Dairy Industry in India

India has the highest livestock population in the world with 50% of the buffaloes and 20% of the worlds cattle population, most of which are milch cows and milch buffaloes. Indias dairy industry is considered as one of the most successful development programmes in the post-Independence period. In the year 2006-07the total milk production in the country was over 94.6 million tonnes with a per capita availability of 229 gms per day. The industry had been recording an annual growth of 4% during the period 1993-2005, which is almost 3 times the average growth rate of the dairy industry in the world. Milk processing in India is around 35%, of which the organized dairy industry account for 13% of the milk produced, while the rest of the milk is either consumed at farm level, or sold as fresh, non-pasteurized milk through unorganized channels. Dairy Cooperatives account for the major share of processed liquid milk marketed in the India. Milk is processed and marketed by 170 Milk Producers Cooperative Unions, which federate into 15 State Cooperative Milk Marketing Federations. Over the years, several brands have been created by cooperatives like Amul (GCMMF), Vijaya (AP), Verka (Punjab), Saras (Rajasthan). Nandini (Karnataka), Milma (Kerala) and Gokul (Kolhapur). Uttar Pradesh, Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu are the milk surplus states in India. The manufacturing of milk products is obviously high in these milk surplus States. Exports of dairy products have been growing at the rate of 25% per annum in the terms of quantity terms and 28% in terms of value since 2001. Significant investment opportunities exist for the manufacturing of value-added milk products like milk powder, packaged milk, butter, ghee, cheese and ready-to-drink milk products. India has emerged as the largest milk producing country in the world with present level of annual milk production estimated as 94.5 million tonnes. We expect a production level of 135 million tonnes by the year 2015. India has a large livestock population base constituting 278 million livestock including 180.5 million cattle, 82.8 million buffaloes, 4 million sheep and 9.2 million goats. The livestock population is projected to increase to 322 million by the year 2015. The large livestock population is raised primarily on crop residues and grazing in the common property including basement. The forest area, which was a major source of grazing, is no longer available to livestock breeders especially landless people. As a consequence, the available feed resources fall short of the nutritional requirement. The shortfall is estimated as 59.9 million tonnes for the green fodder and 19.9 million tonnes for dry fodder. This shortfall is likely to increase by 2015 to 63.5 million tonnes of green fodder and 23.56 million tonnes of dry fodder. The landless people are, therefore, likely to face severe shortage of resources to raise cattle and other species of livestock. There is a real danger that in the absence of resources to maintain their stock, these under-privilege rural people may give up livestock farming. This could be a serious setback to lakhs of rural families who derive income as well as employment opportunities from livestock sector.

India prepares to tackle the international market following Japan, where milk consumption today, has more than trebled to 70 kg per capita from a mere 20 kg in the 'sixties - the consumption of dairy products in other Asian 'tiger' nations is also growing. As a consequence - creating excellent export opportunities for India, as these nations are deficient in milk by at least 3 million tonnes per year. India, with some 27 per cent of Asia's population, accounts for more than half of the milk output with enough growth potential to explore foreign markets. In anticipation of the export opportunities and in view of the post GATT scenario, India is gearing up to tackle the demands of the international market. Indian companies are preparing themselves to meet international standards and other non-tariff barriers. Planners are taking measures to meet the sanitary and phytosanitary specifications - prescribed by Office International des Epizooties (OIE) under the auspices of the World Trade Organization (WTO) -, which range from the quality assurance of processed dairy products to the health status of livestock.

Processed Dairy Products

Cheese The organized cheese market including its variants like processed cheese, mozzarella, cheese spreads, flavored and spiced cheese, is valued at around Rs 4.5 billion. Processed cheese at 60% of the overall market is Rs 2.7 billion. The next most popular variant is cheese spread claiming a share of around 30% of the total processed cheese market. The market is primarily an urban phenomenon and is known to be growing at around 15%. The market for cheese cubes, slices and tins is growing. The flavored cheese segment has been constantly declining. Gujarat Cooperative Milk Marketing Federation (GCMF) with the Amul brand continues to be the main operator in the branded cheese market in India. It pioneered the market for processed, branded cheese. What GCMF did was to develop the technology to make cheese from buffalo milk. World over it is made from cow milk. Britannia Industries joined the fray in the cheese market in mid-1990s through an arrangement with Dynamix Dairy Industries (DDI). It was set up in 1995 by a consortium of five companies - Conwood, Indo Saigon, Hiranandani, ETA and Metro. DDI has capacity to process 500,000 litres of milk per day with an estimated investment of Rs 1500 mn. The plant designed by Valio of Finland is run on technology tie-up with Schreiber Foods of the US. Schreiber is the largest supplier of processed cheese to fast food chains in the US with expertise in sliced cheese.

