In­creased in­vest­ment in In­dia’s dairy sec­tor is driv­ing com­pe­ti­tion

Progressive Grocer (India) - - Contents -

Dairy is wit­ness­ing con­sis­tent growth in the con­sump­tion of value-added prod­ucts such as flavoured milk drinks, lassi, curd and yo­ghurt. The In­dian dairy mar­ket, though dom­i­nated by co­op­er­a­tives, is also wit­ness­ing in­creased in­ter­est from fi­nan­cial in­sti­tu­tions as an in­vest­ment des­ti­na­tion. Pro­gres­sive Gro­cer spoke to Prashant Roy, Se­nior Re­search An­a­lyst – Food & Nu­tri­tion at Euromon­i­tor In­ter­na­tional and

Dilip Rad­hakr­ishna, Re­search An­a­lyst – Food & Nu­tri­tion at Euromon­i­tor In­ter­na­tional about the trends and devel­op­ments in­flu­enc­ing the dairy in­dus­try in In­dia and prospects ahead for its dif­fer­ent prod­uct seg­ments. Give us a sense of the broad seg­men­ta­tion of the dairy mar­ket in In­dia – the size of the mar­ket over­all and the vol­ume and value share of the prod­ucts in In­dia’s dairy mar­ket? How is the mar­ket size of the dairy cat­e­gory grow­ing in In­dia in re­cent years?

Euromon­i­tor In­ter­na­tional’s dairy cov­er­age in­cludes re­tail sales of pack­aged drink­ing milk prod­ucts, but­ter, cheese, yo­ghurt and sour milk and other dairy prod­ucts. As an ex­cep­tion, un­pack­aged hard cheese, such as Ched­dar, Edam, Parme­san and Gouda, is also taken un­der con­sid­er­a­tion. We have also in­cluded soft cheese (pa­neer) in our cov­er­age. How­ever, the ma­jor­ity of cot­tage cheese pro­duced is sold in un­pack­aged for­mat.

The In­dian dairy mar­ket recorded a 16% yearon-year value growth, through 2013-17, in line with the growth of fresh milk. Be­sides the shift from un­pack­aged to pack­aged, in­creas­ing health con­scious­ness and aware­ness is driv­ing growth. Con­sumers are in­creas­ingly shift­ing from car­bon­ated drinks or drinks with high amount of su­gar con­tent, to­wards health­ier al­ter­na­tives such as milk.

To cater to th­ese shift­ing con­sumers’ pref­er­ences, the man­u­fac­tur­ers have ex­panded their range of value-added dairy prod­ucts, such as flavoured milk drinks, lassi and yo­ghurt, which are a bet­ter and health­ier al­ter­na­tive to the tra­di­tion­ally avail­able car­bon­ated and sug­ary drinks.

Value-added milk prod­ucts such as flavoured milk drinks, but­ter­milk, lassi, yo­ghurt and curd have also wit­nessed a huge spike in de­mand dur­ing sum­mer sea­son in the coun­try. As a re­sult, the in­dus­try is ex­pected to wit­ness a high growth mo­men­tum soon, pri­mar­ily guided by im­proved dis­tri­bu­tion ca­pa­bil­i­ties and op­er­a­tional ef­fi­cien­cies, which will en­sure the avail­abil­ity of milk and milk-based prod­ucts ca­ter­ing to the ris­ing con­sump­tion pat­tern across the coun­try.

How do you look at the out­look and prospects ahead for the cat­e­gory – which prod­uct seg­ments will gain more of mar­ket trac­tion?

Even though milk is a ma­ture cat­e­gory, yet the prospects look ex­tremely promis­ing in the fu­ture. Dairy is wit­ness­ing con­sis­tent growth in the con­sump­tion of value-added prod­ucts, such as, flavoured milk drinks, lassi, curd and yo­ghurt, which of­fer bet­ter al­ter­na­tives as com­pared to car­bon­ated bev­er­ages, be­cause of ris­ing health aware­ness.

Even the cen­tral and the state gov­ern­ments are sup­port­ing con­sump­tion by pro­mot­ing ini­tia­tives such as the Mu­dra scheme, which of­fers soft loans to dairy farm­ers to in­crease milk pro­duc­tion or mak­ing con­sump­tion of fresh milk manda­tory un­der mid­day meals schemes in govern­ment schools.

What are the new trends and devel­op­ments within the cat­e­gory?

