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Glistening white blocks of fresh paneer (cottage cheese) come hurtling down a conveyor belt, met by robotic arms that slice the blocks precisely into half kg chunks. Another arm quickly pushes out the paneer slabs that are not the correct size and weight into a drum before the next right-sized chunk comes along — all at bewildering speeds — and is packaged in a Milky Mist branded tub. The tubs are then stacked in boxes ready to be sent out in refrigerated trucks to retail shelves. Elsewhere in the cavernous dairy floor, paneer is being sliced into small cubes to be packaged and sold as frozen paneer.
This sprawling, highly automated dairy of milk processing major Milky Mist is set amidst vast green fields in a verdant belt of Erode district in Tamil Nadu. Apart from humungous quantities of paneer, the dairy churns out a variety of over 20 products and over 350 SKUs, mostly under the Milky Mist brand. In different sections of the dairy, one can see ghee, cheese, fresh cream in cartons, buttermilk, milk shakes, Greek yoghurt, protein enriched curd under its Skyr brand, ice cream, chocolates under the Capella brand and more are being produced. “We process close to one million litres of milk per day sourced from around 70,000 farmers spread over 12 districts,” says T Satish Kumar, the self-effacing founder and managing director of Milky Mist and the ‘pioneer of paneer’ in the South. From producing 50-60 tonnes of paneer a day, the plant is scaling up to produce a whopping 100 tonnes of paneer a day!
Farm to factory
The gleaming edifice of steel vats, miles of steel tubes, robots and a vast fleet of refrigerated trucks with Milky Mist emblazoned on them waiting for dispatches from the dairy, is a far cry from the humble beginnings of Satish Kumar. Hailing from an agriculturist family in Chithode, a neighbouring town, his father traded in milk, sending it to Bengaluru. In 1991, at the age of 17, Satish quit his studies to join the milk trading business.
Satish Kumar, Founder and MD, Milky Mist
One day, Satish took away large quantities of milk to try and make paneer. When his father returned in the evening, much to his horror, he found that Satish had diverted some 400 litres of milk to make paneer in a rudimentary way. He thought Satish had spoilt all that milk. “No Google or YouTube videos those days to learn,” he says wryly. He had learnt that hotels in Bengaluru wanted good quality paneer and he saw in that a good market to value add to the milk they procured.
Today, paneer is ubiquitous in the South, but in the early 1990s, it was a low consumption and novelty product. Only some hotels and large department stores in Bengaluru stocked it. In 1997, when supplying the erstwhile Foodworld supermarket chain, the purchase manager asked him what his brand name was. “I had no idea what a brand name was. We went to a browsing centre and searched 10-15 names and selected Milky Mist. But at that time, I did not have any vision. We just gave a brand name for the market,” he explains.
For the next decade or so, Milky Mist trundled along supplying two to three tonnes of paneer to the southern market but slowly local consumption picked up. “Like the white revolution, we created a paneer revolution in the South,” says Satish Kumar proudly. But he was a single product company with a semi-automated plant. A visit in 2009 to a dairy trade fair in Hanover was a game changing moment for him as he saw the possibilities that automation offered. He later invested in a fully automated plant at the present site and expanded the Milky Mist offering to curd, yoghurt and cheese. “We realised we couldn’t build a cold chain by being a single product company,” he adds.
In 2013, with a turnover of ₹150 crore and a debt of less than ₹15 crore, Satish Kumar said he wanted to invest at least ₹500 crore for a mega, fully automated plant. While many private equity players have been beating a path to his doors, Milky Mist has primarily grown through debt with bank loans. Around eight PSU banks are the company’s bankers and they’ve always been supportive of its growth, he says.
K Rathnam, the CEO, and a former MD of Amul, says the company focused on three areas: one is good quality of milk sourced, second, manufacturing in its own premises to ensure good process control and the third is cold chain distribution. “All the logistics is owned by the company and not outsourced. We burnt our fingers, as often the drivers would shut off the refrigeration of the reefer truck and switch on during the delivery time, and we got several complaints from the market of our products being spoilt,” he explains. Also, he adds, “Milky Mist sells only value-added milk products and not fresh milk. It gives us greater pricing flexibility.”
Milking profits
The company today runs a fleet of 280 refrigerated trucks with its Milky Mist branding, motoring across the length and breadth of the country. Around 60 per cent of its products are distributed in the South and the rest up country. The company claims running the fleet is profitable with some smart reverse logistics wherein the returning trucks bring back food products from those regions meant for the south. Bharat Benz has even set up a workshop on its premises to service this huge fleet.
Milky Mist’s plant runs on 100 per cent green energy with 14 MW of solar and 2 MW of wind and with a planned addition of adding 5-10 MW of green energy, alongside expansion. “Seventy per cent of processed water is treated to make it potable water,” adds Satish Kumar.
Milky Mist expects to wrap up FY23-24 on a turnover of ₹2,000 crore with an EBIDTA of 14 per cent. Satish Kumar says the company has been growing at a quick nick of 30 per cent annually and has sufficient cash accruals to plough back. It’s pumping in ₹600 crore to expand dairy operations and raise paneer and cheese output.
Milky Mist also acquired Asal, a ready-to-cook brand which retails parathas, chappatis, dosa batter and payasam mixes. The head of a large dairy company, while acknowledging the quality and Milky Mist’s status as a paneer pioneer, says the brand may be spreading itself a bit thin with the variety of milk-based products it offers and forays into unrelated areas such as ready-to-cook (RTC) and ready-to-eat (RTE) categories.
CEO Rathnam defends this strategy saying that since the company does umbrella branding under the Milky Mist brand there is no need to put money on different brands. It spends approximately 6 per cent of its revenues on marketing and R&D. Also, as he explains, categories they are present in need to have two to four varieties of products and moreover, he points out, the brand is investing in fast growing categories such as yoghurts, cheeses and ice cream, and, of course, paneer. “There are many inter-linkages of our products. Chocolates are inputs for milk shakes and ice creams. Ice cream goes into smoothies and so on,” says Rathnam.
Asked about the foray into RTE foods, Rathnam explains, “On the face of it, there may be a view that Asal’s product portfolio is completely unrelated to our core business. However, we strongly feel that there is a synergy in RTC/RTE category, which is growing at a healthy rate. Being a company that is into manufacturing dairy and food products, it is quite natural that we want to leverage that opportunity with our existing infrastructure without any kind of distraction from the core business.”
An analyst points out that while P&L and operating metrics are in line or better than peers, there may be some risks in the event of any impact to business from pricing pressures at the topline or higher raw material costs, both of which can impact margins. “While the company’s growth in recent years has been much better than that of larger peers like Hatsun, this growth appears to have been funded by heavy leverage,” says this analyst. The balance sheet for FY23 indicates a debt of ₹800 crore on ₹181 crore of shareholder funds.
Asked about the high debt strategy, Satish Kumar says as the company’s growth and revenues remain rapid, it can service the debt. “We want to freeze this investment and plan for an IPO in 2026,” he says, adding he does not want to be drawn into the private equity route for which there are incessant callers. “Their perception is different from mine as an entrepreneur,” he says. Ask him when his father became convinced about the paneer business after Satish first ventured into it, he laughs and says, “Very quickly he was convinced and he soon became my paneer ‘master cutter’!”
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