Britannia's cheese is sold in tins in the form of cubes, and in individually wrapped slices in packs of fives and tens. The slices are being promoted more aggressively worldwide, and these account for a bulk of cheese consumption. These are gaining acceptance in India as well. Amul followed Britannia in launching slices. Its cheese spread in the form of paste has been well received in the market. Britannia has been concentrating on metros and large cities. The network covers some 60,000 dairy outlets equipped with cold cabinets, refrigerators and insulated boxes. Amul covers some 500,000 retail outlets. French cheese major, Fromageries Bel, a 10-bn French franc outfit, has entered the Indian market with La Vache Kirit or what is worldwide known as The Laughing Cow. Its target market to start with were the two metros of Delhi and Mumbai with distribution entrusted to Delhi-based Rai & Sons, distributors for premium food brands, Ferraro Rocher and Ricola. The Bel product will be produced at Bel's facility in Poland exclusively for the Indian market. La Vache Kirit is a guaranteed vegetarian product. Fromageries Bel is expected to widen its product portfolio by launching laughing Kirit (creamy cheese in cube form) and Babybel (semi-hard with a wax coating appropriate for sandwiches). Laughing Cow was expected to be followed by an Austrian cheese brand, Happy Cow (owned by Woerle). Woerle has entered into a licensing arrangement with Veekay Foods & Beverages in Mumbai. Nestle and Kraft have been planning to make foray in the Indian market. Foreign brands in India include: Probolene, Colby, Mozzarella and Parmessan from Italy, Cheddar from Dutch, Gryueve. The new entrants will have to compete with well-established players such as Amul, Britannia's Milkman and Daburs Le Bon, enjoying substantial market shares in the overall Indian cheese market. The US-based Philip Morris, which brought in its Kraft cheese brand earlier, has gained a significant presence in the market. The rest of the market is spread among Verka, Nandini, Vijaya and Vadilal. Dabur had forayed into the dairy products market through its joint venture company, Dabon International, a 50:50 joint venture between Dabur India and French dairy products major, Bongrain. The company claimed a product range of 20 different varieties of cheese under LeBon brand. Dabon has a manufacturing facility at Noida with an installed capacity of 12,000 tonnes per annum. Incidentally, the government had, in a move in late April 2001, barred Dabon from marketing flavoured milk and processed cheese in the country.

Dabur was to launch speciality cheese like blue cheese and hard cheese. It had plans to developing cold chains at the distributor and retail levels in the state capitals and major towns in order to increase penetration levels. The demand for cheese is projected to grow from about Rs. 4.50 bn in 2003-04 to Rs. 6.00 bn in 2006-07 and to over Rs 11.00 bn by the terminal year of the projection period, 2014-15. Cheese is becoming a popular item in the menu of all relatively affluent families. Slowly but surely, it will penetrate into the rural markets. Processed Cheese

Leading Brands Amul, Vijaya, Verka, Vadilal, Kraft, Britannia.

Lead Players The lead players in processed milk products in the market are as follows: Amul, Britannia, and others include Vijaya, Verka and Vadilal. In the category of cheese Amul, Britannia Dabur (Le Bon) are the leading players including others like Verka, Nandini, Vijaya and Vadilal Dairy Whiteners About 15% of the total milk output in India is estimated to be processed in the organized dairy. The industry has maintained a high growth profile, especially in the wake of the Operation Flood, colloquially also termed as White Revolution, initiated in early 1980s. Today, India produces over 85 mn tonnes of milk annually. The total milk economy is estimated at Rs 1300 billion in terms of value. The market for dairy whiteners (commercially know as beverage milk powders and condensed milk) and creamers is around Rs 3,000 mn. Apart from MNCs like Nestle and companies like Britannia, the Indian enterprises have also made perceptible progress. Names like Amul, Sapan, Vijaya, Mohan, Parag and several others have been seen in the marketplace with their whiteners. These are available mostly in pouches, tetrapacks, and in the near future, may be in miniportion cups. Aseptically packed creamer in miniportions is widely used in the West, but has yet to enter the Indian market in any substantial way. Amul did make a beginning with its whitener pouches and has emerged as a leader with a market share of 45% followed by Nestles 23%. Aseptically packed creamer involves techniques to impart a longer shelf life to the product. It is packed in small cups ready to be poured into a cup of tea or coffee. Creamer is fresh milk with increased fat content (upto 12%) and is aseptically packed after undergoing Ultra Heat Treatment (UHT) at 1400 C. Its introduction will affect the existing whitener market as a natural milk product with a longer shelf life.

