The local advantage

The local advantage

“In the consumer goods business especially in the dairy segment, it is crucial to have your ears to the ground at all times,” points out D. Brahmanandam, co-founder and joint MD of Tirumala Milk Products Pvt. Ltd. (Tirumala). Based in Narasaraopet, Guntur district, Andhra Pradesh (A.P), Tirumala is considered to be one of the fastest growing private dairy players in the southern market, clocking a turnover of Rs. 1200 crore last fiscal. The company, founded in 1998, processes 11.5 lakh litres of milk on a daily basis that serve the markets in Tamil Nadu (T.N), A.P and Karnataka with a wide range of products including butter, ice creams, paneer, ghee and curd. “Our aim is to provide fresh milk to our consumers – not one that has been stocked for days,” says Brahmanandam, who sells his products under the Thirumala brand name.

All its four founders – B. Brahma Naidu, B. Nageswara Rao, Dr. N. Venkata Rao and Brahmanandam – hail from families with their roots in agriculture and strong rural connections, which has helped in getting their milk sourcing right for Tirumala. In June 2010, private equity major Carlyle invested Rs. 110 crore into the company for a minority stake. The investment has been utilised for upgrading its manufacturing plants, improving technology and increasing the number of chilling centres.

Farmers depend on cultivation and when that is not good, they survive on the revenue they get from milk. We do our best to encourage them – we work with banks to ensure they get loans and also guarantee that our payments are transparent and not delayed.

Robust supply chain

Tirumala currently has a total of seven packing plants catering to different markets with a total capacity of 20 lakh litres. Its plant in Gudur, Nellore district caters to the Chennai market while the one in Pasupattur village in Chittoor district supplies to the cities of Bengaluru and Mysore, and another in Vellalacheruvu, A.P supplies to the local districts of the state. It also has plants in west Godavari district, Visakhapatnam and a more recent one (added in 2010) in Hyderabad. Another plant with a capacity of four lakh litres is coming up in Melmaruvathur, T.N by the end of 2013. Its main plant in Gudur handles 5.5 lakh litres of milk every day, of which 1.5 lakh is converted to milk powder to be sold in the northern markets such as Mumbai and Kolkata. Tirumala’s biggest market is Chennai, where it sells four lakh litres of milk daily that contributes to 40 per cent of the revenues.

SnapShot

Tirumala Milk Products
Founders: B. Brahma Naidu,
D. Brahmanandam, B. Nageswara Rao and Dr. N. Venkata Rao
Year: 1998
Place: Narasaraopet, Guntur district, Andhra Pradesh
Target: Rs. 1500 crore for FY 2013

The supply to these plants come from its 160 chilling centres and bulk coolers spread out in about 30 – 40 villages in A.P, T.N and Karnataka, while the bulk coolers cover about 15 villages. The milk is collected from these centres twice a day to be taken to respective plants. “We have a quality control team that goes to different chilling centres on a regular basis to have the milk tested. We also have people at the centres who check for fat and SNF (solid non-fat consisting of vitamins, minerals etc.) using an automatic analyser for every sample that comes in. This data is computerised, which helps us know the quantity in each centre and how much is being dispatched,” says Brahmanandam.

A natural progression

“We are all sons of farmers and used to work on our lands,” says Brahmanandam of their early days. After completing his diploma in dairy technology, Brahmanandam worked with the Guntur Milk Cooperative Society for 16 years. The turning point came when the government allowed private players to set up dairy units in 1992 – 93. “We put up a small chilling centre in our area and due to our local connections, it was easy to get through to farmers too,” he adds. Having been able to procure 40,000 litres of milk, they started supplying to private parties but soon found it difficult to sell the whole amount. The team then took a decision to survey Hyderabad and Chennai in 1996 – 97, and found that the latter had a huge demand. With loans from A.P State Financial Corporation, they set up the first plant in Gudur in 1999 and it then had about two lakh litres capacity. Since then, the plant has seen an investment of up to Rs. 10 crore till now. They slowly scaled up and currently employ 3500 people.

Tirumala works with lakhs of farmers spread across the three states – an aspect that they do not find challenging. “Farmers depend on cultivation and when that is not good, they survive on the revenue they get from milk. We do our best to encourage them – we work with banks to ensure they get loans and also guarantee that our payments are transparent and not delayed,” says Brahmanandam. Procuring milk is its biggest expenditure, accounting for 85 per cent of its revenues. However, what has been a challenge is dealing with the variation in milk supply from the field. “At times, we receive excess of milk and at times, it’s very less. Hence, it has been helpful that our plants are located in different regions as we can share milk from other plants. And sometimes, we convert the excess milk into milk powder,” he adds.

Tirumala mainly markets through the help of agents (5000 of them), who push it to its target audience of upper middle class consumers. It also has 200 of its own milk parlours to market its products in Chennai, Hyderabad and other cities in the south. While the company advertises on traditional media, Brahmanandam says it is negligible and they rather spend on sustaining quality, which he believes will give Tirumala a strong standing among its competitors.

Expansion route 

Tirumala has been growing at a rate of 30 per cent year-on-year for the past three years. There are plans to take the brand to newer markets such as Mumbai, Pune, Kolkata and southern T.N from next year, and expand to Kerala in two to three years time. At the moment, the company is neither looking for any further investment nor eyeing a public issue.

They recently purchased 2,000 acres of farmland in Guntur to rear 5000 cows with automated processes that will ensure milk supply of one lakh litre. “Considering that it’s a seasonal business, there are risks involved. We believe Tirumala has been growing fast and want to continue that growth,” concludes Brahmanandam.