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How a transformed Mother Dairy is spreading its wings — from Delhi to Dublin

Mother Dairy has been re-calibrating its Delhi-centric approach over the years, expanding to other parts of the country, and even overseas.

, ET Bureau|
Updated: Dec 07, 2012, 08.39 AM IST
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Mother Dairy has been re-calibrating its Delhi-centric approach over the years, expanding to other parts of the country, and even overseas.
Mother Dairy has been re-calibrating its Delhi-centric approach over the years, expanding to other parts of the country, and even overseas.
Last month, a rep from the Irish Dairy Board dropped by at Mother Dairy's Patparganj plant in East Delhi to shoot the breeze with Managing Director Siva Nagarajan. They met in the plush confines of the company's Innovation Centre conference room and as the conversation progressed, Nagarajan --or Naga as he's fondly called -- served up a pinkish cup of rice kheer to the Irishman.


He devoured it in no time and asked for a second helping. Naga obliged and then asked why he asked for another cup. It transpired that he had at the back of his mind rice pudding in Germany from a firm called Mulder. He wanted to do a mental comparison of the two products. Naga made sure the meeting ended on a sweet note as the Irishman asked for tech transfer for kheer and a bevy of other products that Mother Dairy manufactures.

Mother Dairy has been re-calibrating its Delhi-centric approach over the years, expanding to other parts of the country, and even overseas. The top management today comprises hires from multinational companies who bring in much needed agility and leanness to an organisation that counts a million people in its supply chain dispensing 30 lakh litres of milk a day.

From selling commoditised milk to exporting mangoes to Japanese customers or banana purees for sorbets in the European market to identifying gherkins as an export item off Bangalore or even offering golgappa-flavoured kulfis at Rs 5 a pop to the domestic consumer, Mother Dairy today straddles an enviable range. In its march to capture new markets and emerge as a leader across categories, the Rs 5,279 crore company is hiring global consultants to tweak its systems, keeping a mindful eye on fair price to the farmer and value to the consumer, the twin peaks that are embedded in the DNA of the company.

THE CORPORATE MAKEOVER

There's clearly a change in thinking from a cooperative setup back in 1974 when Mother Dairy was created as part of the 'Operation Flood' programme of the National Dairy Development Board (NDDB). In 2000, Mother Dairy Fruit & Vegetable Private Limited (MDFVPL) was incorporated as a wholly-owned subsidiary of NDDB to take over the assets, functions and personnel of Mother Dairy Delhi and Fruit & Vegetable Project.
Mother Dairy has been re-calibrating its Delhi-centric approach over the years, expanding to other parts of the country, and even overseas.

But it was in FY2007-08, on the recommendation of a study by Accenture, a corporate structure actually started taking root. That year, Dhara Vegetable Oil & Food Company Limited, another wholly-owned subsidiary of NDDB, was amalgamated into the fold of MDFVPL.

Soon after, taking cues from the study, three strategic business units (SBUs) - dairy, horticulture and oils - were created and functional structures were designed. Gradually, a fourth SBU, dairy products, was incorporated. "The accountability matrix was also fixed at that point of time, implying each functional head was accountable for everything in their respective domains," says Saugata Mitra, Chief People Officer, MDFVPL, who served Japanese consumer electronics majors Sony and Sharp before taking up a position with Mother Dairy.


Mother Dairy has been re-calibrating its Delhi-centric approach over the years, expanding to other parts of the country, and even overseas.


All through the transition and beyond, the six-member board led by Chairperson Amrita Patel, has been more than supportive, says Naga. "This board has a sense of appreciation of what the consumer wants and what the farmer has to go through. It understands fairness and doesn't do anything with a short term point of view," says Naga, who has wide-ranging experience in the FMCG space and worked with Philips before signing on at Mother Dairy. He demonstrates with an example.


 
A year-and-a-half ago, his team was presenting to the board an idea wherein they separated fruits and vegetables at the village level. Instead of taking their suggestion prima facie, the board pointed out their role, which was to market the farmers' produce. "It said that instead of marketing their produce, we segregated it in the village. It asked who will market that 10%. It showed us we were transferring our problem to the farmers who look up to us for solutions," says Naga.

MORE THE MERRIER

In the milk business, while sourcing has moved into new generation cooperatives (NGCs) with dairy farmer stakeholders, the company is reaching out with its range of products to new consumers in Surat, Hyderabad, Pune, Jaipur, Bangalore, Tirupati and Chennai. In Mumbai, the company entered with its range of dairy products three years ago and is already a formidable force with close to 3,000 retail outlets. Interestingly, it is also trying to solve the milk adulteration problem that irks the Maximum City with its homegrown 'Kamdhenu' project. Simply put, it's a milk tank loaded atop a Tata Ace vehicle, which can vend milk either on volume or on value. Though these vehicles now largely cover lower income clusters educating consumers while dispensing 'any quantity milk', their potential is enormous. "We're contemplating if we can have 100 or 200 of them running around Mumbai to solve the adulteration problem," says Naga, hinting at an innovative solution to wean out value from the bottom of the pyramid.

