An increase in production costs and slowdown in milk procurement have posed a challenge to Hatsun Agro Product Ltd in the fourth quarter of the last fiscal, according to its Chairman and Managing Director RG Chandramogan.

The deficient monsoons over the last couple of years have led to a 15 per cent increase in production costs for dairy farmers.

Procurement price was increased ₹3-4 a litre in Tamil Nadu and Karnataka in December 2013. Both the cooperative and private sector hiked procurement prices.

Costly delays

However, the private sector was handicapped because the cooperatives did not hike the sales price.

Hatsun Agro opted to hike the sales price a month later as the packaging and MRP printing had to be done , he said. Hatsun hiked the sales price by about ₹3.50 a litre of milk and also hiked prices of ice cream and dairy products. Chandramogan feels the delay in hiking sales price will have an impact. During the lean procurement season between January and March, the company focussed on branded products rather than commodity. Branded products include, skimmed milk powder and ghee.

These are large volume products as well, he said.

In 2013-14 the company continues to focus on branded, value-added products. Over 90 per cent of its business during the year will come from them against 75 per cent in the previous year, when business was about ₹2,150 crore.

Largest in pvt sector

Hatsun is the largest private sector dairy company in India offering liquid milk, ice creams and dairy products.

It handles over 70 crore litres of milk annually.

With a capacity to process about 19 lakh litres of milk a day, Hatsun markets liquid milk under the brand name Arokya; dairy products under Hatsun; and ice creams under the Arun brand and an exclusive chain of Ibaco ice cream stores.

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