Overview of indian dairy industry

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The market size for milk and milk products (formal + informal sector) is estimated INR 3.6 lakh crores.
The organized market is growing at nearly 10 percent in value terms annually
Traditional dairy products account for about 50% of the total milk produced
The organized sector processes an estimated 20% of the total milk output in India
Milk is processed and marketed by 170 Milk Producers’ Cooperative Unions
Dairy Sector Contributes 17% of the Country’s Total Expenditure on Food
Per capita milk consumption is around 276 g per day
Dairy contributes to 16% of consumer spend on food – 18% in Urban, 15% in rural
Milk procurement price has grown by about 2.5 times in the last decade

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Overview of indian dairy industry

  1. 1. 1Extending our insights, knowledge and experience for building and growing businessesprofitablyOverview of Indian Dairy Industry
  2. 2. Indian Dairy Market Snapshot• Cow milk production 46.57 million tonnes• % of worldwide milk production 17%• Buffalo milk production 57.96 million tonnes• No. of milk producing dairy cows 38.50 million• Number of buffaloes 38.10 million• The productivity of Indian cattle (944 kg/annum)• The average size of herd in India is 2‐3 milch animals• Dairy Cooperatives account for 60% share of processed liquid81 84 86 88 93 97 101 102 109 115 120Total Milk Production (MT)2• Dairy Cooperatives account for 60% share of processed liquidmilk marketed in the India.• About 16% of the world milk is produced in India• Milk production is growing at 7% by volume and approximately10% by value• Production level of milk is projected to increase to 190 milliontonnes, worths 5 Lakh Crore by the year 2015• Accounts for 21% of agricultural production of IndiaSource : National Dairy Development Board, International Dairy Federation 2010Consumption (kg per capita)Milk 36.6Butter 3.3
  3. 3. Indian Dairy Market Snapshot• The market size for milk and milk products (formal +informal sector) is estimated INR 3.6 lakh crores.• The organized market is growing at nearly 10 percent invalue terms annually• Traditional dairy products account for about 50% of thetotal milk produced• The organized sector processes an estimated 20% of thetotal milk output in India• Milk is processed and marketed by 170 Milk Producers’937679435 538 446 378 383 364 289 287 278 194 215 210 197Per Capita Availability of Milk by States (gms/day)2010-113• Milk is processed and marketed by 170 Milk Producers’Cooperative Unions• Dairy Sector Contributes 17% of the Country’s TotalExpenditure on Food• Per capita milk consumption is around 276 g per day• Dairy contributes to 16% of consumer spend on food –18% in Urban, 15% in rural• Milk procurement price has grown by about 2.5 times inthe last decadeSource : Department of Animal Husbandry, Dairying & Fisheries, Ministry of Agriculture, GoIDegree ofProcessingType% milkhandledRawRetention by rural consumers / saleto rural non‐producers41Sold as loose milk in urban areas 17Processed(Formal)Packed liquid milk 15Value‐added milk products 5Processed(Informal)Value‐added milk products(mostly traditional Indian milkproducts)22Total 100
  4. 4. Structure of Dairy Industry in IndiaIndian DairyIndustryKey National Private PlayersAarey Milk ParagAravind Foods Mahaan FoodsBritannia VadilalDynamix Dairy Vidya DairyMother Dairy GowardhanVRS Foods4OrganizedPrivate Dairies(National)Private Dairies(International)CooperativeSocietiesGovernmentUnorganizedInternationalPlayers (Existing)International Players(Upcoming)Nestle Alra FoodsDanoneFonterra withBritanniaHatson Land O’Lakes, IncKerry GroupSchreiber Food withDynamixCokePepsi
