622.77 734.14 855.13 898.51
Civil Works 23.79
3 Oerating profit 123.07 304.75 361.48 423.10 443.63
4 Less:           Plant and Machinery 61.63
i) Interest on term loan @ 16% 12.43 16.57 12.43 8.29 4.14
ii) Interest working capital @ 16% 1.24 2.88 3.31 3.75 3.82 Misc Fixed Assets 8.75
iii Depreciation:          
  Civil works 2.38 2.14 1.93 1.73 1.56 Vehicles 4.99
  Plant and machinery 15.41 11.56 8.67 6.50 4.88
Deposits 0.90
  Misc. fixed assets 4.58 3.05 2.03 1.36 0.90
Amortisation of preliminary and preoperative
iv. expenses 1.03 1.03 1.03 1.03 1.03
Prelimnary and Preoperative Exenses 6.15
5 Profit before tax 86.01 267.52 332.09 400.45 427.30

6 Tax at 35% 30.10 93.63 116.23 140.16 149.55 Contingency 12.09

7 Net profit 55.91 173.89 215.86 260.29 277.74
              Working Capital 5.16
  Net Profit Ratio 14.51% 18.75% 19.70% 20.36% 20.69%
TOTAL 138.12