indian dairy industry overview

8/10/2019 Indian Dairy Industry Overview

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Group 6

Dhiraj Bonda (1301-067)

Oli Ghosh (1301-144)

Sounak Basu (1301-221)Abhishek Dhull (1301-302)

Jai Shankar Rai (1301-348)

Praveen Shrivastava (1301-386)

Poornima Sharma (1301-548)

DAIRY AND MILK PRODUCTS INDUSTRY IN INDIA:

UNDERSTANDING STRATEGIES OFAMUL INDIA & PARAG MILK FOODS


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Indias Dairy & Milk Products Industry:

Worlds largest milk producer: Contributing nearly 18 percent of the worldsproduction by volume

0

5000

10000

15000

20000

25000

Production (000 tons) 2012

0

50

100

150

200

250

300

350

1950-51 1968-69 1998-99 2000-01 2005-06 2007-08 2009-10 2011-12

Per Capita Availability (gms/day)

0

50

100

150

2004 2005 2006 2007 2008 2009 2010 2011

Production in million tons

16.25%

12.15%

5.71%4.93%4.46%4.42%4.12%3.36%2.36%1.94%

0.00%

5.00%

10.00%

15.00%

20.00%

Share in Production 2010

Source: NDDB


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According to Investor Relations Society (IRS), the IndianDairy Industry is currently pegged at USD 70 billion (bothorganized and unorganized)

It is expected to double to USD 140 billion by 2020

According to Rabobank report, the country's total organizeddiary sector is about USD 10 billion in 2012-13, comprisingcooperatives and private players who control the supply chain

linkages Market would grow at 15-20 percent annually till2019-20

The market share of value-added products is likely to increaseto 31 per cent from the current 21 per cent during this timeperiod

Milk is the country's biggest agricultural produce,contributing 22 per cent to agricultural GDP. India overtookthe US in 1998 to become the world's leading milk producer,accounting for over 15 per cent of the global output

Growing since

past 30 years

Futuredemand to

remain high

Highest Milkproducer inthe world


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Indian DairyIndustry

Organized

PrivateDairies

CooperativeSocieties

Unorganized

Small MilkProducers

MARKET STRUCTURE

Organized sector: Dairy units registered to Milk &Milk Products Order 1992, each having capacity

to handle more than 10,000 litres per day areCo-operatives, private or others (like governmentDiaries)

Rest of all are unregistered small milk producersor traders selling raw/boiled milk and other milkProducts at local levels but have a major share in

the market.


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Source: NDDB Annual Report 2012-13

Successfulnessof Indian Dairy

industry

Processing &value adding

Management

Nationalpolicies Animal/

Breeds

Marketing


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The demand for packaged,Branded traditional milk is rapidlyIncreasing and also for value-addedProducts like flavored milk,Dahi, Paneer, lassi, kheer etc.

Source: NDDB


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Demand for Milk & Milk Products

Households

Milk, curd, butter, ghee, buttermilk andLassi

Unorganized Sector

Urban liquid Milk, Sweet productionand other traditional products

OrganizedSector

Pasteurized liquid milk & products forexports

Demand

Factors

HighProteinDiets

Lifestyle

Change infood habits

due toeducation

levels

Urbanization

Awareness &Availability

DisposableIncome


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Global dairy products trade

India dairy products trade

Source: Emerging challenges and strategic references

2000-01 India is the Net Exporter

increase in Exports from USD 3.45MM

in 1996 to 270 MM in 2008& decreased

in 2009

Increase in income levels, urban centers

resulted in rapid growth in demand

for processed dairy products reduced

surplus for exports and increased in

imports from USD 1.48 MM in 1996 to

USD 169 MM in 2010


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Key Issues & Challenges

Average Milk Yield per cattle remains very low when compared to developed

and other developing countries

Small size of the cattle per producer makes it difficult to adopt mechanized system

of milking, cooling and storage facilities which hampers the quality at the

production stage

Large vegetarian population and dependent on the only source of essentialnutrient milk causing huge domestic demand and low surplus left for exports