"When we launched Lassi and Mishti Doi in Mumbai, within a week's time we got a call from Reliance Retail's vice president of R&D who said that his board had asked him to talk to us if they could partner with us on a project on packaging," says Dr Prabhakar Kanade, Chief R&D Officer, MDFVPL.
Mother Dairy has been re-calibrating its Delhi-centric approach over the years, expanding to other parts of the country, and even overseas.

Unlike Delhi, the company doesn't run the 1,000-odd franchisee-owned milk booths in any other city but the retail map is already in place. While 175,000 outlets vend its edible oil Dhara, there are 15,000 stores that sell Mother Dairy ice creams countrywide, alongside some 29,000 retail points vending dairy products and 350-odd Safal stores that hawk fruits and vegetables. Besides, there are about 150 on-premise kiosks in Delhi NCR and about 4,500 ice cream vending carts pan-India. The on-premise kiosks, though in the NCR as of now, are an interesting variation since they are institutional vends from society flats to companies, educational institutions to hospitals, and everything in between. The plan is to take them to 750 by 2015.

As for the 1,350 branded outlets of Mother Dairy (25 of them in Bangalore), they've been recently GIS-enabled. In Delhi NCR, IT Head Annie John Mathew is working on a GIS-based information system to capture the retail footprint in the capital as a prototype for countrywide expansion. "Every single outlet and distributor of ours will be GIS tagged to help us arrive at high and low density areas," says Naga.

REINING IN THE SUITS

While the rollout has been rapid, the company has kept a watchful eye on costs. Last year, PwC implemented its 'Integral Supply Chain Project' that helped draw up its manufacturing footprint for the next three years. "The 'Integral supply Chain project' was one of the many initiatives we took to make the organisation more efficient and improve cost management," says Nikhil Madgavkar, CFO of MDFVPL, who joined Mother Dairy in December 2009 after putting in 21 long years at Philips Electronics.

The year Madgavkar came on board, Ernst & Young was called in to improve the 'corporate fiber' of the company. "In my first meeting, Madgavkar told me he was not used to accounts getting delayed as financial reporting used to take as long as 5 months," says Sanjesh Kumar, Partner at E&Y, who has had a hand in Mother Dairy's transformation. It now takes anywhere between 20-30 days.

To help the company achieve its governance vision, E&Y drew up a roadmap in 2009-10 with the objective of graduating Mother Dairy to a company with best-in-class governance and risk management set up. While the business focused on the growth agenda, there was an urgent need for the underlying processes and systems to be geared to meet the business demands amidst changing market dynamics.
 
As part of the roadmap, E&Y shifted the company's focus from transaction to process audit. As a case in point, when Madgavkar and his team studied about 25 Safal booths in Bangalore, they saw a flaw in the billing system, which was not reflecting the actual data mirroring volume and value. "We recommended automation of the entire billing process to prevent any leakage in Safal's system and as that got implemented, 4-5 of the outlets shut down," says Kumar. The company executives say that they've rectified the problem and the same number of fresh Safal outlets are up and running in Bangalore.

PEOPLE PROWESS

Simultaneously, the 3,000-strong organisation started hiring and grooming top talent. This year alone, while it has worked with PwC for developing a 'competency framework', it engaged Hewitt to stitch up its 'employee engagement survey'. "Our Six Sigma programme is being rolled out by CII and we are also working with the National Productivity Council for productivity improvement," says Madgavkar. In training and development, the company has worked with Franklin Covey and drew up an Assessment Centre with yet another heavyweight, Thomas International, while selling skills have been imparted by Carew International.

Of the 3,000 employees, there are 170 people from various Tier II and III B-Schools. "If you look at the technical inflow, the complexion has changed dramatically over the last two years as from a cooperative and rural marketing background, we are now getting talent from multinational companies like Coke, Pepsi, Nestle and Britannia," says Saugata Mitra, adding how he used to run after search firms a few years back, which has reversed in recent times. "We recently hired a business head without contacting a search company."

As Mother Dairy continues an aggressive rollout keeping its values intact, FMCG majors have genuine competition. "The Brand has been very well accepted by consumers in cities wherever it has entered specially in fresh dairy & frozen categories. In categories like curd they are within striking distance to the market leader in some cities with high double digit market share. With more focus on 1) distribution 2) entering other top cities with their strength of frozen & fresh value added dairy categories like Dahi etc, Mother Dairy can do wonders," says Devendra Chawla, President, Food Bazaar Business, Future group.

Naga cites an email he received recently that quoted verbatim from a story published in ET's Brand Equity dated July 18, 2012. It said on the wall of Hindustan Unilever's Mumbai headquarters, there are honest feedbacks on display and one of them read, 'In certain (ice cream) flavours, Mother Dairy was clearly a better option than HUL's own Walls'. Of course, that note made Naga's day as did his outing a couple of weeks back in Delhi's Taj Palace to attend Nestle's 'Shared Value Conference'. Just as he was signing in, a Nestle employee said, 'Watch out, this is a company we have to be careful about', narrates Naga, insisting we try the rice kheer that may soon make it to European shelves. At this rate, one wonders if Irish Cream is next.

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