Heritage Foods Ltd (NSE: HERITGFOOD) Q3 2026 Earnings Call dated Jan. 29, 2026
Corporate Participants:
Unidentified Speaker
Sambasiva Rao — President
Srideep N Kesavan — Chief Executive Officer
Analysts:
Unidentified Participant
Sameer Gupta — Analyst
Saumil Mehta — Analyst
Rehan Sayed — Analyst
Pradyumna Choudhary — Analyst
Prateek Kothari — Analyst
Resha Mehta — Analyst
Presentation:
operator
Sam sa. Sam sa. Ladies and gentlemen, good morning and welcome to The Heritage Forbes Q3. Nine Month FY26 Earnings Conference Call hosted by Goindia Advisors. As a reminder, all participant lines will be in the listen only mode and you will get an opportunity to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star than zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Diya Kaswa from Go India Advisors. Thank you. And over to you, Ms. Diya. Thank you.
Unidentified Speaker
Good morning everyone. I am Diya Kaswa and it’s my pleasure to welcome you on behalf of Heritage Foods Limited. Thank you for joining us today for QT and 9M FY26 earnings call. This call is being hosted by Goindia Advisors. Please note that today’s discussion may include certain forward looking statements. Therefore they must be viewed in conjunction with the risks that the company faces today. On the call we are joined by Mrs. Brahmi Nara, Executive Director, Dr. M. Sambasiv Rao, Whole Time Director Mr. Srideep Kesavan, CEO Mr. A. Prabhakara Naidu, CFO Mr. J. Samba Murthy, COO Dr.
Brij Mohan, CEO, Heritage New Cubit Limited and Mr. Umakanta Barek, Company Secretary and Compliance Officer. I now invite Dr. Rao to present the company’s business outlook and performance. After which we will open the floor for Q and A. Over to you sir.
Sambasiva Rao — President
Thank you, Diya. Good morning to everyone on the call at the outset. On behalf of the management team at Heritage Foods, I would like to extend our New year wishes to all our shareholders, farmers, employees, customers, consumers and all stakeholders. We wish everyone a healthy, prosperous and successful year ahead. Now turning to quarter three of FY26, the quarter is marked by an unusually industry supply environment. Even during what is typically a seasonally strong flush quarter, milk shortages, elevated procurement costs and butter supply tightness continue to weigh on operating performance leading to margin pressure. Despite steady demand conditions.
Procurement and raw material costs rose sharply during the quarter driven in part by industry wide butter tightness. Attractive global dairy trade prices led to significant butter exports from India resulting in domestic butter shortages and firm pricing for the first time in the last two years. Constrained raw material availability even during flush quarters necessitated of bulk butter purchases at elevated market prices in November, impacting overall profitability. At the same time, milk procurement volumes were impacted by supply side constraints. For the first time in several years, YTT milk procurement volumes declined marginally by 0.82% to 16.86 lakh liters per day for nine months of FY26 following three consecutive years of 9 to 10% year on year growth.
Q3 procurement averaged 16.73 lakh litres per day down 9% year on year reflecting milk shortages. However, procurement volumes showed sequential stabilization during the quarter supported by our farmer first philosophy. We continue to prioritize timely payments, feed support and on ground engagement, reinforcing long term farmer relationships and ensuring continuity of supply during a challenging period. On the sales sides, milk sales volume grew 2.1% year on year to 11.94 lakh liters per day while net milk realizations improved to 57 rupees 31 paisa per liter reflecting pricing discipline and sustained brand trust. Ongoing efficiency initiatives across routing, chilling infrastructure, digital tracking continue to mitigate logistics and handling costs despite multiple headwinds, Company delivered resilient top line performance reporting consolidated revenue of 11,192 million rupees registering 8% year on year growth, crossing the 11,000 quarterly revenue mark for the third consecutive quarter.
This performance reflects resilient top line execution supported by sustained consumer demand, value added product led growth and an expanding retail footprint even as elevated input costs constrained profitability. Ebitda stood at 629 million rupees while PAT was 346 million rupees. Margin compression during the quarter was primarily driven by a sharp escalation in milk procurement prices which increased by 9% year on year, outpacing consumer price realizations despite calibrated pricing actions undertaken by the Company. Following the Notification of New Labor Codes, the company recognized a one time increase in provision for defined benefit obligations under Indas 19 I.e.
employee benefits resulting in an incremental provision of 27.42 million rupees on a standalone basis and 27.78 million rupees on a consolidated basis during the quarter and the same has been recognized as an employee benefit expense in the current reporting period. Value added products remained central to our growth strategy during the quarter. Value added product volumes grew 6.8% year on year with almost all categories delivering positive growth despite adverse weather conditions. Strength was visible across curd, paneer, drinkables, ghee and ice cream supported by strong consumer engagement and market expansion which improved the quality of sales mix.
Including ghee. And butter consumer packs. Value added product revenues grew 22.6% year on year contributing 38% of total revenue compared to 33.5% in the corresponding period last year, underscoring sustained premiumization and mix improvement from A strategic growth perspective. Capacity additions remain firmly on track. The Hyderabad ice cream plant is progressing as planned with trial production underway now and commercial commissioning expected in current quarter. The flavoured milk plant is also expected to be commissioned in the current quarter, positioning the company well to capture incremental demand across fast growing categories. I am also pleased to share that Mrs. Bramri Nara, executive Director was honored at the Business Today Most Powerful Women in Business Awards 2025 and Mrs.
Nara Bhuneshwari, Vice Chairperson Managing Director received the Outstanding Dairy Professional Award 2025 from the Indian Dairy Association. Reflecting the strength of leadership and governance at Heritage, I am also pleased to announce Heritage Foods Limited has been recognized among India’s top 50 manufacturing companies for its practices. Looking ahead near term, cost measures remain. We are confident that margins will progressively normalize supported by improving supply conditions, higher value added products contribution and continued disciplined execution. With that now I open the floor for questions. Thank you very much.
