Dairy industry will see significant new investment from large corporate houses

significantOur milk production has touched almost 100 million tonnes in 2006-2007 and we have the distinction of becoming the world’s largest producer of fluid milk. About 16% of the world milk is produced in India and growing at a rate of about 4% per annum whereas rest of the world is growing at only 1.5%. At this rate by the year 2020 India will produce 25 % of the world production. In spite of this significant achievement in milk production our global trade is miniscule and our per capita consumption is lower than what is consumed in developed world. We have been always considering dairy sector as promising in comparison to other categories of processed food. But, of late several of our earlier dairy projects have not been performing well and in their place some new companies have come up beautifully well. Post liberalization Foremost Dairy and Dalmia Dairy have closed down but Heritage and Dynamic Dairy are doing well. There were times when Foremost and Dalmia products were coexisting with the MNC brands of Glaxo, HLL, Nestle and Smith Kline Beechem. Even Foremost and Dalmia were doing better than HLL. But post liberalization selling traditional skim milk powder, butter and ghee were not found to be profitable. The industry has seen many new products; even some of the traditional dairy products have now been branded and launched successfully. The milk also now been successfully branded and launched in several new packaging forms including aseptic packaging.

According to an estimate released by Dairy India 2007, the total production of milk will reach about 120 million tonnes in 2011 with organized sector contributing to as much as 30%. Further, by 2011 the share of private players will grow to about 24 million tonnes against 8.5 million tonnes in the year 2005. The same report shows the growth of government run milk cooperatives much slower -- from 8.5 million tonnes in 2005 to 12 million tonnes in 2011 and that too this growth will be primarily driven by fluid milk. This means that the milk products will be primarily the domain of private players whereas fluid milk will be with the traditional cooperatives. The per capita availability of milk as per report of 2005-06 is said to be 240 gms per day. However, the availability in the rural sector is only 158 gms per day against 431 gms per day in the urban areas. While average availability of milk is well below the global standard but the figure for the urban areas is significantly higher. Besides, the new format modern retailers are helping the growth in consumption of milk and milk products. The trend in consumer consumption is also showing a distinct sign of shift from fun foods to healthy foods and in that scenario milk offers a great possibility for exploiting the market opportunity as milk is generally considered as good for health. There are therefore couple of factors which will attract significant new investment in the dairy sector and these are: rapid growth in supply of milk, increase in consumption particularly in urban areas, growing heath consciousness of the consumers where milk is considered not only healthy but also essential to have and finally new modern retail stores to push private label brands. On the top of these all leading global players in dairy like Kraft Foods, Danone etc. are also coming to India and although they have not yet disclosed their entry mode which could be through the acquisition route but sooner or later these MNCs will bring in lot of new products in the dairy sector which are their mainstay in business.

Some of the local companies who have ventured either into food processing or in the retail segment have announced their intention to get into this category in a big way. Both Reliance and Bharti Retail are entering dairy business in a big way. While Bharti Retail is still exploring various options for entry, Reliance has already ventured into this sector. Reliance entered this high volume, low margin fluid milk market with its brand ‘Dairy Pure’ in Hyderabad recently. For it foray in dairy sector Reliance is looking at interesting business models through acquisitions. The company plans to float a pan-India dairy co-operative across the country. The model is clearly seen as duplicating the Amul model. The possible modification of this model could be that while collection will be in cooperative mode, the processing will be privately owned and that model will work if the milk producers co-operatives are assured of much higher return than what they normally get. The company is planning to even buy out large companies and retain both current owners as well as milk vendors in the company’s pay roll. For sourcing of milk, Reliance is planning to have over 1000 direct collection centre. In this model Reliance will be able to find cooperatives in dairy sector that are not doing well and are possible takeover candidates. Reliance has signed recently a memorandum of understanding (MoU) with the Punjab government for sourcing close to 7 lakh litres of milk every day and the company is likely to sign similar agreements in UP and Bihar , the two other states having large scale milk production.

There are many other companies including MNCs who are entering into this newfound opportunity. Both Cola majors Pepsi Cola and Coca Cola are keenly interested to enter into the dairy business in India particularly for the reason of recent shift in consumer preference from carbonated beverages to health beverages. However, the current policy regulations will allow these companies only to source milk and not setting up dairies. They therefore, can go for tetrapack format to sell fluid milk including long life milk. Amul is also gearing up for new challenge. This, over INR 40 billion turn over in sales giant in dairy sector has projected a turn over of over INR 100 billion in next three years which is an ambitious growth by any standard. Amul is gearing up their distribution and sales information systems to change the scale to achieve this significant growth.

The dairy business of Nestle is growing at a healthy rate of over 20 percent and they are therefore, very bullish on this sector. Nestle is therefore, focusing on the dairy sector particularly for the reason that while company’s business is growing at 10-11 per cent dairy business is registering a very healthy rate of growth. The dairy business of Nestle is expected to become almost double by the year 2011. The company has projected to become INR 8 billion in dairy business by that time from the current level. The company has recently launched yoghurt, which has been promoted as probiotic food. One can notice that the promotion of the new yoghurt has been through the health route again keeping the trend in consumer shift in mind. They also planned to launch world’s largest selling children milk powder brand ‘Nido’ in India in near future and considering many other global brands in dairy sector for Indian market. They are even considering acquisition in this category and at the same time going ahead for big capacity expansion in their Moga (Punjab) and Sealyham (Haryana) manufacturing facilities and also sprucing up its distribution infrastructure.

With the involvement of so many big players both local and multinationals dairy sector is in to see lot of new activities and investment.
 

Following all 23 Project Reports are provided in Cd

* BUTTER MILK     
* CASEIN FROM MILK 
* CONDENSED SWEETENED MILK WITH CONTAINERS     
* CONDENSED MILK SWEETENED  
* DAIRY FARM TO PRODUCE MILK & GOAT FARM     
* DAIRY FARMING AND DAIRY PRODUCTS
* DAIRY FARM TO PRODUCE MILK (JERSEY COW)    
* DAIRY FARM TO PRODUCE MILK (BUFFALOE)
* DAIRY DEVELOPMENT     
* FLAVOURED MILK (STERILIZED)   
* GHEE AND BUTTER      
* ICE CREAM OF DIFFERENT FLAVOURS
* LACTOSE AND BY-PRODUCTS PROCESSING FROM MILK
* MILK TOFFEE MANUFACTURE
* MITHAI/HALWAI (SWEET & NAMKEEN)
* MILK POWDER & GHEE
* MILK CHILLING PLANT
* MILK PROCESSING PLANT
* PROCESSED CHEESE
* PEANUT MILK, KEFIR, FLAVOURED PEANUT MILK MILK BEVERAGE
* SOYA MILK & PANEER
* TONED MILK
* YOGHURT