Synopsis
The best known name in the Indian dairy sector is Amul. But the chances of Amul becoming a listed company is next to none. So, how does one take exposure to the dairy sector? Through a listed company? But, among the listed entities in this sector, one struggles to find any that have size, scale, and a brand – the three things crucial for a company to generate profits for itself and create wealth for investors. All the listed firms have single-digit net margins. In a business where margins are thin, it is size and scale that matter. Yet, as they say, there is no substitute for experience. And experience counts for a lot in the dairy business. So there are companies here that are reaching an inflection point.
The dairy business is not an easy space to be in. Even the best dairy industry player like Amul took decades to reach where it is today. It is a business where challenges are present all year around. But if you scale the business, these challenges tend to come down. And then comes an inflection point where every incremental effort delivers ever greater results. But, ironically, the biggest challenge is to scale the business.