  5. 5. Market for Dairy Products is expected to grow at 15‐20% over the next three yearsProductsOrganized marketvalue INR billion(2008-09)Growthrate (%)RemarksLiquid milk 313.90 20Dairy co‐operatives have a major presence in this segment e.g. ‘Amul’ in Gujarat, ‘Verka’ inPunjab, ‘Nandini’ in Karnataka, ‘Aavin’ in Tamilnadu,,‘Saras’ in Rajasthan. Private players likeHatsun Agro, Creamline Dairy are also having a sizeable market share in liquid milkMilk Powder,sweets, Dairywhitener36.22 10‐15(Dairy Whitener)‐ Amul as a leader have a market share of 45% followed by Nestle’s 23%,Britannia 5% and others are Dynamix Diary, Sterling Agro, Haryana Milk Foods, Mohan Food,Modern Dairy, K DairyGhee(Anhydrous milkfat)33.78 8‐10‘Amul’ and ‘Sagar’ are two well known brands. Other strong regional brands include ‘Saras’,‘Verka’, ‘Nandini’, and Madhusudhan’ etc.5fat)‘Verka’, ‘Nandini’, and Madhusudhan’ etc.Ice‐cream 15.44 2070% of the Ice‐cream sold in India through organized retail.Market share – Amul (25%), Kwality (15%) & Vadilal (10%) and others are Mother Dairy,Hatsun Dairy, DinshawButter 12.56 8Amul is market leader with 80% market share. Other strong regional players present areMother Dairy, Parag Dairy, Verka, Vijaya etc.Dahi (Curd) 6.28 20Karnataka Dairy Co‐operative (brand ‘Nandini’) is the market leader in pouch dahi while Amulis the leader in set curd segment & other players are Mother Dairy, Nestle, Britannia and ParagCheese 5.34 25Processed cheese has around 70% market share of the total cheese sold in the country. Keyplayers Amul, Vijaya, Verka, Vadilal, Britannia, Kraft, Dabon, DanoneFlavored milk 5.78 20‘Amul’ is the market leader with close to 75% market share. Other brands includeMother Dairy (7%), Verka, Nandini, Vijaya, Saras etcPaneer (IndianSoft Cheese)2.39 10‐12The market share of ‘Amul’ is close to 50% while Mother Dairy and MilkFed (brand ‘Verka’)have 20% share each. Reliance Industries has also entered this category.Source : National Dairy Development Board
  6. 6. Cooperative Revolution in IndiaDairy CooperativeNetwork• Increased from 21.2 million MT in 1968-69 to 110 million MT in 2008-09• Per capita availability increased from 112 grams/day in 1968-69 to 258 grams perday in 2008-09• Indias 3.8% annual growth of milk production between 1997-98 and 2007-08surpasses the 1.8% growth in population; the net increase in availability is around 2%p.a.• Includes 177 Milk Unions• Operates over 346 districts• Covers 1,33,349 villages• Owned by around 13.9 million farmersMilk Production6p.a.Marketing• In 2008-09, average daily cooperative milk marketing stood at 200.4 lakh litres;annual growth has averaged about 6.1 per cent compounded over the last five years• Dairy Cooperatives now market milk in all metros, major cities and more than 2000towns/cities• During 2001-2009 the daily milk supply by Cooperatives to each 1000 urbanconsumers has increased from 57.8 to 73.1 Kg per dayInnovation• Bulk-vending - saving money and the environment• Milk travels as far as 2,200 kilometers to deficit areas, carried by innovative rail androad milk tankers• Automatic Milk Collection Unit (AMCU) and Bulk Milk Cooler (BMC) at grass rootlevel – preserve quality and reduce post-procurement losses