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sameer Gupta from India Infolin. Please go ahead.
Sameer Gupta — Analyst
Hi, good morning sir. And thanks for taking my question firstly, sir. I mean last quarter we were expecting a normal flush but we’ve seen milk prices rise even on a sequential basis. I understand you mentioned that there were supply shortages but can you just elaborate on the major reasons as to what resulted in this? And the point, the reason I’m asking is just wanted to assess if these are more like recurring things or more like a one off.
Srideep N Kesavan — Chief Executive Officer
May I take one? Yeah. Good morning Sameer, this is Srideep here. Good morning Sameer, this is Srideep here. Thank you for your question. It was a bit of a surprise for all of us till I should say till the month of August we were very hopeful and lot of mixed news were flowing in that the flush would be normal and these things we would not know until it happens. But if you recall, Q2 when we announced the results we said that it was a period of excessive rainfalls. In fact many of the regions where we Operate saw upwards of 20 to 25 Percentage of excess rainfalls which actually has caused a double whammy this year.
And on the consumption side, many of the key weather related value added product Categories were impacted in terms of consumption momentum and the same excess rainfall actually caused stress at the animal level and which is possibly what has caused productivity decline at the farm level. And this was observed not just in one procurement region, but we probably procure from across nine states in the country. And we felt this across. Usually in the flush season we receive a lot of milk. This year, if I can just give some numbers, last year from Q2 to Q3 we had 1.8 lakh increase in milk.
So just to give Q2 last year was about 16.44 lakh liters of milk and Q3 of last year was about 18.4 lakh litres. So 2 lakh increase from Q2 to Q3 this year Q2 was about 16.1 lakh litre and Q3 was 16.7 lakh litre. Only 60,000 litres has increased. So that’s primarily the big impact that we’re talking about. Is it going to be like this usually? No, because usually after a season of constrained supply, usually it eases because prices are very firm at this point in time. It is highly profitable for a dairy farmer to produce milk today.
So we expect dairy farmers to increase production and that should eventually sequentially bring down the prices. How long will it take? We are not sure. We are expecting the mini flush season or the cow flush season in the south India which starts from May onwards. We expect that at least should normalize because the prices in south of India is very firm at this point in time. So with that we expect things to ease out, but we’ll have to wait to see how it happens. But one thing we are observing now is the impact of climate is palpable in our industry and you will see, you will read up on a lot of reports in this regard in the media.
I hope I have been able to answer the question.
Sameer Gupta — Analyst
Yes, yes, this is very, very helpful. Just to reiterate, basically excessive rainfall is only is the only reason. But usually what we have seen is that excessive rainfall also results in good groundwater and the next year typically results in a better year in terms of everything in terms of agri production, in terms of milk production etc. Something that happened last time. See, we can’t really predict as to other factors, but this sole factor alone should result in better milk productivity. Is that a fair understanding?
Unidentified Speaker
I would say so. But see, the dynamics are so complex with over a dozen variables is very difficult to protect that. No up to 5,6 percentage of milk after up to 5,6 percentage of rainfall excess is good because you get a lot of green powder and you know, the farmer income also improves, but beyond that point it creates stress for everyone. Yeah, possibly. You know, that’s what I’m, you know, we are waiting for more scientific reports to come in and then we’ll be able to update, but what we felt was a palpable shortage of milk.
Sameer Gupta — Analyst
Got it. Fair. Fair. And just another related question. So I remember that during the analyst earlier this last year you had indicated a 7 to 9% kind of an EBITDA margin range and this was taking into account the weather, vagaries and milk price volatility. Now, nine months is 5.9% for standalone and 6.3% for consol. Would you still retreat this margin guidance or do you think that one should basically trim it downwards?
Unidentified Speaker
The only sameer, the only point I’d like to, only word I’d like to call out here is guidance. When we said 7 to 9 percentage is our targeted range, I use the word, I must have used the word targeted range and not guidance. We would like to keep our ebitda towards the 7 to 9% range, which means that at this point in time, which I feel is a low, lowest point we would have hit, we’re still about 0.7, 0.9% below that level, which means that we need to work harder on an apple to apple basis, improve our business performance by about 1% so that we can move currently, even this year.
Also you must have seen that the EBITDA has declined by nearly about 1.8% which means that actually if I can improve the business performance on a like to like basis by about a percentage point with similar raw material situation, we should be around 7 percentage and a better raw material situation, we should be around 9%. That’s what I meant when I said what I said there is an impact of EBITDA on account of various other factors which we need to work on as well.
Sameer Gupta — Analyst
Got it. I’ll come back in the queue. I have more questions but I’ll come back in the queue. Thanks for all this.
operator
Thank you. We have the next question from the line of Somil Mehta from KoTech AMC. Please go ahead.
Saumil Mehta — Analyst
Yeah, thanks for the question. So if you can just quantify, while the quarterly procurement prices are very high, what were the exit prices and what are the pricing trends you’re seeing at least for the month of Jan and any price hikes we have taken in liquid sales for the regions where we operate?
Srideep N Kesavan — Chief Executive Officer
You were asking what exit price, right?
Saumil Mehta — Analyst
Yes, the pricing trends in specific month of December and the Jan price. Yeah.
Srideep N Kesavan — Chief Executive Officer
Jan, I wouldn’t be able to comment. So December, I’ll be able to tell you, just give me one minute. Have you got the weighted average procurement price for the month of. For the quarter? Hello?
Saumil Mehta — Analyst
Yes, sorry, I was not able to hear you.
Srideep N Kesavan — Chief Executive Officer
Yeah. So the month entered, month ending cost of milk price in the month of December was. Weighted average price was 46 rupees 1 by say 46.0 4601. So if it gives you a sense, if it gives you a sense of how sequentially that is increased. Because for the quarter the reported number that we have number that we have put is about 45.57. So but December is 46.01 which means that you can see how it has climbed up from October, November, December. We expect the prices to further harden in the next 30 to 45 days but should ease off.
