Back
to our roots
Ethnic
Indian dairy products are being launched in the organised sector, giving
the Indian market a major boost. Neeta Ramnath from Rabo India gives
the lowdown
The
Indian dairy sector is experiencing a tremendous upheaval, with new
products being launched, brands being repositioned and/or extended,
and new players entering the market. What is interesting about the products
being launched is that they are not exactly new – they already form
a part of the regular Indian diet. However, the products that had previously
been the exclusive forte of the unorganised sector have now become the
manufacturing and marketing target for many companies in the organised
sector.
The
organised Indian dairy sector While India as a country became the world’s
largest milk producer in 2001, not a single Indian dairy company featured
in the list of global top 20 dairy companies (see figures 1 and 2).
Over
45 per cent of Indian milk is retained at farm level, while another
42 per cent is handled by the unorganised sector. This means that in
the organised sector just 13 per cent of the entire milk produced is
put through a process where ‘value’ is formally added. However, it is
expected that this percentage will accelerate, as the products in the
organised sector are growing at a much faster rate than in the unorganised
sector (Figure 3).
Economic
and demographic changes including rising disposable incomes, a growing
proportion of working women becoming a part of the urban population
and greater awareness due to exposure to global trends are leading to
an increased demand for convenience and innovation in food products.
This, in turn, has resulted in increasing demand for packaged dairy
products (traditionally prepared at home) and new international products
and flavours.
National
footprint
In
the past, Indian dairy players, typically, had a basic commodity specific
portfolio of pasteurised milk (distributed in a limited region around
the processing facility), milk powder and ghee. This was either due
to a lack of appropriate technology for enhancing shelf life or an inability
to invest in brand and market development.
There
are 678 manufacturing units registered with the Central and State Governments;
many of them manufacture only milk powder and ghee. The combined capacity
of these units is 73 million litres per day while they process about
29 million litres per day. This implies that there is significant excess
capacity in milk powder and ghee.
Given
the low capacity utilisation in Indian dairy units at large coupled
with primarily commoditised product portfolios, several of these players
are looking for ‘partners’ who can provide a boost in the form of assured
sales volumes. These ‘partners’ could contribute marketing skills or
technological support required for developing and manufacturing value-added
products.
On
the other hand, with the growth of the organised dairy sector, many
dairy players are aspiring to gain a significant national presence,
which practically translates into the fact that the company will not
only sell products with longer shelf lives but also create a portfolio
of perishable products that will be marketed across the country.
So
far, companies had sourced products from their own factories (mostly
within the states in which they operate) and this limited their distribution
reach for products such as pasteurised milk and curd. However, companies
who are aiming to have a national presence in perishable dairy products
are now linking up with various processing units across the country
to enable local sourcing for such products.
These
sourcing tie-ups do not currently involve equity stakes simply because
most companies do not want asset-heavy balance sheets and there are
more acquisition targets than acquirers. However, this is likely to
change very soon as:
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