  7. 7. Key Players in the Dairy Industry in India & their Product PortfolioKey PlayersCondensedMilk/UHTGheeMilkFoodCheese Paneer Butter WheyYoghurtIce-creamMilkPowderFlavoredMilkLactoseAmul √ √ √ √ √ √ ‐ √ √ √ √ ‐ADF Food ‐ ‐ ‐ √ √ ‐ ‐ ‐ ‐ ‐ ‐ ‐Britannia √ √ ‐ √ √ √ √ ‐ ‐ √ ‐Dynamix Dairy Industry Ltd √ √ ‐ √ √ √ √ √ ‐ √ ‐ √Heritage Foods (India) Ltd √ √ √ √ √ √ ‐ √ √ √ √ ‐Herman Milk Foods √ √ ‐ ‐ ‐ √ ‐ √ ‐ ‐ ‐ ‐Hatsun Agro Ltd √ √ √ √ √ √ ‐ √ √ √ √ ‐7Hatsun Agro Ltd √ √ √ √ √ √ ‐ √ √ √ √ ‐Mother Dairy Food √ √ ‐ √ √ √ ‐ √ √ ‐ √ ‐Mahaan Foods ‐ ‐ √ ‐ ‐ ‐ √ ‐ ‐ √ ‐ √Parag Foods √ √ √ √ √ √ ‐ √ ‐ √ ‐ ‐Vadilal √VRS Foods √ √ ‐ √ √ ‐ ‐ √ ‐ √ √ ‐Vidya Dairy √ √ ‐ √ √ ‐ ‐ ‐ √ ‐ ‐ ‐International PlayersKraft Foods ‐ ‐ ‐ √ ‐ ‐ ‐ ‐ ‐ ‐ ‐Le‐bon ‐ ‐ ‐ √ √ ‐ ‐ ‐ ‐ ‐ ‐ ‐Nestle √ ‐ √ ‐ ‐ √ ‐ ‐ √ √ √Danone √ ‐ ‐ ‐ ‐ ‐ √ ‐ ‐ √ ‐
  8. 8. Snapshot of Key Indian PlayersKey Players Brand Turnover (2009-10)Rs. CRGCMMF Amul 8007Nestle India Nestle 1641Punjab State Cooperative Verka 1150Hatsun AgroAnun, Komatha, Hatsun Cooking Butter,Hatsun Curd1141Britannia Industries Ltd Britannia 10838Kwality Kwality Walls 1054Heritage Foods Heritage, Heritage Golden 900Parag Milk Food Parag 550Modern Dairy Modern Dairy 445Rajasthan State Cooperative Saras 300Vadilal Industries Vadilal 189ADF Food Ashoka 102Himalaya International Himalaya Fresh (Paneer) 69
  9. 9. Supply Chain of Indian Dairy IndustryInputs forDairyingMilkProductionMilkCollectionChilling& BulkCoolingTransportation ofChilledMilkProcessing &PackagingMarketing&DistributionConsumerMilk9• Fodder Farming• Animal FeedPlant Owners• Veterinary aid• Labor• Large Scale Farmers• Medium ScaleFarmers• Small Farmers• CooperativeSocieties• Milk Aggregators• Chilling Center atVillage Level• Bulk Cooling atDistrict Level• Refrigerated Vans• Insulated MilkTankers• Cooperative Plant• Private Plant• Govt. Plant• Own RetailOutlets• Supermarkets• Any retail outletsUnorganized Sector:Local MilkmanConfectionaries/RestaurantsValue AddedProducts
  10. 10. USAKey CompaniesLand –O‐ LakesKraft FoodsConAgraDairy Farmers of AmericaDean FoodsPraire Farms1. Annual milk production in US is 83.42bn litres in 2009 andgovernment estimated the production of around 86.73 bnlitres in 2010.2. Key Processed foods are Cheese, Milk Powders, Whey, Lactoseand bulk milk.3. India, Majorly, imports Whey and LactoseAmount in INR CroreImport of Dairy Products from USA10HS Code Product 2009-10040210 Milk & Cream in Powders 0.180406 Cheese and Curd 0.510405 Butter and Other Fats 0.0040310 Yogurt 0.000404 Whey 10.61170219 Lactose 3.90Total Dairy Products 15.201% 3%0% 0%70%26%Product-wise Contribution of Imports toIndia from USA (2009-10)Milk & Cream inPowdersCheese and CurdButter and OtherFatsYogurtWheyLactoseSource: Ers.usda.org, Business WeekSource: Commerce.nic.in
  11. 11. EURO ZONEHS Code Product 2009-10Key CompaniesGroupe DanoneLactalisFreisland CampinaArla FoodsNordmilchNestle S.A1. Europe’s milk production is estimated to reach 135 bn Litresvis‐a‐vis 2009’s production of 134.75 bn litres.2. Key Processed foods are Liquid Milk, Cheese, Butter, WholeMilk Powder and Condensed MilkAmount in INR CroreImport of Dairy Products from EU11HS Code Product 2009-10040210 Milk & Cream in Powders 1.650406 Cheese and Curd 19.600405 Butter and Other Fats 0.7740310 Yogurt 0.530404 Whey 6.90170219 Lactose 16.11Total EU 45.564%43%2%1%15%35%Product-wise Contribution of Imports toIndia from EU*(2009-10)Milk & Cream inPowdersCheese and CurdButter and OtherFatsYogurtWheyLactoseSource: Euromilk.orgSource: Commerce.nic.in *: comprise of Denmark, Netherlands, Germany, France, Itlay