Like I mentioned once the mini flush or the cow flush in the south starts from May onwards.
Sambasiva Rao — President
Sure. And in terms of our end product prices, any price hikes we’ve taken, or at least we envisaged to take at least in the forthcoming quarters at this point in time.
Srideep N Kesavan — Chief Executive Officer
Yeah. So for the quarter that went by, which is Q3, while the raw milk prices increased by about 8.9% the market milk prices on a weighted average basis across our regions we have been able to increase by about 4.9%. So we have passed on in absolute terms. If I can just give you the number, the absolute milk prices increased by 2.67 rupees per liter, which is about 4.9%. That’s as much as we could pass on, which brought down the gross margin in milk itself by about 12%. Actually that has been the biggest impact. Actually the impact everything is dependent on how much milk is absorbed, how much milk had to absorb of the raw material increase, value added products.
Also on a percentage basis we have taken up prices by about 6.6%. Weighted average value added price per liter now is about 75 rupees compared to 70 rupees 40 paisa last year. Ghee. Also we have taken up prices by about 15% compared to last year. So we have taken significant price increase compared to last year. But weighted average, if you look at all of this put together, the revenue has not been, has not increased enough to compensate for the raw material increase.
Saumil Mehta — Analyst
Sure. And my last question, what would be the carrying inventory for the bulk fat?
Srideep N Kesavan — Chief Executive Officer
I’ll ask cfo to answer this. Please give me a second.
Saumil Mehta — Analyst
Sure.
Unidentified Speaker
Okay. Without looking I can tell you that the fats we are carrying at this point in time is very, very, very nominal. Maybe 400, 300, 400 tons, which is what would be less than a month’s cover. I believe 390 tons of butter is exactly what we are carrying. So we don’t have any butter.
Saumil Mehta — Analyst
Sure, sure, sure. Thank you so much and all the. Best for subsequent quarters. Thank you.
operator
Thank you. We have the next question from the line of Rehan Sayed from Trinitra Asset managers. Please go ahead.
Rehan Sayed — Analyst
Yeah, good morning. Thank you for giving me the opportunity. So sir, I have a couple of questions first on your ice cream plant summer pit. So you are. You have said that plan expected to commence commercial production by March 2026. So what peak capacity utilization should we assume over the next two to three years? And how margin accretive is this facility at Central State?
Srideep N Kesavan — Chief Executive Officer
Yeah, this is Srideep again. We are expecting the commissioning to happen towards the end of February or beginning of March as we had promised earlier. It’s well on track. As we speak now trial runs are happening. We are just waiting for the commercial production date. In the first year of operation we expect a capacity utilization of about 40 to 45%. 40% is what we are expecting. And this is on as per business plan. We don’t expect any surprises unless the summer goes bad and ice cream business is impacted as we speak. Now ice cream is a product category which has grown strongly for us in Q3.
We are on the back of, we are entering Q4 with a year on year growth of about 21% on ice cream. So that’s a very strong number if you look at it Q2 the growth was about 16, 17%. So every quarter we are increasing the growth rate of ice cream, which is actually good news. We are expecting to enter the summer season with a very strong growth rate as well as volumes in terms of how value accretive it will be. It is on an EBITDA basis, it is actually very profitable business ice cream as you would know.
But then there is also the asset, you know, it’s a new asset investment with its depreciation and all that will come in. So it’ll, it’ll take at least a year or two for the profitability to normalize.
Rehan Sayed — Analyst
Okay, okay. So you have said right now that your ice cream business is really doing well from the last two to three quarters. So. And you have also given the commentary in the last, in the last quarter that 20% CAGR over the. That you, that you can grow paneer cord in ice cream categories are expected to grow at 20% CAGR over that next seven years. So how is heritage prioritizing capital and marketing spends across these categories to maximize their returns on roce roic basis?
Srideep N Kesavan — Chief Executive Officer
Except. Except for ice cream where we, you know, ice cream is a, you know, it’s the nature of the product that it is seasonal. One.
Rehan Sayed — Analyst
Yeah.
Srideep N Kesavan — Chief Executive Officer
Number two, you can’t increase the capacity on an incremental basis. Except for ice cream. Most of our value added product categories, our capital investment over the years has been incremental to keep our plant utilization very high percentage. And as we speak now, the key categories for us as far as value added products is concerned is curd, paneer, buttermilk ice cream that you called out flavored milk as well as ghee. These are the categories where we have, these are the products where we have made capital investment. And curd is something in which every year we make capital investment so that our planned utilization stays at around 90%.
Paneer is something in which we have even this quarter also we have grown paneer by about 30%. So paneer is something which is growing very strong for us. So we have some capex in the pipeline which will get commissioned in the second or third quarter of next financial year.
Rehan Sayed — Analyst
Oh, okay, okay, fair enough. And one more last question. Like it’s kind of, if you can understand a bit understanding regarding your. Like how am I audible?
Srideep N Kesavan — Chief Executive Officer
Yes, yes, go ahead.
Rehan Sayed — Analyst
Yeah, so like I want to be understanding regarding your southern market. Like how like if you see that organized dairy penetration expected to rise from 40 to 60% over the next decade. So like how heritage realistically targeting it in its core southern markets to category.
Srideep N Kesavan — Chief Executive Officer
Overall dairy. I believe your question is regarding overall dairy, right?
Rehan Sayed — Analyst
Yeah, yeah,
Srideep N Kesavan — Chief Executive Officer
yeah. Okay. So see, we are very sharply focused on our core markets. See, the size of dairy industry is huge even in the markets where we operate. The headroom for growth is tremendous. Like if I can just give you an example, the penetration of curd, packaged curd in a state like Andhra Pradesh, which is actually a very high curd consuming state, is only 25%. Okay. 75% of curd that gets consumed in Andhra Pradesh is in the unpackaged form. And in a city like Hyderabad, it is about 40% is the penetration of packaged curd.