In developed countries only cow milk is suitable for human consumption where as

India produces substantial quantity of buffalo milk

Health and disease prevention and control of the cattle is to be given high

importance

Competitive Pricing Points & maintaining high international standards, quality

assurance, clean milk production, reduction of antibiotics, pesticides, and other

contaminant residues in milk & up gradation of the technical processes


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Political MMPO Act 1991 & liberalizing the same act by removing Milk Shed for more private investments. Programs & projects to develop infrastructure, clean milk production scheme, National Dairy

Development Board research projects in training and awareness on hygienic milk production & cattle Other welfare programs by rural development agency and womens SHGs Import duties, quotas, restrictions & domestic subsidies

Economic availability of finance to the farmers, availability and cost of labor to feed, milk and market the product

and its priority in relation to other demands on the household , depreciation of rupee increasing exports, growing consumption & disposable income at the semi

urban and rural level Rise in retail industry has given consumer a wide choice of brands

Technological Production and processing stages technologies to meet the International standards to boost exports Consumers are empowered with the technology that provides information about anything they

consume or use

Socio-Cultural Growing nutrition consciousness , changing lifestyle of urban and rural households increased

consumption of ready-made dairy products Exposure to different forms of media has resulted in increased brand consciousness in the consumers

Environmental & Legal Climatic conditions in which cattle are raised; Input to the cattle in terms of the disease control and

healthcare Center for Analysis & learning in livestock and food under NDDB, carries out a wide range of analyses

on dairy and food products, feed and feed ingredients, acquired diseases and chromosomal andgenetic disorders.

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Threats of New Entrants Economies of Scale Cost and Resource

advantages Brand Preferences and

Consumer Loyalty Access to Distribution

Channels Inability to match the

technology and specializedknow-how of firms alreadyin the industry

Capital Requirements

Threat Of Substitutes Changing consumer

lifestyles preferringsupplements for nutritionalover dairy products

Local Vendors and Smalltime producers offering atlow prices

Indirect threat from theother product categories inthe food & beveragessegment

Bargaining power of buyers Switching to competitors

brands in the high margined

value added productscategories like Ice cream,curd, milk powders,confectionary products.

Large no. of buyers & theproducts have occupiedregular share in the pockets

Bargaining power ofsupplier No or low level of

exploitation as cooperativesare run for the benefit ofthe milk farmers

Suppliers are protected byrules & regulations

Rivalry among competitors Firms operating in high

margined value addedproducts market are

expanding into other productcategories with consistentinnovation

International Players M&Awith domestic firms

More Product lines andbrands in the value added

products market

PORTERS


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The Anand Milk Union Limited (Amul) cooperative formedin 1946; but it has become a brand name managed by theGujarat Cooperative Milk Marketing Federation (GCMMF)

Year of Establishment 1973

Members

17 District Cooperative MilkProducers' Unions (16Members & 1 NominalMembers)

No. of Producer Members 3.18 Million

No. of Village Societies 16,914

Total Milk handling capacityper day

16.8 Million litres per day

Milk Collection (Total - 2012-13)

4.66 billion litres

Milk collection (Daily Average2012-13)

12.7 million litres

Cattle feed manufacturing

Capacity

5890 Mts. per day

Sales Offices 48

Dealers 5000

Retailers 1 Million across the country

Sales Turnover -(2012-13)Rs. 13735 Crores (US $ 2.54

Billion)

Product Categories:

Bread spreadsCheese RangeFresh & UHT MilkMilk PowdersGhee ProductsCurd ProductsFlavored Milk Products

Ice-creamChocolate & Confectionary ProductsSweetsHealth Drink


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From selling milk to cities, Amul now selling value-added products back to villages

EEE Strategy: Expand, Expand & Expand; Expand in the procurement and

distribution lead to 20 percent compounded annual growth rate for the last 5 years

Investment in increasing milk procurement, processing capacities and distribution