  12. 12. United KingdomHS Code Product 2009-10Key CompaniesDairy CrestFirst MilkMilk LinkUnilever UKMuller Dairy (UK) Ltd1. UK Produces approximately 13 bn litres of Milk every year.2. 50% of milk goes for the processing of dairy foods.3. Key Processed foods are Cheese, Milk Powders and Butter.Amount in INR CroreImport of Dairy Products from UnitedKingdom12040210Milk & Cream inPowders0.050406 Cheese and Curd 0.690405Butter and OtherFats0.0040310 Yogurt 0.000404 Whey 0.20170219 Lactose 0.61Total 1.55Source: DairyUK.org3%44%0%0%13%40%Product-wise Contribution of Imports to Indiafrom UK (2009-10)Milk & Cream in PowdersCheese and CurdButter and Other FatsYogurtWheyLactoseSource: Commerce.nic.in
  13. 13. AustraliaHS Code Product 2009-10Key CompaniesDairy FarmersDe Cicco Industries ptyFonterraMurray GoulburnPaulsTatura Milk Industries1. Australia’s milk production is estimated to reach 9.2 bn litresconsidering a growth of 1%‐2%.2. Import demand for dairy remains strong and relatively stable3. Key Processed foods are Whole Milk Powder, Cheese andButterAmount in INR CroreImport of Dairy Products fromAustralia13HS Code Product 2009-10040210 Milk & Cream in Powders 0.000406 Cheese and Curd 1.130405 Butter and Other Fats 23.2340310 Yogurt 0.000404 Whey 0.02170219 Lactose 0.00Total 24.39Source: DairyAustralia3%44%0%0%13%40%Product-wise Contribution of Imports to Indiafrom AUS (2009-10)Milk & Cream in PowdersCheese and CurdButter and Other FatsYogurtWheyLactoseSource: Commerce.nic.in
  14. 14. Opportunities in India for International Dairy Players• One of the fastest growing market for milk and milk products• Market size for milk and milk products (Formal & Informal sectors) is INR.2000 bn (EUR 30.8 bn)• Organized market is growing almost at 10% annually in terms of value• The demand for value added milk products viz. cheese, dahi (Indian yoghurt),probiotic drinks etc. is increasing at a double digit rateMarket Potential• Foreign players can enter into a Joint Venture with an Indian company toFarm Related• Foreign players can enter into a Joint Venture with an Indian company toimprove farm management practiceFarm Related• Setting up own procurement network is not only costly but also time consumingfor any foreign player entering India. It is therefore essential to have a localpartner to enter India to ensure consistent supply of raw milk to the dairy plantProcurement• As part of the JV mentioned in farm related /procurement related (above)players could also invest in the supply chain infrastructure to ensure availabilityof high quality milk on a sustainable basisInfrastructure14
  15. 15. Growth Drivers of Dairy Industry• Population growth• Economic Growth: Indian economy is the second fastestgrowing economy in the world after China and growing atan average rate of 8% (Y-o-Y )• Rapid Urbanization: At present about 28.40% of India’spopulation live in urban area and this figure expected totouch 40.76% by 2030• Rising Income Levels: Average income of Indians havePopulation Growth,Urbanization &Rising IncomeLevels15• Rising Income Levels: Average income of Indians havegrown by 10.50% to Rs. 44,345 in 2009-10 from Rs.40,141 in 2008-09• Technical innovation in milk products processing• The fast changing food habits• Increased use of fast foods, modified foods and instantfoods• Health food is a sunrise industry in India• Value added milk productsTechnicalInnovationFast ChangingFood Habits
  16. 16. Key Challenges of Indian Dairy IndustrySmall HolderLevel• Milk base mainly consisting of small holders• Involvement of too many intermediaries• Increasing pressure on the land resources for cultivation• Lack of good quality animal feed• Lack of animal health care facilities• Low genetic potential of the animals• Lack of chilling capacities• High production costsCollection Level16• Involvement of too many intermediaries• Lack of Infrastructure• Manipulation of the quality of milk by the farmersProcessing LevelCollection Level• Seasonality of production and fluctuating supply• Absence quality standards• Adulteration and Food safety• Lack of trained and skilled workers