So the headroom for growth for us is tremendous. And our own core markets are delivering so much of growth. So our priority at this point in time is doubling down and going deeper with cold chain. Cold chain is one of the biggest enablers of our business. With cold chain improving, what we are seeing Is that the retail outlets that are stocking dairy, especially value added dairy, is expanding manifold. Maybe five years ago, the number of retail outlets that used to stock dairy were very limited because you had to buy dairy. You will have to either go to a milk booth or you have to go to a modern trade.
Today, as an average retail outlet had started stocking dairy products. And this is, this is the biggest opportunity that we are capitalizing on. The headroom for us is tremendous and we are working on expanding our distribution footprint as well as consumer traction. For this, I hope I have answered. It’s a very simple strategy. Stay focused on where we are strong and keep building strength.
Rehan Sayed — Analyst
Okay. Yeah. Thank you for. Thank you for Detailed also and jumping in the queue.
Rehan Sayed — Analyst
For the benefit of all investors. See, the advantage we have is that we are dealing with products and categories which don’t need explanation. It’s not something that you need to explain what this product is. It’s something that consumers are already consuming, as in something that people are familiar for thousands of years. It’s just that we are improving the product delivery in terms of quality, taste and convenience, which is what is switching people from, you know, unpackaged to package. Apart from other aspects such as trust, built on purity and transparency.
Rehan Sayed — Analyst
Yeah. Okay.
operator
Thank you. We have the next question from the line of Pradyam Choudhary from JM Financial. Please go ahead.
Pradyumna Choudhary — Analyst
Yeah, hi. So, couple of questions. The first one is on, like you mentioned that margins should progressively improve from here on. But if I look at your commentary on the procurement price, we are expecting the procurement price to further harden from here. So why are we really, like, why do we feel that the margins have bottomed out? Like, are we expecting improvement in our selling price? Also, currently you mentioned that last quarter the selling price had increased by 2.9 rupees. So are we expecting a further increase here in the current quarter?
Srideep N Kesavan — Chief Executive Officer
Thank you. Pradyut, this is Srideep again. Yeah, you picked on that point when I said the margins probably would have bottomed out and probably should improve. This is an estimate at this point in time and we’ll have to see how this plays out. There are two or three reasons why I mentioned what I said. One is raw material prices will increase at least in the very short term. Let’s talk about 30 days or so. That’s a given. We were hoping, number one, to pass on some of this to the consumer through higher pricing. That is one.
Number two, we’re also entering summer, which means actually already in many of the regions and markets where we operate, the temperatures have started hitting 30 degrees. We are our business. Many of our value added products, especially the more profitable ones such as curd, buttermilk, ice cream, these are all highly seasonal. So the contribution of these products or the salience of these products in our kitty in Q4 will be much higher than that in Q3. So it’s an improvement of the weighted gross margins as well as our ability to pass on some of this pricing to the consumer.
But you’re right, procurement price, at least in the near short term, will increase. This is something that we are cautious about. But our effort at this point in time is that as we grow volumes on the consumer side, we need to keep growing our procurement in line so that we don’t have milk shortage. That’s our highest priority. As we enter the season, we will require at least a couple of lakh liters of milk from the current levels. So our teams are focused on getting this milk at this point in time. Margins will be a result of how well we grow our value added products.
Pradyumna Choudhary — Analyst
Sorry, just to follow up here, when was the last product price hike we took in milk, just to understand how much of it is yet to be passed on and are we planning to take any further or have we already taken any further price hikes in the current quarter?
Srideep N Kesavan — Chief Executive Officer
We operate in close to 8,500 villages and this is across some 15 or 18 regions as we call it, as in divided among all the nine states we operate at some point in time, some price is always changing, right. You know, so it’s not like, you know, on one particular day we change the price. So this price movement is a continuous phenomenon. So I won’t be able to give a date on when was the last time we changed.
Pradyumna Choudhary — Analyst
All right, like let me just put it another way. The increase, absolute increase in selling price we are expecting in the current quarter, would it be higher than the absolute increase in the average procurement phase in the current quarter.
Srideep N Kesavan — Chief Executive Officer
We would like to match it is the way I’ll put it. And the weighted average improvement would be beneficial.
Pradyumna Choudhary — Analyst
Understood. And my second question is on the slow growth in value added products. Right. Like we mentioned, you mentioned that we took a 6.6% price increase in value added products. And despite that, I think the VAP grew by around 14 for us compared to earlier. It used to grow at 18, 20%. This is the third consecutive quarter of slower web growth. Well, I understand the first half was due to cooler temperatures, but any particular reason to point out here in Q3 as well the WAP growth Was quite slow and especially if we look at the volume growth.
Srideep N Kesavan — Chief Executive Officer
Yeah, so yeah, so see value added products, Primarily curd growth was lower this quarter. Curd growth came down to about 10%. Usually we grow curd around 13, 14%. So curd growth was lower. We also saw muted growth in drinkables primarily led by buttermilk and flavored milk. The growth was muted. The drinkables grew only at 16%. We used to grow and rather actually our north star or rather actually our attempt and objective is to grow value added products at 20 to 22%. Right. You know, the high 20, low 20s is the targeted growth rate of value added products.
And if it has to clock that kind of number, then our core value added products, which is curd etc has to grow at about 14, 15%. And then the smaller value added products such as drinkables and ice creams and all of that need to grow at around 30% only then you get a weighted average like that. So Q3 weather wise was soft. It’s something I spoke about primarily due to excessive rainfalls and lower temperature. On a weighted average basis, the average temperature across our region was about 1 degree lower than not just last year, but even last 10 year average.