The ma­jor trends for the cat­e­gory are: In­creased health aware­ness: The modern con­sumer is very aware about their health and is re­duc­ing de­pen­dence on the tra­di­tional car­bon­ated drinks and mi­grat­ing to health­ier al­ter­na­tives. As a re­sult, Pep­sico Inc. and Coca-cola In­dia Pvt Ltd, have wit­nessed con­sid­er­able head­winds in car­bon­ated bev­er­ages and are ex­per­i­ment­ing with new prod­ucts, such as su­gar-free drinks or non-aer­ated bev­er­ages to drive their or­ganic growth and main­tain their foot­print in the In­dian mar­ket.

In fact, prod­ucts such as cow ghee and cheese are per­ceived to have sig­nif­i­cant health ben­e­fits over other cook­ing fats, such as Vanas­pati or ghee. Con­sumers are in­creas­ing pur­chas­ing such prod­ucts and which is con­tribut­ing to growth.

Healthy Liv­ing: Healthy liv­ing is gain­ing prece­dence among con­sumers, and the de­mand for health and well­ness dairy prod­ucts is con­stantly on the rise. Other than the growth in milk and milk prod­ucts con­sump­tion, even the growth of for­ti­fied milk prod­ucts has been look­ing promis­ing.

The Food Safety and Stan­dards Au­thor­ity of In­dia’s (FSSAI) made it manda­tory for milk pro­duc­ers to add more vi­ta­min A and D to pack­aged milk prod­ucts, and even pri­vate play­ers, such as Nes­tle SA, have al­ready started im­ple­ment­ing the sugges­tions.

Ac­cord­ing to Gu­jarat Co­op­er­a­tive Milk Mar­ket­ing Fed­er­a­tion, with the ris­ing per capita con­sump­tion of milk at 360 grams per per­son per day in 2018, up from 110 grams in the late 1970s, and ex­pected to touch 800 grams in a few decades, th­ese ini­tia­tives will en­sure that the na­tion is able to de­crease the pop­u­la­tion of mal­nour­ished in the coun­try.

Dairy is at­tract­ing in­creased in­vest­ments: The In­dian dairy mar­ket, though dom­i­nated by co­op­er­a­tives, is also wit­ness­ing in­creased in­ter­est from fi­nan­cial in­sti­tu­tions as an in­vest­ment des­ti­na­tion. For in­stance, KKR In­dia, lo­cal arm of the New York-based buy­out en­tity KKR & Co. Inc., had in­vested INR6000 mil­lion in Kwal­ity Ltd., a ma­jor pro­ducer of dairy prod­ucts with the ‘Kwal­ity’ brand. The Lac­talis Group of France, had in­vested INR 1,7500 mil­lion and INR 4,700 mil­lion in Tiru­mala Milk Prod­ucts Pvt Ltd and Anik In­dus­tries Ltd., re­spec­tively. Cargill Ven­tures also in­vested INR1,100 mil­lion in Dodla Dairy Lim­ited.

Th­ese in­vest­ments are driv­ing some com­pe­ti­tion in the In­dian mar­ket, pro­mot­ing pri­vate sec­tor play­ers and co-op­er­a­tives to re­vamp their strat­egy, and in­vest in brand build­ing, ex­pan­sion, di­rect pro­cure­ment and dis­tri­bu­tion. As a re­sult, Heritage Foods Lim­ited spent ap­prox. INR 750 mil­lion in brand build­ing ex­er­cise, while Gu­jarat Co­op­er­a­tive Milk Mar­ket­ing Fed­er­a­tion, pro­ducer of the Amul brand of dairy prod­ucts, have plans to in­vest INR 30,000 mil­lion by 2020. Parag Milk Foods Ltd. and Prab­hat Dairy Lim­ited have in­vested INR640 mil­lion and INR400 mil­lion on strength­en­ing their in­dus­try pres­ence.

The In­dian dairy mar­ket recorded a 16% yearon-year value growth through 2013-17, in line with the growth of fresh milk. Be­sides the shift from un­pack­aged to pack­aged , in­creas­ing health con­scious­ness and aware­ness is driv­ing growth. — Prashant Roy Se­nior Re­search An­a­lyst – Food & Nu­tri­tion, Euromon­i­tor In­ter­na­tional

Fur­ther­more, Gu­jarat Co­op­er­a­tive Milk Mar­ket­ing Fed­er­a­tion re­cently an­nounced plans to ex­pand its foot­print to through the fran­chisee model, whereby, it would lease out is brand name to in­di­vid­u­als and small busi­nesses, against a small fee. This would fur­ther en­able them to achieve sales as the small ini­tial in­vest­ment (ap­prox. half a mil­lion in lo­cal cur­rency) and store space re­mains very small. Pre­mi­u­mi­sa­tion: This is an­other ma­jor trend as con­sumers are in­creas­ingly de­mand­ing prod­ucts hav­ing high qual­ity in­gre­di­ents, ex­otic flavours and sold in in­no­va­tive pack­ag­ing.

