Dairy Industry: Utterly Butterly Prospects
Having established itself as the world's largest producer of milk, the Indian dairy industry now seems fully geared to move up the value chain on the wings of disruptive innovation in the manner in which milk is produced, packaged and marketed. It's indeed ironical that the numero uno status in production offers a sharp contrast to the mediocre methods of production that still prevail across the country. Most of India's supply-side constraints are glaringly restrictive – whether the poor per cow production average or pathetic infrastructure and logistical arrangements. India produces an estimated 400mn litre of milk per day. Of the total milk supply, merely 30% is generated by the organised sector as of today, comprised mainly of co-operatives.
New waves of Demand and Supply
Clearly, the need of the hour is a significant leap in production efficiencies to be able to meet the fast-growing demand, especially for value-added products like milk-based sweets, processed cheese and flavoured variants. This is a significant shift in demand patterns considering the fact that for many years, most Indian households preferred to consume milk in plain liquid form and the only variants in vogue were butter and ghee. But in recent years, the Indian consumer has shown a marked inclination for value-added products, thanks to lifestyles shaped by Western influences, more number of working couples with higher purchasing power as also demanding work schedules that make 'ready-to-eat' a tailor-made option.
Sensing this discernible demand shift, as also the fact that co-operatives have conventionally focused on liquid milk, butter, cheese and ice cream, many private players have sensed a potent and productive market waiting to be conquered.
The high rate of growth and increasing preference for branded products is what is drawing players like Mahindra & Mahindra (M&M), ITC and others. M&M has launched liquid poly-pouch milk with 44% higher cream content and is enriched with Vitamin A & D. FMCG major ITC, on the other hand, has forayed into dairy with Aashirvaad Svasti pure cow ghee. The company will roll-out newer value added dairy products in the coming months. Godrej Agrovet raised its stake from 10% to 25% in Creamline Dairy for Rs1500mn.Meanwhile, Danone, Nestle and other existing private sector players are adding to their product line-ups and pushing in big money into the market while home-grown dairy cooperatives such as Mother Dairy and Nandini, among others, are also expanding their operations rapidly.
Companies covered in this report: Hatsun Agro, Heritage Foods, Kwality Dairy, Parag Milk Foods and Prabhat Dairy.
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