So that impacted the weather dependent categories with curd and the core value added products coming to about 14, 15% and the smaller categories such as ice creams and drinkables going to about 30% which is what we expect in Q4. And paneer holding strong at around 30% as it will continue should give us a weighted average of what, 20% kind of value added products. But the key point to note, if I may call up value added product contribution to our revenue has expanded by 1.8% in this quarter, which is you can say roughly around 2% which means that it is in line with the value added products contribution improvement over the years.
We’ve been growing value added product contribution roughly 2% year on year.
Pradyumna Choudhary — Analyst
Understood. And last couple of questions. The first one is the like. There are two new plants that are starting. One is on the ice cream side and one on the flavored milk side. If you can tell me full year revenue potential from these plants once they are operating at full capacity, what sort of a revenue potential do these two plants hold? And like that gives me an idea regarding what sort of a value added products revenue potential I can expect. And second, on the continued growth of other expenses. Right. Previously also we’ve spoken about this and that continues to be a concern.
So how are we really addressing this part and how Much of our other expenses I think we incurred close to around 117, 118 crores of other expenses in Q3. How much of this would be related to the new plants starting up?
Srideep N Kesavan — Chief Executive Officer
Thank you. Just quick answers to both. See, the ice cream plant has a potential to deliver about 500 to 600 crores of revenue. That take about six to seven years for us to realize that. Right. Our current revenues this year we might close at around 110 crores. So that’s a 4x or a 5x kind of multiple as possible because it’s not just with volumes. Also because of revenue per liter increase right over a period. And it might take a about seven years for us to get there. Flavored milk on the other hand has a potential to grow up to 120 crores in revenue. We are targeting ourselves probably in the next four or five years. We should be crossing the 100 crore mark with the flavored milk. So these are all categories of significant categories which are profitable which we are investing on as far as the other expenses are concerned.
See, primarily I’ll just call out two numbers while there are many smaller items, but the two big ones which has changed for us. One is the whole logistics cost which has as a percentage of revenue has gone up from 2.7% to 2.9% which is a roughly 0.2 percentage increase which you will see in the EBITDA Decline. Also the 0.2 percentage is impacted because of logistics, primarily because of revenue not growing in line with the cost. And also our distribution expenses going up as we are pushing the distribution. Right. So that’s a small 0.2 percentage impact.
The other expense which has gone up is our marketing investments. This year in quarter three of this year compared to quarter three of previous year has gone up by about 0.5%. Last year Q3 was about 1.2% of revenue. This year Q3 is about 1.8% of revenue. While this looks like a 0.5 percentage hit to the P and L, we consider it as timely investment. As we are getting on to high selling season, our salience in terms of organized trade is increasing. Organized trade is already contributing about 1819 percentage of our sale. And we are seeing a higher uptick, higher stickiness, higher retention rate for our brands in these channels thanks to these marketing efforts.
This is something that we are consciously doing which will help us differentially take up prices as far as the consumer is concerned.
Pradyumna Choudhary — Analyst
So at 10.5% other expenses as percentage of revenue in the current quarter, can we Say that most of it is sticky in nature because a large increase has come from marketing costs which will continue going forward as well. So the expense bit at least seems to be.
Srideep N Kesavan — Chief Executive Officer
Yeah, see the way I’ll put it is that marketing is the only cost which is absolute and it’s not a percentage thing. And so with revenues, let’s say for example moving up by about 100 crores or 200 crores in the coming quarters as a percentage of revenue, this marketing expense will continue to come down. Right? Because I’m not going to see it’s an absolute spend. It’s. Let’s say for example in a quarter I spent 20 crores, so that will continue to come down as a percentage. And in terms of other expenses we also count operating expenses which has also gone up, especially the conversion cost which we feel as the volumes increase the absorptions in our plans will be much better and that will also sequentially come down basically the startup related cost, although so.
Pradyumna Choudhary — Analyst
And the two plants which are starting. What would be the two plants which are starting? I’m assuming.
Srideep N Kesavan — Chief Executive Officer
No, that that has. Is there any impact of pre operating expenses? I’ll hand over to CFO to answer that question.
Unidentified Speaker
Yeah, pre operating ice cream is not there actually. But it is not significant actually as far as ice cream is concerned because in the month of February and March actually we are going to commission so nominal actually then revenue expenditure has been taken into account to be charged with not, not very much nothing, nothing significant at all capitalized because it’s a total greenfield facility.
Pradyumna Choudhary — Analyst
Understood? Understood. Thank you, thank you and all the best.
operator
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participants in the conference call, we request you to kindly limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again we have the next question from the line of Prateek Kothari from Unique pms. Please go ahead.
Prateek Kothari — Analyst
Yes, good morning. So first on consumer fat I think I mean very healthy set of numbers growth. So you can talk about what is going right. One you spoke about the price IQ took but other than that how is our brand developing there? I mean we are seeing quite strong ramp up there and also the fat loss number for this quarter if you can share.
Srideep N Kesavan — Chief Executive Officer
Yeah, thank you Pratik. Volumes have grown about 45% and overall revenue growth is about 69% and this primarily in ghee. The bulk fat has degrown 99.9%. So practically there’s no bulk fat this quarter.
Unfortunately, the milk supplies that we had, raw milk procurement, was just enough for us to meet the requirement for our own thing. So there was no surplus butter generated. So to meet the growing demand for ghee, we had to actually buy butter from the market, which happened at a very high price because the butter prices in the market were quite strong, quite high compared to last year. So in terms of prices on a per liter or a per kg basis, while sales side we saw a strong improvement. Weighted average basis prices went up by about 106 rupees.
We never seen this kind of price increase anytime. 106 rupees price increase per liter. We have seen liter kg because I am combining ghee and butter together. It’s not the right way to look at it because you should understand that there is a conversion factor of 81% to buy butter ghee. But if I just do a simple weighted average, 106 is the weighted average price of on the sales side. But the raw material side also went above 103%. 103 rupees. So which means actually there’s no benefit at all. So because of which, even though the business shifted from bulk to consumer, there is.
