139 HERITAGE FOODS LTD | 32ND ANNUAL REPORT 2023-24 MDA STRATEGIC REVIEW STATUTORY REPORT FINANCIAL STATEMENTS Key risks and concerns Risk Definition Mitigation Regulatory Risk The risk of regulation changes can affect operations. The company conscientiously adheres to all Safety, Health, and Environment (SH&E) standards. It implements various waste minimization and recycling practices and ensures strict adherence to all pollution control and emission regulations. Raw material risk The unavailability of raw materials and fluctuation in raw material prices are significant threats to our business. HFL’s milk processing units are located in close proximity to some of the largest milk producing regions of India. Further, the company has built a widespread farmer network with over 3,00,000 farmers. The company has developed a multi-decadal relationship with its farmer community, thus ensuring a regular and timely supply of quality raw material. Competition risk The company operates in a competitive environment and faces competition from local players, large private players and even international players. The Company focuses on operational excellence, from milk processing to R&D, ensuring prompt product delivery through an efficient network. The company’s brand-building and diversification into related categories aim to boost market share, while data-driven targeting and pricing strategies are informed by attractive price-value propositions. Innovation risk The ability to innovate and improvise in the dairy business is crucial for growth and profitability. The company is an R&D-driven focused organization with a team of technically competent persons in the dairy industry. The company focuses on consistently innovating its portfolio to match the changing consumer demand and market trends. Customer retention risk The risk of being unable to retain clients due to the rising complexity in demand may lead to a decline in profitability. The company has meticulously developed a distinguished dairy portfolio, positioning HFL to serve a diverse clientele. The firm’s robust focus on research and development, coupled with its drive for innovation and commitment to delivering cost-effective products, underpins the enduring appeal of HFL’s offerings and sustains customer interest. Geographical concentration risk Higher dependency on any region or market may cause a dip in profitability in case of adverse condition in the region or market The Company has expanded its product reach to over 12 Indian states, gaining a notable market share in high dairy consumption areas. The company has strategically grown its market influence, moving from a basic retail presence to capturing a significant consumer spending share. This broad distribution helps reduce risks linked to regional instabilities. Product concentration risk High concentration on any one product, especially in the dairy industry, may adversely impact revenues and profitability The Company has established a large portfolio of dairy products. The company has embraced a product diversification strategy, venturing into the Flavored Milk and Ice Cream segments to reduce the risk of product concentration. Furthermore, the company is continually seeking new avenues for further diversification within related markets. Distribution risk Dairy products are perishable. Thus, inability to supply finished products within a particular time may lead to waste and loss if products are not sold and consumed within their shelf life. The company ensured that its products are available through a vast network of retail outlets spread across different states. This has been made possible by a fleet of 6000+ milk and fresh product distributors, 237 Happiness Points, 300+ value added product distributors, 850+ parlours, all reaching nearly 180,000 retail outlets in the General Trade Outlets and a strong presence across all national modern trade and E-Commerce retail. This ensured that fresh products are made available at the convenience of its customers.
RkJQdWJsaXNoZXIy NTE5NzY=