The mar­ket has wit­nessed growth in but­ter in dif­fer­ent flavours, such as gar­lic flavoured but­ter and choco but­ter spread, which are priced higher than the nor­mal but­ter. Pre­mium in­ter­na­tional brands, such as Pres­i­dent, are also launch­ing dif­fer­ent vari­ants of but­ter, such as un­salted and but­ter with crush gar­lic, to ex­pand their foot­print in the In­dian mar­ket. Th­ese are priced slightly higher than the usual but­ter avail­able in the In­dian mar­ket.

The mar­ket is also wit­ness­ing de­mand for pre­mium va­ri­ety of cheese, such as mozzarella, em­men­tal, and leer­dammer.

How is the cat­e­gory is grow­ing in terms of as­sort­ment, new prod­ucts?

With the in­creased adop­tion of western foods both in food­ser­vice as well as in day to day cook­ing at home, the de­mand for in­ter­na­tional and non­con­ven­tional cheese va­ri­eties has grown. Ac­cord­ing to Euromon­i­tor In­ter­na­tional, spread­able pro­cessed cheese, has been grow­ing at 24% year-on-year in value terms 2013-17.

The mar­ket has been wit­ness­ing new prod­uct launches in cheese. For in­stance, Parag Milk Foods Ltd. launched ‘Go Cheese Cubes’, with zero preser­va­tives and high cal­cium and milk pro­tein con­tent in 2018. In the last quar­ter of 2017, even Prab­hat Dairy Lim­ited an­nounced plans to launch new cheese and soft cheese prod­ucts.

What’s ex­cit­ing is the in­creased avail­abil­ity of flavoured cheese such as pep­per flavoured pack­aged cheese. The In­dian mar­ket is wit­ness­ing de­mand for ar­ti­sanal cheese. There are sev­eral cheese farms spread across In­dia, which man­u­fac­ture Euro­pean ar­ti­sanal flavours, such as Mon­ta­sio, Edam, Feta, two kinds of Gouda, plain and pep­per and a Camem­bert-style cheese for lo­cal con­sumers.

Non-dairy cheese va­ri­eties are catch­ing up too. For in­stance, Vi­o­life, a Greece based cheese man­u­fac­turer, launched ve­gan cheese in In­dia in 2018. Sold in dif­fer­ent vari­ants, th­ese are in­dis­tin­guish­able from their dairy coun­ter­parts, and high­lights In­dian con­sumers’ in­tent to tran­si­tion to healthy food habits, i.e, mov­ing away from meat­based food habits.

With the in­creased adop­tion of western foods both in food­ser­vice as well as in day to day cook­ing at home, the de­mand for in­ter­na­tional and non-con­ven­tional cheese va­ri­eties has grown. — Dilip Rad­hakr­ishna Re­search An­a­lyst – Food & Nu­tri­tion, Euromon­i­tor In­ter­na­tional

What is the con­tri­bu­tion of the cat­e­gory to over­all sales and to the pro­cessed food sec­tion; Is the shelf space for the cat­e­gory in­creas­ing over the years?

The con­tri­bu­tion of cheese to the over­all dairy cat­e­gory is very low. It is pri­mar­ily dom­i­nated by soft cheese (pa­neer) with the ma­jor con­sumer be­ing the un­or­gan­ised sec­tor, where freshly made pa­neer is pre­pared ev­ery day and sold in un­pack­aged for­mat.

While cheese con­tributed al­most 3% to the over­all pack­aged food re­tail sales, the growth po­ten­tial is promis­ing for this cat­e­gory in In­dia.

The in­creased use of cheese in con­sumer food­ser­vice is also ex­pected to con­trib­ute to in­creased sales of cheese. Cheese re­mains an im­por­tant in­gre­di­ent in Amer­i­can, Ital­ian, Euro­pean fast food and food­ser­vice in In­dia. Ac­cord­ing to

Euromon­i­tor In­ter­na­tional the Pizza and Burger fast food value sales in 2017 it­self grew by 24% and 12% re­spec­tively.

Ex­pan­sion of food­ser­vice out­lets, such as Domi­nos, Pizza Hut, Mcdon­alds and Taco Bell, will fur­ther drive the con­sump­tion of cheese in In­dia, as cheese forms a key com­po­nent of their food menu.

