The recent reduction in Goods and Services Tax (GST) is set to be a game-changer for India’s organized dairy sector. According to Srideep N. Kesavan, CEO of Heritage Foods, a prominent dairy brand with a strong presence in South India, this strategic move will not only boost consumption and make dairy products more affordable for consumers but also allow organized players to significantly capture market share from the unorganized sector.
“There’s truly no better time for business, especially within the fast-moving consumer goods (FMCG) sector, and particularly in dairy,” Kesavan stated, expressing strong support for the government’s GST rationalization. He emphasized that the lower tax burden on a wide array of dairy products would have a massive impact due to dairy’s broad appeal and high purchase frequency. For investors and businesses, this translates into considerable expansion opportunities as they penetrate the informal market. From the government’s perspective, it means a broader GST tax base.
Key dairy categories like ghee, butter, cheese, and ice-creams currently generate approximately ₹65,000 crore in revenue for organized players. Ghee alone accounts for about ₹32,000 crore for these companies, while the remaining ₹1,20,000 crore of the total estimated ghee market is dominated by unorganized players. Kesavan highlighted the immense growth potential for the formal sector with reduced GST, particularly in supplying traditional sweet makers and hotels, many of whom currently rely on informal sources.
Furthermore, the price reduction resulting from the GST cut is expected to increase consumption among existing customers of organized dairy brands. Similarly, the lower levy is anticipated to significantly boost demand for paneer. “We’re merely scratching the surface of this ₹2,00,000 crore industry,” Kesavan remarked. “If we can even shift another ₹10,000 crore or ₹20,000 crore, the organized industry’s growth potential is truly enormous. This GST change is arguably the best thing that could have happened.”
During a recent interaction with The Hindu, Mr. Kesavan discussed Heritage Foods, a company founded in 1992. He affirmed that while the company aims for robust growth in both its current markets and new territories, it remains deeply committed to its core mission of supporting farmers and delighting customers.
“Every day, we remember our humble beginnings, which keeps us grounded. We recognize there’s still a long journey ahead, but we are experiencing a growing presence in the markets we serve,” Kesavan explained. Beyond its dominant presence in Andhra Pradesh, Telangana, Tamil Nadu, and Karnataka, Heritage is also expanding steadily into Maharashtra, Odisha, Punjab, Chandigarh, and Delhi. “Roughly 10% of our current revenue comes from outside South India,” he noted, adding that Heritage Foods continues to pursue footprint expansion through both organic and inorganic strategies.
A significant ongoing expansion project for the company is a new ice-cream factory near Hyderabad, an investment exceeding ₹200 crore. This state-of-the-art facility is set to become one of their “mega factories.” Heritage is already processing milk, curd, paneer, and buttermilk, and is simultaneously expanding capacities for curd and buttermilk production. The greenfield ice-cream plant’s construction is expected to be completed by December this year, with inauguration planned for January, perfectly timed for the summer season.
This new factory is projected to help Heritage scale its ice-cream business five to six times over the next six to seven years, Mr. Kesavan concluded.