November 24 2008
When Ravi Shastri drove across the Melbourne Cricket Ground in an Audi 100 on March 10, 1985, little would he have realised that he had inspired a budding entrepreneur in a small town back home. Devendra Shah, then 21, who was watching the proceedings live on television in Manchar in Pune district decided he too wanted to become a “champion of champions” just like Shastri, and own an Audi car one day. “Like any other youngster, I was ambitious and dreamt of owning the car. And I wanted to do it with hard-earned money,” says Shah, who is now chairman of Parag Milk Foods, a Rs 320 crore company which manufactures the ‘Gowardhan’ brand of liquid milk and milk products.
After graduating in commerce, Shah dabbled in other businesses like clothes retailing but it was not until 1989 that he found his true calling—the dairy business. Courtesy the license Raj, milk procurement was being done only by state agencies and co-operatives. But the agencies used to shut for two days every week (called ‘milk holidays’), forcing dairy farmers to throw away milk accumulated during these days. Shah, who hailed from a family of traders that had settled in Manchar four generations ago, started procuring milk on the milk holidays in 1989 as a “social obligation”. “The benefits of Operation Flood had started accruing but we did not have the infrastructure to put the surplus milk to good use. I tied-up with people in Pune city and started selling the procured milk to them,” says Shah, whose family had been into supplying seeds to local farmers for over a generation.
The timing wasn’t right though, as the dairy business was at its lowest point then. Milk went waste due to poor infrastructure and an infamous anecdote goes that a dairy in Mumbai had to flush excess milk out into the sea. Dairy farmers didn’t have high-yielding varieties of cattle, and distribution networks were poor in urban areas. Shah had his first task cut out—addressing issues at both ends of the spectrum—and he did that well enough. "I was taught to take risks by my parents, and I get some kind of a high by taking risks," says Shah about his philosophy. Without sounding rhetorical, he adds, "It is the herds that go together in a flock. Somebody has to act like a cheetah and go for the kill."
Perhaps, it was this trait that led Shah to steer clear of the widely accepted and fairly successful route of starting a co-operative, and instead opt for private ownership. "I was ambitious and it’s not a bad thing to be so. And while some of the biggest names in the business come from the co-operative sector, I too have been able to achieve a lot," he smiles.
The company has been exporting butter, milk powder and butter oil to 47 countries and recently launched its dahi (curd) in the market. With a sizeable brand presence in western India, Shah says he plans to open a factory near Bangalore soon to address the southern market. "Thankfully, this is a recession-proof business as people will continue to consume milk products. We aim to close 2008-09 with a turnover of Rs 480 crore," proclaims Shah. Earlier this year the company received Rs 60 crore in private equity funding from India Business Excellence Fund managed by Motilal Oswal Venture Capital Advisors.
While younger brothers Parag and Pritam joined the dairy business in 1993 and 1994, respectively, and now form the core team at the company, Shah spends more time on new projects, and on branding and ‘farmer relations’ traveling regularly to Mumbai (165 km and three hours away). “At the core of success in a business like this are your relations with farmers. If you can’t procure the milk, you cannot survive,” he says, adding that from a modest beginning of 20,000 litres in 1992, Parag now procures over 8 lakh litres of milk daily.
Whenever a farmer waves at his Audi A6—he realised his dream of owning one six months ago—on the roads of Manchar, Shah always stops to speak with him. "In the 1980s, when my family owned a Premier Padmini, everyone in the town knew it belonged to us. It's the same today also," he quips.