  17. 17. Key Challenges of Indian Dairy IndustryStorage & LogisticsLevelCo-operative Level• Lack of cold storage facilities• Gap in the cold chain and transport facilities• Less number of member farmers• Lower participation in the decision making process• Low prices of milk• Inefficient services17MarketingChallenges• Insufficient Infrastructure• Majority of the Market is still unorganized• Acceptability of the Consumer base• Less penetration to the rural Market• Lack of transparent milk pricing System
  18. 18. Government InitiativesIntensive Dairy Development Scheme:• Improve the entire dairy supply chain by providingfinancial aids and technical input• Pattern of assistance is 100% grant in aid with amaximum allocation of Rs 300 lakhs/district• A 70 % loan and 30% basis of funding is provided forover 20000 LPD milk processing capacity• Milk chilling capacity of 18.49 lakh litres per day andNational Dairy Plan:• Aims to increase the milk production to about 180million tonnes annually by 2021-22• Enhancing milk production in major milk producingareas, and strengthening and expanding infrastructurefor production process• This plan also proposes to bring 65% of the surplus milkproduced under the organized sector for procurement asagainst the present 30%18• Milk chilling capacity of 18.49 lakh litres per day andprocessing capacity of 23.96 lakh litres per day havebeen created under this schemeDairy Venture Capital Fund Scheme :• Aims to promote ventures in the dairy sector• Assistance is provided to bankable projects with 50%interest free loan component• Entrepreneur has to contribute 10% seed amount andarrange 40% loan from local bank. Government of Indiaprovides 50% interest free loanStrengthening Infrastructure and Clean MilkProduction Scheme:• To promote clean milk production and creation ofnecessary infrastructure for it• Pattern of funding is in the ratio of 75:25 for purchaseand installation of bulk milk coolers at village level• Achievement: About 30,468 farmers trained, 1362 no.of Bulk milk coolers with a total chilling capacity of21.05lakhs LPD were installed and 886 existinglaboratories have been strengthened
  19. 19. Regulatory Environment of Indian Dairy Sector1. Dairy sector was de-licensed in 19912. Milk and Milk Products Order 1992:a. Collection areas/milk sheds specifiedb. Processing capacity fixed3. Private sector investment in dairying has increased considerably4. Previously, co-operatives did not have any competition from the private sector5. To strengthen co-operatives Mutually Aided Cooperative Societies (MACS Act,1995): reduce government195. To strengthen co-operatives Mutually Aided Cooperative Societies (MACS Act,1995): reduce governmentinterference in management6. Farmer freedom to govern the organization7. Agriculture is a state policy in India8. Center cannot enforce policies, driven by the ideologies and interests of the state government9. Department of Livestock is with the Ministry of Agriculture10. Feed distribution at subsidized rate through co‐operatives
  20. 20. “We are led by high energy experienced individuals having operating expertise and deep domainknowledge across verticals. People at D’Essence are driven by accountability and performance”For further queriesChief ConsultantChandni Sahgalchandni@dessenceconsulting.com20D’Essence Consulting303, Aar Pee Center,11th Road, MIDC, Andheri (E)Mumbai- 400093+91-22-28347425www.dessenceconsulting.com

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