Milky Mist Case Study
Have you ever wondered how new startups manage to emerge and compete even when giants are already dominating the market? How do they strive and succeed in such a competitive environment?
Here’s a fascinating story for you: a company that started with zero capital in an era dominated by giants like Amul, with no prior business background, and rose to become a ₹1,950 crore enterprise.
This study is not just another case study but a reality check for those who have nothing but dreams—the dream of building a company that could revolutionize its sector.
Let me share with you the story of a man driven by a strong ambition to succeed in business, who took over his father’s struggling milk distribution enterprise. His primary goals were to turn the business around and support his family.
Introduction
Milky Mist is a prominent dairy company that has evolved from its humble beginnings to become a significant player in the dairy industry, particularly in South India. The company’s founder, Satish, started with a vision of addressing key market gaps, focusing on improving supply chain efficiency and enhancing the quality of dairy products.
Observing his father’s business, Satish identified three major challenges that needed addressing to transform it into a profitable dairy company:
- Low Margins: The dairy business, particularly milk, has very low margins, around 3-5%.
- Short Shelf Life: With such low margins, the short shelf life of milk (around 2-3 days) made it even more challenging, creating a business with limited profitability.
- Difficulty in Expanding: With the urgency to sell products within 2 days and a margin of just 3-5% leading to less cash flow, it was very challenging to expand the business.
When he started the business, he noticed that even the industry giants, supported by government policies and the White Revolution, failed to address many problems, leading to market gaps and opportunities for revolution. There, he saw his chance.
Building Trust and Loyalty Among Farmers:
He began by targeting farmers, as at that time, farmers were often underpaid and mistreated.
Satish began by building trust with farmers through consistent and timely payments, caring for their cattle, helping them secure loans, and providing education—all without binding contracts. This approach fostered loyalty among farmers, leading to a steady supply of high-quality milk.
By nurturing relationships with farmers, he solved another major issue. He ensured a consistent supply of high-quality milk, which was crucial for maintaining product standards and supporting business growth.
Value Addition and Branding
Milky Mist focused on value addition and branding to overcome the limitations of selling fresh milk. By transforming milk into high-quality dairy products like paneer and ghee, which had longer shelf lives and better margins, they were able to significantly increase profitability.
Let me explain you with an example –
If you sell bananas, you would know that their shelf life is around 2-3 days, and a dozen bananas might cost around ₹80. To the seller, the cost could be lower, resulting in a minimal profit margin. However, if you take a dozen bananas and make banana shakes, you can produce multiple glasses. Let’s say each banana shake is sold for around ₹100 per glass.
Assuming a dozen bananas (₹80) can yield approximately 5 glasses of banana shake, each selling for ₹100, the total sales amount to ₹500. Subtracting the manufacturing cost, say ₹20 per glass (totaling ₹100 for 5 glasses), the total margin would be ₹500 – ₹80 (cost of bananas) – ₹100 (manufacturing) = ₹320.
This approach of adding value by turning raw bananas into banana shakes significantly boosts the profit margin, similar to how Milky Mist transformed raw milk into value-added dairy products.
Similarly, transforming milk into various dairy products allowed Milky Mist to capture more value from the raw material.
Targeting and Expansion:
Initially, Milky Mist targeted five-star hotels in Bangalore, which had stringent requirements for dairy products like paneer. Their ability to meet these high standards helped them secure a reliable customer base early on.
Once they had control over cash flow and understood their market, they began targeting “Kirana stores.” However, they faced two major challenges:
- Lack of Refrigeration: Many Kirana stores lacked refrigeration, making it difficult to store paneer for more than two days.
- Logistical Challenges: Without refrigerated transport, paneer had to be sold within 48 hours of production.
To address these issues, Milky Mist distributed 20,000 chillers to retailers and equipped their trucks with chilling technology, pioneering a cold storage supply chain in the dairy industry.
Lessons Learned
So this story of Milky Mist provides several key lessons for us:
- Identify Market Gaps: Satish’s ability to identify and address the challenges that even industry giants were overlooking was crucial to Milky Mist’s success. Entrepreneurs should constantly look for gaps in the market that can be turned into opportunities.
- Build Strong Relationships: By building trust and loyalty among farmers through fair practices and support, Satish secured a consistent supply of high-quality milk. This demonstrates the importance of nurturing relationships with stakeholders to ensure long-term success.
- Focus on Value Addition: Transforming low-margin, perishable products into value-added offerings with longer shelf lives and higher profitability was a game-changer for Milky Mist. Businesses should explore ways to enhance their products and increase value for both the company and customers.
- Invest in Quality and Infrastructure: Milky Mist’s focus on meeting stringent quality standards and investing in cold storage and logistics infrastructure allowed them to overcome distribution challenges and expand their market reach. Strategic investments in infrastructure can greatly enhance operational efficiency and product quality.
- Adapt to Customer Needs: Initially targeting five-star hotels helped Milky Mist build a strong foundation with demanding clients, allowing them to refine their processes before expanding to broader markets. Understanding and meeting the needs of your initial customer base can set the stage for broader success.
- Innovate and Stay Resilient: Satish’s innovative solutions, such as distributing chillers to retailers and equipping trucks with chilling technology, helped overcome logistical challenges that hindered market expansion. The ability to innovate and adapt to challenges is vital for overcoming obstacles in any business journey.
Conclusion
Satish and Milky Mist’s story demonstrates that with the right strategies—focusing on quality, trust, and value addition—it is possible to build a successful business even in a highly competitive and commoditized market like dairy. By solving supply chain challenges, creating innovative logistics solutions, and nurturing loyal partnerships, Milky Mist has grown into a billion-dollar company. This case study offers valuable lessons in entrepreneurship, highlighting the importance of quality, collaboration, and strategic investment in achieving remarkable business success.