The losses are pretty much similar actually. 10.15 compared to 9 crores last year. So it’s. Except that, you know, we are just cycling much higher volumes now. Correct. And so secondly, again on other expense. So it’s been about seven quarters since the good news is, I’ll just indicate this, but the good news is we have been able to establish a much higher consumer price in our ghee. The revenues are much higher. Like you know, I just indicated the amount of the revenue numbers that I spoke about at a much higher volume level. Which means that with commodities easing we should be in a very good position.
We’re just hoping for that. Correct. No point taken. So coming back on other expenses, again, so it’s been about 7/4 since we have not seen those, the targeted VAP numbers or a consolidated revenue number. So I understand that marketing is a good spend to have. We want to build that brand. But X of that. Are there no levers where we can kind of slow down, cut cost at time when one we are not seeing growth? One where we are seeing increase in milk price to kind of manage our cost because for last many quarters our other expense has been growing at 20% year on year for I think maybe 10, 12 quarters now despite no revenue growth or lower revenue growth rather.
So I understand we were investing for growth, but if that growth is not coming do we not have any levers to kind of curtail this X of marketing which I understand is a good spend to have. I agree. So if I prateek a couple of things I’ll call out. One is operating leverage, right? Which is actually the most important thing in our business because we are not while we call it premium but we are actually mass premium players. Right now our business is totally dependent on volumes. And if you look at the volumes of this year, the volume growth is nothing great actually we need strong volume growth and volume growth is what is going to completely offset our operating costs.
And the operating leverage has to kick in. And for some reason or the other this year has been from Q1. If you recall maybe 2/4 ago in the same investor call we mentioned that Q1 was a washout, complete total washout because of rains and the rains continued into Q2. So somehow this is a very very strange year which the way it is going we are actually building strength because we know that the per sales point offtake has improved, per consumer stickiness has increased, per distributor sales has improved. We know the unit metrics are looking good, but we have not been able to convert that in terms of large volume growth.
We need volume growth coming back in low double digits and revenue growth in mid teens. Revenue growth is fine, 4 to 5% of NR increase is fine. But we need volume growth happening in 10 to 11 percentage. That’s when operating leverage kicks in. And that is the reason why I was answering a previous question I mentioned that we can offset the cost by what? 0.6, 0.7 percentage the EBITDA on a like to like basis. Today’s EBITDA would be instead of 6.2 or something on consolidated basis will be close to 7% which I believe is a bottom out number.
If we can do that then we are working in a range of 7 to 9% going forward. That operating leverage is what we seek. And I have no nothing to give any excuse here. We need to work harder to get those volumes. No, no, correct. But sir, if other expense is growing at 20%, the operating leverage will only come in if the top line starts growing beyond 20, right? If you still grow volume at 10, price at 4, 5 and consolidate 15, you will still not see operating leverage kick in. No, I’m talking about see while the operating expenses that we report a good percentage of it is actually fixed in nature and we can’t do anything about, there are variable costs which will keep increasing.
But the other expenses as a percentage of revenue will come down the Moment volumes kick in. That’s what I meant. There are other factors as well which has gone little bit beyond our control. Like this quarter we had close to 1.7 crores of GST, 1.2 crores of GST impact
Unidentified Speaker
GST in the sense actually we are not able to absorb the ineligible portion of GST charged to the pendulum because the dairy products GST has come down from in the case of actually ghee actually from 12% to 5% and paneer has become zero, those kind of things.
So the input, input GST we are not able to recover. Then the ineligible GST we are charging to the PNDL in this quarter itself around 1.2 on account of that. So that I’ll consider as a variable number which is what actually has softened the gross margins of Paneer a little bit. The only option for us is to increase the nr. But the accepting for these kind of things, many of the other things, other costs in the other expenses are actually fixed in nature which will come down with operating leverage.
Prateek Kothari — Analyst
We’ll wait for that. Thank you and all the best.
operator
Thank you. A reminder to all the participants, kindly restrict your questions to two per participant. We have the next question from the line of Rajat Parab from Systematics group. Please go ahead.
Unidentified Participant
Yeah, hi Sharip sir, this is Abhishek from Systematics. Thank you for the opportunity. Just wanted to check on this mini flush or the cow flush that you were talking about earlier. What would this be as a percentage of the main flush? How signal significant would this be? Because what I’m trying to understand is, you know, in case for whatever reason there is some kind of a tepidity or a failure to this also is there a risk of mere procurement cost remaining firm till the next flush and do things like till October. Just wanted to understand your perspective on that.
Unidentified Speaker
Possible. The mini flush is witnessed over a period of decades in South India where the cows are predominant. There will be two, three months of milk production improvement and some amount of price softening happens is a standard feature. But this climate vagaries and related issues like diseases can sometimes impact like one year we had lumpy skin disease which had impacted and occasionally there would be some problems. But it is a standard feature of the cow. There will be many flush in the April, May, June period in South India that we expect to be normal this year.
Particularly the milk prices are very remunerative now to farmers they would take greater care and production should come and the buffalo flush will typically occur in October, November, December period which did not happen. In the expected or standard way this year.
Unidentified Participant
Right, understood, sir. And secondly on, yeah, second, secondly on, on this, this, the price hikes that you have just detailed in your opening remarks. I understand from, from one of the earlier calls of the, one of the listed competitors that probably some of the other private dairies and probably some cooperatives have not taken price hikes. They’ve chosen to not take hikes. While we have taken something like a 4.9% on milk and on that. Is there, are we seeing some bit of market share impact of that in January or is there a risk that we see in this current quarter mainly because of this? Yeah, that’s it for me.
Srideep N Kesavan — Chief Executive Officer
Thank you. Abhishek Srideep here. Yeah, so see some of the, see there is, there’s also, you know, see the volume growth. I’m sure that you must have done the analysis of all the operators of dairy others who have declared results as well, accepting some of those new businesses. The core Apple to Apple business for everyone has been soft this quarter. So I believe, I think the industry will have to increase prices. It cannot remain like this. Everybody’s cost has gone up. Everyone has reported higher costs in Q3. It’s not just heritage. So we have passed on part of it to the consumer.
