Heritage Foods Limited | 30th Annual Report 2021-22

Financial Statements Company Overview Statutory Reports 95 Global Dairy Industry According to a report from IMARC, the industry is expected to grow over 5.09 per cent between FY 2022 to FY 2027. Milk production in New Zealand increased by 9.8 % in March, 2021 compared to March, 2020 even after drier climate conditions in the country. Production was down by 0.8 % in February, 2021 compared to the same period last year. The major reason for decreasing production was reducing herds, labour challenges and farm exits. EU’s milk production dropped by 3.8 % in February, 2021 and many EU countries like Germany, France and Netherlands faced this problem. The US experienced an increase in the production of milk by 1.8 % Dairy Industry in India India is the largest producer and consumer of dairy products in the world. It produces 22 % of the total global dairy production. The dairy industry is an essential part of the rural economy and is one of the major sources of employment and income for the rural population. According to a report by IMARC, the dairy industry is expected to grow at a CAGR of 14.98 % between FY2022-2027. Majority of the dairy produced in India is consumed domestically, most of which is liquid milk. As per a report by CRISIL, revenue from the organised dairy sector will rebound by 12 % in FY 2022 compared to the growth of approximately 1 % in FY 2020-21. The growth would be largely due to the pick-up in demand of value added products (VAP), steady sales of liquid milk and rising retail rates in the year. Operating profitability is expected to reach its pre-pandemic levels as a result of high packaging and transport costs and high raw milk prices. Government Initiatives The Government of India has implemented the Rashtriya Gokul Mission from FY 2021-22 to improve productivity and enhance milk production. These schemes aim to improve remuneration for farmers. An allocation of ` 2400 crore has been made over the next five years. Many new technologies have been made available to the farmers under these schemes which focus on promoting private entrepreneurship to enhance affordability and increase access. With efficient implementation, it is expected that 8 crore farmers involved in the dairy industry will benefit directly as a result of the increased milk production, which is expected to increase from 198.4 million metric tonnes in FY 2019-20 to 300 million metric tonnes in FY 2024-25. Opportunities Increasing Health Awareness - As an after effect of Covid people are opting more for nutrient-rich and immunity-boosting foods. Rising Income levels – With income levels rising, the spending on dairy and value-added products has been on the rise. Affordable innovation would help people buy more of the products from the Company. Rising young working population - An increasing young urban population is expected to grow from 31 per cent in FY 2011 to 36 per cent in FY 2036. The food sector is thus likely to see a growth in consumption. Demand for premium products - As income levels rise and lifestyles change, consumers are demanding products with innovation and benefits. This provides an opportunity for the food and dairy companies to innovate and launch products that will attract the consumers to the Company. Challenges Ɣ Increased competition from local players and international companies Ɣ Lack of awareness among the farmers and dairy farms not being in the best of the conditions Ɣ Extensive cross-breeding for raising milk productivity may lead to disappearance of indigenous cattle Ɣ Unusual climate change and adverse weather conditions Ɣ Rapidly changing preferences amongst customers Company Overview Heritage Foods Limited is amongst the top dairy companies in India. It operates through two verticals - dairy and renewable energy. The Company carries a wide range of products like, fresh milk, curd, paneer , ghee, buttermilk, UHT milk, lassi , flavoured milk, ice-cream/ frozen dessert and other dairy-based products. Currently its products are present in 11 states. The Company has a robust R&D policy, advanced technology for manufacturing and processing, top tier quality control, a highly qualified team to oversee its operations. It has 18 processing plants, 187 bulk coolers, mini chilling and chilling centres to ensure availability of fresh and high-quality products. Product Categories Milk Ɣ Fresh Milk Fresh milk is the most consumed product in India. It is also the most trusted source for essential nutrients for health. With the increasing population the consumption of milk is also on the rise. Health consciousness, dietary needs and rising living standard have also been major contributors to rising demand of fresh milk. The growth rate for liquid milk is expected to be 16.80 per cent during FY 2021-26 Ɣ A2 Milk A2 milk is 100 per cent buffalo milk with full cream, which is procured from the farms and sterilised in the Company’s plants. The milk is high in A2 protein, it boosts immunity and is easy to digest. Ɣ UHT Milk UHT milk, or ultra-high temperature milk, is made by processing milk at high temperatures to remove pathogens. The UHT process preserves all the nutrients present in milk and makes it suitable for storage at room temperature for long periods MDA