Cheese is also in­creas­ingly cap­tur­ing shelf space and en­hanc­ing its vis­i­bil­ity. Modern re­tail­ers, along with su­per and hy­per mar­kets, tend to have huge shelf space for cheese. Cheese va­ri­eties at­tract at­ten­tion of con­sumers look­ing to make in­ter­na­tional food va­ri­eties at home. In­de­pen­dent gro­cers and re­tail­ers (ki­rana stores) do sell cheese in smaller packs, or slices, which are com­par­a­tively cheaper than the pre­mium cheese va­ri­ety. Pre­mium and ar­ti­sanal cheese is only avail­able in se­lected su­per and hy­per mar­kets and in gourmet stores. Right dis­tri­bu­tion chan­nel re­mains key to ex­pand­ing the prod­uct reach of cheese.

Which are the brands that are gain­ing ground in dairy seg­ment and the rea­sons thereof?

Amul brand, owned by Gu­jarat Co-op­er­a­tive Milk Mar­ket­ing Fed­er­a­tion Ltd will con­tinue to lead the over­all dairy mar­ket. With best sup­ply chain the com­pany en­sure steady sup­ply to dis­trib­u­tors and has main­tained a strong foot hold in the mar­ket through its sin­gle brand strat­egy. Amul has also been in­volved in prod­uct innovation and has launched more than 50 new prod­ucts in the last four years. The com­pany is ag­gres­sively ex­pand­ing its milk pro­cess­ing ca­pac­ity over 2011-2017 and has a tar­get to achieve 20% CAGR growth over 2018-2022.

Mother Dairy brand from Na­tional Dairy Devel­op­ment Board grew by 18% dur­ing 2018 in the dairy business. The com­pany em­barked on ex­ten­sive ex­er­cise to re­de­fine its brands into three ba­sic seg­ments Healthy Basics, Health Plus and User Driven Seg­ments. The strate­gic business unit po­si­tioned the brand high in the con­sumer’s con­sid­er­a­tion and mak­ing the brand

more no­tice­able.

Which new niches can of­fer fresh op­por­tu­ni­ties for the man­u­fac­tur­ers?

Mar­garine with a low base of sales will con­tinue to main­tain dou­ble digit growth rate in the fu­ture. Since, it is con­sid­ered to be a cheaper al­ter­na­tive to but­ter, the de­mand for the prod­uct pri­mar­ily comes from small, roadside, eater­ies and other small-tomedium sized restau­rants. Vanas­pati which is a fa­mous In­dian mar­garine is quite pop­u­lar in the In­dian house­holds for mak­ing sweets. Cream, coffee whiten­ers are some of the cat­e­gories which are quite un­ex­plored prod­ucts in In­dia. Coffee whiten­ers and cream are ma­jorly used in in­sti­tu­tions, ho­tels, restau­rants and cafe­te­rias while the re­tail con­sump­tion is very neg­li­gi­ble. Since, In­dia has abun­dance of milk th­ese prod­ucts have low de­mand. How­ever, coffee whiten­ers are im­mensely used in mid-day meal pro­grams in schools and to make tra­di­tional In­dian sweets.

Cream, coffee whiten­ers are some of the cat­e­gories which are quite un­ex­plored prod­ucts in In­dia. Coffee whiten­ers and cream are ma­jorly used in in­sti­tu­tions, ho­tels, restau­rants and cafe­te­rias while the re­tail con­sump­tion is very neg­li­gi­ble.

Which are the ar­eas that brands should fo­cus on for their own and cat­e­gory growth?

Some of the area they can fo­cus on are:

Health and well­ness: Brands should fo­cus on ad­dress­ing the spe­cific needs of con­sumers by launch­ing more of health and well­ness prod­ucts. For ex­am­ple, low fat milk and low-fat cheese should not only suf­fice the need of con­sump­tion but should also ben­e­fi­cial to health. Main­tain­ing the bal­ance be­tween in­dul­gence and healthy is of prime im­por­tance for the fu­ture growth dairy.

Right prod­uct po­si­tion­ing: Brands should fo­cus on mar­ket­ing their prod­ucts to the right au­di­ence. For ex­am­ple, launch­ing spe­cific flavoured milk tar­get­ing the kids and adults will give good brand ex­po­sure. Spoon-able yo­ghurts as desserts for kids and drink­ing yo­ghurt with low calo­ries for health­con­scious con­sumers will be an ef­fec­tive prod­uct po­si­tion­ing.

Pack sizes: Prod­ucts such as cheese and yo­ghurt are priced high, and many price con­scious con­sumers of­ten want to try be­fore they buy. Hence, smaller pack sizes with low price points would be ideal for trial. Britannia In­dus­tries Ltd, Milky Mist Dairy Ltd and many com­pa­nies have cheese slices sold at INR 66 for a pack size of 100 gm are very pop­u­lar in In­dia as trial packs.

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