We believe others also will do so. Usually it is just before March that everybody passes on some bit to the consumer. So we are waiting to see how this shapes up. I will not be able to specifically comment why they have not increased prices or why they have reduced why they have taken lesser price increase. I can only tell you our reasons.
Unidentified Participant
Fair enough, sir. Thanks. That’s it from me. Thanks and all the best. Thanks.
operator
Thank you. A reminder to all the participants, kindly restrict the questions to one per participant. We have the next question from the line of Reshim Mehta from Green Edge Wealth. Please go ahead.
Resha Mehta — Analyst
Yeah, good morning. Thank you. I do have a couple of questions. So one is, you know, on the, you know, heavy rainfall or erratic rainfall kind of disrupting growth. Well, that is well understood. But you know, how does excess rainfall hamper milk production? Because so does it happen that, you know, artificial insemination or natural mating gets impacted or farmers become lax, you know, they don’t give animal feed to their cattle. How does this basically hamper milk production?
operator
Ladies and gentlemen, the line for the management has been disconnected. Please stay connected while we join them back. Sam. Ladies and gentlemen, the line for the management has been connected over to you.
Unidentified Speaker
Sir, where it gets a little bit reduction in milk as well. As we are observing across Indian states now that there’s a sharp decline in the milk happening in our cross bred cattle. So as you all are aware, we are not having the pure genetics. We are having the cross bred cattle. And after three or four years of.
operator
Sorry to interrupt.
Unidentified Speaker
In between, they usually go for decline. So these are the two biggest factor.
operator
Sorry to interrupt.
Unidentified Speaker
Can you hear us, sir?
operator
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Unidentified Speaker
Can you hear us?
operator
Yes sir, I can hear you. Can you hear me?
Unidentified Speaker
Are we audible?
operator
Ladies and gentlemen, please stay connected.
Unidentified Speaker
Nothing is visible here. No, we are. Yeah. So can you hear us?
operator
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Unidentified Speaker
Oh, okay. So which means here, anyone from go India. Can you hear us?
Resha Mehta — Analyst
Yes, we can hear you. Hello? Hello? Hello. Hi. Can you hear us.
operator
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Unidentified Speaker
Yeah, can you hear us? Yeah, now we got back. I don’t know. You heard. Dr. Bridge, clarification on animal health and milk production drop.
Resha Mehta — Analyst
I missed that. If you could repeat your answer because.
Unidentified Speaker
Yeah, I’m repeating myself. This is Dr. Brijmohan from Heritage Nutrivet. We have observed that across Indian states we have the crossbred cattle. And as you know, that major milk collection is happening from the cattle, not from the buffaloes. And these crossbred cattle, they are.
operator
Hold.
Unidentified Speaker
On. Yeah, Ms. Mehta, can you hear me again?
Resha Mehta — Analyst
Yeah, yeah, I can. Please go ahead.
Unidentified Speaker
Okay, so, yeah, I’m repeating again, but very briefly now that Indian states we have the cattle which are crossbred and they are found to have decline in their milk yield after a couple of lactations. So two or three lactations, it goes down. And second is there are hormonal cycles during, especially during the rain site. That time there are a couple of complications like mastitis infections which are widespread, that reduces the milk heat. Hope I can answer your query.
Resha Mehta — Analyst
But then structurally, how can this get resolved? And you know, from a midterm standpoint, how can, you know, the milk shortage be addressed? Because, you know, seeing a 9% degrowth on milk procurement was really huge. And you know, how also in terms of, you know, how do we meet this milk procurement requirement considering the growth plans that we have? So my fear is that, you know, have we already lost out on some sales revenues because we were not able to procure milk? And is that expected to continue?
Unidentified Speaker
No. Okay, so Reisha. No, we had sufficient. See what happened? Structurally, we had sufficient milk in Q3 to service our needs. You just see the quantity we procured. We procured about 16.8 17 lakh liters of milk. And if you see our Average our total sale of Q3 is roughly around 17 lakh liters. So we managed to. But usually what happens is in Q3 we get about 19 lakh liters of milk. You see that historically, you see the last quarter three that surplus milk is what converts into commodities. It also brings down the prices, raw milk prices.
It increases profitability. That butter, we use it for ghee, etc. Etc, etc. That didn’t happen. Now it doesn’t mean that we don’t have milk. Now we are currently. And to address your question, you know we have about 1 percentage share of the industry, right? It’s a very humongously huge industry. Indian dairy. It’s very difficult for one small actor to impact the whole ecosystem. It’s impossible. Nearly what we are focusing on is to double down on what we do best, which is actually in the villages, in the farmers with the farmers that we work with. We are trying to work on farmer productivity.
On an average three or four years ago, an average farmer that we used to work with, I’m not talking about Indian aver farmer. An average farmer that we used to work with used to produce about 7 liters per day. Now it is about 10 liters per day. Now we need to. Okay, we might have hit a small air pocket that productivity has come down a little bit in Q3 of this year because of all these events. But we’ll have to continuously working on taking this 10 liters to 11 to 12 to 13 kind of thing.
That’s what we can work on. And but this is, this thing takes time. It cannot be addressed on a quarter to quarter basis. So while the overall, so we’ll have to expect the overall milk availability to improve which will also improve our farmers. But our farmer productivity we work with let’s say 2 lakh farmers. These farmers are not going to produce 12 litres per day tomorrow. This is not going to happen because this is a long term thing and it will take time. So what we’ll focus on here is that structurally if you see well earlier somebody asked this question on like what changed? EBITDA is down by about 1.8%.
