Great opportunity in organising the chaotic unorganised milk sector: Samarth Setia of Mr Milkman

(L-R) Abhishek Goel and Samarth Setia
Image: Mr Milkman

Samarth Setia, co-founder of B2B dairy tech startup Mr Milkman thrives in chaos.

India might be the largest milk producer in the world with over 75 million dairy farms that produce over 150 million tonnes of milk per year, but the sector remains highly chaotic with only 25 percent of the milk produced in the rural households sold in the Rs 100,000 crore organised market.

“We see great opportunity in organising this chaos,” Setia says, who founded Mr Milkman in 2017 and later roped in Abhishek Goel as a co-founder. Mr Milkman, which raised angel funding from Anil Arya and Bimal Arya, the co-founders of mosquito repellent brand All Out, empowers dairy farms and milk brands with a cloud-based SaaS (software as a service) platform. It helps the dairy farmers predict demand, procurement, track the product lifecycle, plug the leakages, last-mile delivery, and manage unsold inventory. It also helps the producers plan production in a better way to cut losses.

Being a B2B player, Setia reckons, is better than being the more glamourous B2C counterpart. “B2C always sounds more exciting but the risk running out of funds and shutting shop is higher [in B2Cs] compared to a B2B player,” he says in an interview with Forbes India. Edited excerpts:

Q. How was the last year for the startup in terms of revenue growth?
2019 has been a great year for us. We almost doubled our revenue from Rs 22 lakh in 2017-18 to Rs 41 lakh in March-end in 2019. We are now striking a revenue run-rate of Rs 2 crore. Today Mr Milkman is one of the largest dairy tech players in India, and works with over 50 milk brands and dairy farms across the country. Some of our top clients include Milk Mantra, Raw Pressery, Yakult, Gyan Dairy, Akshayakalpa, House of Nanak, Health Ways and Whyte Farms.

Q. What was the trigger to start Mr Milkman?
Before leaving for a vacation in 2015, my mother had given me several chores. One of them was to tell the milkman to stop the delivery of milk while we were going to away. What seemed like a simple task unveiled the way milkmen operated—they would usually deliver the milk at 4 am and leave, creating a communication gap between them and their customers. This gap became my side project in the college: an app for the milkmen to manage their orders, deliveries and billing.

Every interaction thereafter with them got me closer to the challenges of the dairy sector. A chance encounter with my city’s largest dairy became an eye opener on how India’s largest and oldest industry was still running on registers and [Microsoft] Excel! Excited to see the opportunity, and by making minor modifications on what was built for the milkmen, evolved into a platform for dairies and milk brands. With just two clients as our source of knowledge, in late 2017, we set out to build a platform that today helps over 50 large as well as small milk brands and dairies across India track product lifecycle, do sales predictions, reverse logistics of crates, and accounting. We are on track to process over 1.5 million litres per month by the end of this financial year.

Q. What were the pain points you are trying to address in this sector?
India is the largest milk producer in the world with over 75 million dairy farms, big and small, producing over 150 million tonnes of milk per year. It is no wonder we are called the ‘oyster’ of the dairy industry. However, the dairy sector is highly chaotic with only 25 percent of the milk produced being sold in the organised market of Rs 100,000 crore. According to a recent report presented at the International Dairy Federation’s World Dairy Summit, India’s milk production is at 4.8 percent CAGR, which is twice of the global milk production, which is growing at a CAGR of 1.8%. We see great opportunity in organising this chaos.

Despite the fact that great strides have been made in dairy automation, the markets have been largely managed using a pen and a register right from the point a farmer sells its produce, till the point the milk gets packed, branded and sold to the end consumer. The lack of automation, digitisation and product lifecycle tracking leads to significant losses, most of which went untracked. This, in one way or the other, had an impact on the margins of the producers. We see ourselves as a one stop solution, digitising and automating every aspect of the value chain, to make this sector a much more efficient and, eventually, a higher margin play for the Indian dairy players.

In the dairy business, what comes back from the market is just as important as what goes into it. Several components, including crates, glass bottles and unsold milk are sent back to dairies or milk brands. Mr Milkman helps manage reverse logistics of peripheral items. It also aids the automation of processes like generation of orders set to go to distributors, retail outlets or end consumers.

Q. What were the early challenges when you started the venture?
Being a solo founder was the biggest challenge. Managing everything alone was not easy, be it client management, addressing technical issues or taking care of finances. I learnt a lot from my mistakes. The second challenge was the absence of any technical knowledge about the dairy industry. The initial product was created to help local milkmen and not to address the challenges of the dairy industry. It was only with the help of, and consultation with the clients and some industry players that the product evolved to become what it is today.

Q. How difficult was it to get the first client? Did they even know about a concept called SaaS?
Mr Milkman’s first client was a Delhi-based dairy, which already had an extensive in-house developed software in place that was far more advanced and had more features and functionalities than Mr Milkman did at that time. Moving to our platform would have required the dairy owner to pay double the cost he was incurring at the time, for half the number of features. But he did. What won him over was the fact that the Mr Milkman platform would eventually be used by more clients across the country, allowing it to learn from the operational experience of other clients as well. This naturally meant that our platform will have features and functionalities that he hadn’t even thought of yet since we were dedicated to solving the sector’s problems.

We did face quite a lot of challenges convincing the clients that we were not selling a software product but giving them the license to use it, which is how SaaS works. It is said that India is a market to build SaaS but not sell. However, this is changing and Indian businesses have started accepting technology as an important infrastructure to invest in. Luckily for us, the clients and the dairies we reached out to, understood the importance of technology and its use.

Q. What's the expansion plan? Are you also looking at the overseas market?
Almost 80 percent of India’s soon to be Rs 21,971 billion milk market is unorganised, and not yet digitised. We see ourselves as a one-stop solution to digitise and automate every aspect of the value chain. In the next five years, we aim to become India’s largest dairy network.

With the help of data from our clients, we also plan to launch smart tools, which will allow dairies and milk brands identify anomalies in sales, suggest timely recollections of unsold inventory from retail stores to reprocess it into value-added products and reduce losses to a bare minimum. We have also caught the attention from some international dairies and will make the product ready for the international milk market.