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Indian Dairy: Coming of age

Sep 16, 2000

India is the 2nd largest milk producer in the world (estimated production: 78 m tonnes in FY00). This segment is dominated by co-operative societies like Gujarat Co-operative Milk Marketing Federation (GCMMF), because of government policies. The private sector has entered into value added product categories such as branded ghee, butter, cheese, skimmed milk powder, dairy whiteners and infant foods. The total market is valued at Rs 50 bn at present and as per industry sources is expected to touch Rs 120 bn by the year 2005. Indian households are closely knit and the percentage of nuclear families and working women is very low. Therefore, while the market itself is one of the largest in the world, the penetration of packaged and branded products is abysmally low. People prefer homemade products, which are cheaper than branded products.

Annual growth in these branded products range from 5-15%. The fastest growing products in this segment are butter (8-10%), cheese (10-15%) and dairy whiteners (10-15%). All other products are growing at 5-7%.

Overall, GCMMF is the market leader in this segment. Its brand Amul controls 75% of the branded butter and cheese market. Nestle is the market leader in infant foods (Cerelac), with a 78% market share.

Realising the growth potential of this segment a number of entrants have set their eyes on this segment. Britannia is one of them. This biscuit major is partly promoted by Group Danone (the 3rd largest food processing company in the world) and is therefore counting on its parent’s expertise to dominate the segment. Apart from Britannia the Rs 2 bn Oman National Dairy Products has also eyeing the Indian milk and dairy market.

The segment that has seen the most action in recent months is the milk and curd segment. The milk segment itself is worth around Rs 1 bn currently. Local co-operatives call the shots in this segment. Seeing the vast potential, Nestle and Amul both have launched branded plain milk, but Britannia is concentrating on the flavoured milk segment. Meanwhile, Amul has also introduced branded curd. Though this market is large (1 million litres per day), but local vendors dominate it.

With recent food poisoning cases happening in metros like Delhi and concerns on contaminated milk growing, there are a growing number of consumers especially in the big cities. As health concerns grow, so will the number of entrants and investments in cold storage chains.

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