Let’s look at it like that. We are about at a consolid level, 6.2 and on a standalone basis about 5.4. We are saying that this should actually be about out of this. We spoke about marketing and other costs about 0.6, 0.7% which can be offset through operating leverage, which is revenues and volumes coming back. Which means on a like to like basis we should look at this margin offset by that much amount getting into the next quarter and beyond. Right. And there are other operating leverages which I mentioned alluded to once the volumes kick in because we are still cycling much lower volume growth.
We need the volume growth to come back for which we are working. I think all the metrics are looking good but we also need a little bit of weather and other consumption, everything, all of those things also to kick in. All in all, all these factors are what’s going to stabilize, normalize our business in terms of margins potential. But that said, a 1 1/2 to 2 percentage swing in EBITDA will always be. Because this is a cyclical. This is a cyclical business. This is an agri commodity.
Resha Mehta — Analyst
Sorry, my, sorry to interrupt. My, my question was not on margins. I think that was well covered. My question was more on, you know, so, so what I understood from between.
operator
Rasham, I would request you to kindly rejoin the queue for the follow up question.
Resha Mehta — Analyst
I, I think a lot of time got spent, you know, in this, you know, the connection issue and I think all the other participants were given a fair chance to ask their questions. I’ve just asked.
Unidentified Speaker
Answer. I’ll answer very, I’ll answer very simply that, you know, we are working with the number of farmers and the villages where we are operating. What we are trying to do is to recruit more farmers in the villages where we are operating. We are trying to get them to add more animals. We’re also expecting, let’s say the mini flush to play to our benefit. That’s the only thing we can work on. Right. We are working on the variables that we have influence over.
Resha Mehta — Analyst
So in the markets that you know, where we have taken price hikes, would our peers would have also taken price hikes or is it only us?
Unidentified Speaker
I, I think Mr. Sambamurthy CEO will be able to answer this better.
Sambasiva Rao — President
Yeah, yeah. Some, this is. We have taken it up and some competitors have taken it up but most of the competitors have not taken up but certain places, certain markets they have also taken up. So it’s not that. No, by everywhere others have taken it up. So some places they have taken it up along with us as well. So there is. Sure.
operator
Thank you. We have the next question from the line of hashtube from LHS Securities. Please go ahead.
Unidentified Participant
Yeah, thank you for taking my question. I just had one couple of questions but I will restrict it to 1. Just wanted to understand that the El Nino effect that is going to come into the weather. So what, what is the expectation like? Clearly the milk supply is really low in the industry as well as the prices are stiff. And you are saying that this is what something that we can expect in the next 30 to 60 days as well. So when we talk about the value added product of how do you think that is going to do in this summer as well as since we are not able to convert excess of the milk into the commodities now.
So how about the prices on the margins? Will VAB will be sold on lower prices and the margins.
Unidentified Speaker
Yep, this is Pradeep here, so I’ll not be able to comment on Ellen here but yeah, excess of anything in summer if there is excess heat also that affects milk production, excess rainfall, excess of anything impacts our business. Right. Business has to operate in a particular corridor of comfort. That said, excess heat is good for our sales side. That is for sure. Products such as curd, buttermilk, ice cream and all of that should go well whether it is El Nino or not.
We expect the summer to be normal. If it’s a normal summer, I believe the growth that we’ll deliver will be strong because we already have good indications of even with soft weather when the days weather would open up. Our numbers are quite strong. If I can just say we crossed for curd for example, 400 tons is a big number that we crossed and it’s the first time we crossed that Number in Quarter 3. All other numbers are also strong so we are entering the summer in a strong manner.
Unidentified Speaker
Brahmani here, executive director, just wanted to add one more point that our numbers show a lot of positive progress when we look at scientific numbers such as brand health Track, loyalty, awareness, etc. So a lot of effort is going in that direction to mitigate some of these external factors impacting our sales and that’s been quite positive. Aside from that, we are also seeing through platforms where things are measurable, such as e commerce platforms that the stickiness with the brand for our product in certain categories is improving significantly. Last but not the least, I think it is very important for us to a certain extent to de seasonalize ourselves as a business and hence the functional proposition is becoming exceptionally important for us.
I think all along we’ve been very focused on fortification as a lever to be able to do it. We’re also focusing significantly on probiotics. One of our variants of buttermilk is probiotic in nature and is growing pretty well so that people consume it more for the functional benefits and not just the seasonal, you know, not just seasonal reasons. Aside from that, protein is a huge huge proposition for us and dairy Naturally is a great source of protein if R and D and packaging is done the right way and it’s delivered to the consumer with a good amount of awareness.
I’m also happy to say that in the past quarter we had launched Nourish plus paneer which is 60 grams protein paneer, a high protein paneer along with Nourish plus milk as well. And the initial offtake has been very, very positive through new age e commerce platforms. So I think there are several levers that we are working on very consciously to sort of season proof ourselves and to make ourselves a formidable brand so we are less affected by external conditions and we’re also putting in that effort and building awareness among our consumers.
Unidentified Participant
Thank you for that detailed answer. I would just like to have one follow up in this that when we talk about the milk procurement that we were not able to increase our milk procurement because of the industry problem that we are facing right now. I just wanted to understand since bulk commodities not there right now on our balance sheet. So when we talk about value added product sales, will there be milk shortages that you expect in the coming quarters? Is there chances of that or will we lost our sales because of that? Is that a possibility?
Unidentified Speaker
No, that is not foreseen. We will find sources of milk and also we have enough SMB purchased and stored for meeting the requirements of next season.
Unidentified Participant
Perfect. Thank you so much and thank you so much.
operator
Thank you very much ladies and gentlemen. That will be the last question for today. I now hand the conference over to Mr. Dr. Rao for the closing comments. Thank you. And over to you sir.
Sambasiva Rao — President
Thank you very much for your continued interest in Heritage. I’m sure you got the essence of the quarter and we look forward to meet you all soon for the next earnings call. Thank you again.
operator
Thank you management members on behalf of Heritage Foods Limited and GoIndia Advisors. That concludes this conference. Thank you for joining with us today. And you may now disconnect your lines.