Recent Capital Investments of Rs. 3000 crores Kheda district union recently

inaugurated a new plant in Virar, near Mumbai, and is setting up another processing

facility in Kolkata. The Sabarkantha district union has invested in Rohtak, while the

Banaskantha union is investing in creating capacities in Faridabad and Kanpur

Liquid milk constitutes more than half of Amul's turnover, which is a low margin

business. More focus on the value-added/higher margin products like ghee, butter

milk, curd and ice cream

Decentralizing to increase the reach of these value added products to small towns of

population less than 20,000. due to increase in disposable incomes of the people in

the towns with population less than 100,000 & 1-10 lac towns


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Creating & extending the cold chain for distribution of

the value-added products like flavored milk into the

hinterlands of the country (products like Masti

buttermilk, Kool milk shakes)

Investing in setting up new company-owned depots in

smaller towns. For example, Kharagpur, which was

earlier under Asansol, now has a depot of its own and

so does Aurangabad, which was fed from Pune

Introduced a new layer in the distribution channel

called a 'super distributor', who operates at district level

and supplies to sub-distributors at the taluka level.

already appointed 250 super distributors, each with 50

subdistributors. Business from these areas has increased

by 15%

Establishmentof a direct

linkagebetween milk

producers andconsumers byeliminatingmiddlemen

MilkProducers(farmers)control

procurement,processing and

marketing

Professionalmanagement


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A

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Strengths Largest food brand in India & Asia High Quality at affordable price Largest Distribution network Professionally managed and introduced

TQM Highly diverse product mix having high

margin value added products Responsible for White Revolution Successful marketing & advertising

campaigns created favorable brandperception

Weaknesses Strong dependency on the weak

infrastructure & completely dependenton village for its raw materials

Short shelf life of its product Low market share in confectionary and

other value added segments which aregrowing at rapid pace

Lack of control over average yield percattle

Threats Competition from international and

domestic players in high margin orientedsegments

Inconsistent export policies threateningthe pole position

Ban of plastic which is widely used inpackaging

Liberalization lead to large no. ofentrepreneurs

Creation of Non Tariff Barriers byDeveloped Nations

Opportunities Introduce new products in the chocolate

segment To tap the untapped market, increase its

reach in rural markets Rise in purchasing power of Indian people Export to Western economies if

International standard infrastructuredeveloped in value chain


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PRODUCT DIVERSITY/MIX

Lowto

High

Low to High

STRATEGIC GROUP MAPPING

Amul,

Nestle,MotherDiary

Aavin,Vijaya,Hatsun

Britannia

Parag,Heritage,


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Parag Milk Foods Parag had initially started as a Milk company with Ghee being the first product with which they

entered the customer segment Parag Milk Foods is among the largest milk producers in the country Pune based company commanding over 2% of the total $10 billion organized market

Company Exports milk products to 27 countries in West Asia, South East Asia and Africa Operates with more than 300,000 retail outlets Comprises of more than 2,000 distributors Major Areas -

Liquid Milk 20% of the revenues Cheese 25 to 30% of the revenue Skimmed Milk Products (SMP) 20% of revenues

UHT/Tetrapak 7 to 8% of the revenue Fresh Division (Dahi, yogurt, paneer) 15 to 18% of the revenues

Parag also sells byproducts such as whey protein and cheese to processed food makers in thecountry


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P

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Strengths Hygienic Milk processing Asias largest cheese producer State of the art technology Receiving milk from different centers Full 100% use of cows to produce milk Thick dahi Selling of byproducts like whey protein

Weaknesses Improper distribution network Short shelf life of its product Use of only cow milk Positioning Not spread out as much as its domestic

rivals

Threats

Competition from well establishedinternational and domestic players in

high margin oriented segments Competition from regional and small

time players

Opportunities

Locking in with institutional clients Nofocused competition

High growth of the Indian cheese market(15-20% annually)

New market for packaged dahi Creation of more brand loyalty Rapid expansion Rise in purchasing power of Indian people Export to Western economies


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indian dairy industry overview

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