Britannia forayed into the dairy business as a diversification move in 1997. Its first offering, Milkman Butter, just managed a 5% share. The dairy business claims a 10% share in Britannia's topline. The company had drawn up plans to atleast capture 5% of the overall fresh milk market estimated by Britannia at Rs 420 bn. Extending the product portfolio beyond cheese, dairy whitener and butter, Britannia entered the fresh milk segment in 2001. In the dairy whitener, the company has managed to capture a significant market share. Nestle India with its Everyday dairy whitener has established its brand well. It has also entered into the market with its Nestle Pure Milk and, of course, a product in its niche area, Nescafe Frappe. Having earlier launched UHT milk, Nestle is concentrating on expanding its reach. Its plans covered Rs 800 mn investment in its Moga (Punjab) facility. New product segments like butter, yoghurt and flavoured milk were also on the cards. While Sapan characterises it as Dairy Special (instant milk mix for tea and coffee), Vijaya is the only UHT processed milk homogenised brand sold in the market in 200 ml and one litre tetrapack. All the rest, Amulya, Meadow, Mohan, Parag and Shweta dairy whiteners are in the form of powders. Mohan also markets a non-dairy whitener alongside its dairy type product. Since India is a major consumer of tea and coffee, it would be a very large market if only the price was not a constraint. In addition to domestic consumption, the whiteners/creamers find a high level of institutional acceptance, especially by railways, hotels and restaurants, airlines, hospitals and nursing homes and corporate offices. The institutional market can be tapped first, in particular, the airlines, railways and hotels. The penetration can then be extended to the household sector. The potential for exports, especially to neighboring countries and the countries in the Middle East, the Gulf and Africa, also exist and could be exploited.

Lead Players Nestle, Amul, Britannia, Dynamix Diary, Sterling Agro, Haryana Milk Foods, Mohan Food, Modern Dairy, K Dairy
Leading Brands Amul, Sapan, Vijaya Spray, Meadow, Mohan, Parag, Shweta, Malkana, Gagan, White Magic, Every Day.
The main thrust of proposals is on the improvement of animal health and adoption of sanitary and phyto-sanitary specifications (SPS) for dairy products. Towards this end, the Technology Mission on Dairy Development (TMDD) has initiated a wide-ranging program. The upsurge in milk production has thrown up challenges in milk marketing. The country is blessed with an enormous domestic market because of the following factors: Large population and its continuous growth, low level of per capita milk consumption and hence large size of potential, but latent demand, increasing purchasing power, which is already in evidence, will transform the huge latent demand into real demand. The groups

of dairy products offering exciting marketing opportunities are liquid milk itself, which accounts for a sizeable part of the milk consumption products, in which our dairy industry already has demonstrated considerable expertise, like milk powders, butter and ghee. The ability to manufacture the relatively new and sophisticated products like cheese and ice cream alongside the traditional products like paneer, khoya and milkbased sweets are now being manufactured on a large scale.

Utilization pattern
As shown in the table, of the total milk produced in the country, nearly 46 per cent is consumed as liquid milk and the balance converted into various dairy products, such as ghee, butter, milk powder, ice cream, cheese, condensed milk and for making various kinds of sweetmeats having distinct regional preferences. Dairy products an estimated 54 per cent of India's milk production is converted into products, both traditional and Western. In this, the share of traditional products is about 50 per cent, accounting in 2001 for a little over 42 million tonne of milk, which yields over 10 million tonne of mithais and other related products per year. The growth projections for their demand in the organized sector are presented in Table above.

Commercial production of traditional products

With the increase in the availability of liquid milk and Western dairy products, refinement in the marketing network and significant improvement in per capita income, there is an increased pressure for the restructuring of the indigenous milk product industry. Now, the organized sector has started showing keen interest in processes and equipment for manufacturing traditional products standardization of products, as well as refinement in packaging and improvement in safety and shelf life. Any innovation which can enable the organized sector to manufacture and market indigenous milk products on an industrial scale can have a far reaching impact on the dairy industry as well as on the economic condition of milk producers. The market for indigenous products far exceeds that for Western dairy products like butter, milk powder and cheese. A great scope exists for further expansion of the market for indigenous milk products, provided quality and safety are ensured and the shelf life is extended to facilitate distribution over larger areas. Major innovations are needed in manufacturing, quality assurance, packaging and process engineering to adapt these products to current marketing and consumer requirements. Some commercial processes have been developed to manufacture ghee, khoya, shrikhand and gulabjamun, but much is required to be done.

Major Players
The dairy industry is dominated by the co-operative sector. About 60% of the installed processing capacity is in the co-operative sector. The National Dairy Development Board (NDDB) is a major player in the market with its major brand, Amul. Leading brands like Amul, Nestle, Mother Dairy and Britannia are in the race to tap the growing market.

SmithKline Beecham Consumer Healthcare, Nestl India and Heinz India are amongst the large MNCs that dominate the high-value milk products market. Other players include Indiana Dairy Specialties, Jagatjit Industries Ltd and various other state cooperatives. Some dairy plants have production of mithais on a commercial scale. Some national brands like Haldiram, Bikanervala, K C Das, Chitales, Ganguram, Brijwasi, Agarwal Sweets etc are getting wide acceptance because of consistent quality Encouraged by the growing market and cashing on brand value select dairy companies are planning major expansion plans in various cities with new brands suited to local taste and preferences and realizing higher prices with higher sales volumes and product safety. The milk and dairy products segment is set for up gradation of cold-storage chains for expansion. Mother Dairy, a wholly owned subsidiary of National Dairy Development Board plans to make strong presence in the market of milk and milk products under the Mother Dairy brand through retail outlets across the country in addition to its own 300 outlets with provision of cold storage and cold chains.