analysis

AAKANKSHA ROBERTS NEHA SRIVASTAVA

INTRODUCTION
Dairy industry represents a major segment of the food industry. Every individual consumes dairy products daily in various forms like curd, cheese, milk, and their increased attention towards health and nutrition has increased the demand of dairy products. The dairy farming has been transformed from traditional farming to advanced farming where more tools and equipments are used to fulfill the increasing demand of the customers and has enabled the manufacturers to present the dairy products in different forms like condensed milk, powdered milk, homogenized milk, and pasteurized milk.

GLOBAL DAIRY MARKET

The global dairy market was valued at about 276 billion euros in 2010, corresponding to 207 million tons of dairy products Within the dairy market, liquid and powdered milk had the lowest growth rate. Flavored milk and yogurt were the most dynamic categories, with substantial growth rates over the fiveyear period being analyzed

Within the dairy market, liquid and powdered milk had the lowest growth rate. Flavored milk and yogurt were the most dynamic categories, with substantial growth rates over the fiveyear period being analyzed.

On a value basis, milk (white+flavored) is the biggest category (39%), followed by cheese (30%) and yogurt and similar products (19%). On a volume basis, milk is still the top category (72%), but in this case yogurt is next (14%), followed by cheese (7%).

As shown in the chart below, the most important geographic macroareas for dairy products are Western Europe and Asia, which together account for about 50% of the total dairy market.
More specifically, while Western Europe and North America are more mature markets with limited growth (2005-2010 CAGR of 0.6% and 0.7%, respectively), Asia is growing at the fastest rate (2005-2010 CAGR of more than 6.5%), showing that it is a dynamic market in the diary segment as well. The Middle East and Africa are also growing markets (2005-2010 CAGR of more than 6%).

ASIAN DAIRY SCENE

POPULATION

MILK PRODUCTION
20%

40%

60%

80%

REST ASIA

With 60 per cent of the world population, Asia accounts for only 20 per cent of the global milk production The total world milk production of more than 500 million tonnes for a population of about 4 billion amounts to an average annual per capita availability of 100 kg. The corresponding figure for Asia is only about 27 kg and the consumption is about 30 kg. Some 10 per cent of milk consumed in Asia is imported. In several Asian countries, imports of dairy products, both as finished products in consumer packs and in bulk for recombination into milk, have helped create a dairy market and a milk processing industry.

Dairy productivity growth in Asia: Sources of change in cow milk production, 1985-1998 % of change in cow's milk production

INDIA AND THE DAIRY INDUSTRY (Oyster of the global dairy industry)

RESOURCES
India has vast livestock resources (57 per cent of the world buffalo population and 16 per cent of the cattle population)

Indian Dairy products

Product Fluid Milk Ghee Butter Khoya Milk powder(IMF included) Cottage cheese others Percentage 46.0% 27.5% 6.5% 7.0% 6.5% 3.5% 2.0% 1.0%

INDUSTRY INFRASTRUCTURE

INDUSTRY INFRASTRUCTURE
The industry is dominated by small, informal and unorganized dairy units. In the absence of adequate integration and economies of scale, most of the milk and milk products are either sold unprocessed, or processed locally into low value-added products. Such products in absence of hygiene, quality and safety are unable to command premium prices from the consumers. However, as we enter the new millennium, many changes are expected in the production and processing sectors as the formal sector's share grows in response to changes in demand, consumer tastes, and consumers' willingness to pay for quality

FROM INFORMAL TO ORGANISED SECTOR

The projected impact of these changes on the structure of dairy production and processing are: Increase in crossbred population and herd size The figures given in earlier sections clearly reveal that the population of crossbred high-yielding animals is increasing at a faster rate than local cattle. If this trend continues, milk production will increase significantly. The studies have also revealed that as production of milk increases, the marketed surplus of milk also increases. The higher the procurement, the lower the cost of producing the product, which will make the product competitive and remunerative. With the entry of the private sector into milk processing, the average herd size may go up because the private sector would like to reduce transaction costs in milk procurement, and therefore may promote large dairy farms. Clean milk production To compete in the world market as well as the domestic market, and to meet international quality standards, it is highly desirable to produce clean milk under hygienic conditions, which considerably increases the shelf life of the product.

RESEARCH AND DEVELOPMENT

Thanks to one of the latest scientific discoveries, babies could soon drink a bottle of human milk produced from cows instead of being breastfed by their mothers. Once again scientists have been tinkering with genetic modification researchers at the China Agricultural University bred 300 cattle with human genes so their milk contains the same beneficial and unique nutrients and fat content as breast milk. For moms unable or unwilling to breast feed, the scientists believe this new human milk from cows could offer an alternative to infant formula.

RESEARCH INFRASTRUCTURE
The Indian dairy industry has aimed at better mananamegemt of the national resources to enhance milk production and upgrade milk processing involving new innovative technologies.

Embryo Transfer (ET) technology allows the multiplication of elite livestock breeds at a much faster rate. In the past 30 years, the annual production of compounded feed has gone up to 3 million tonnes from 40,000 tonnes New types of feeds have been developed, to improve the nutritive value of the traditional cattle diet. Herbal and ayurvedic formulations, are also being used extensively for disease control and as feed supplements and as yield boosters. The Government of India, realizing the importance of animal genetic resources, has established the National Bureau of Animal Genetic Resources (NBAGR) at Karnal, Haryana, in 1984.

SWOT ANALYSIS
The study of this SWOT analysis shows that the strengths and opportunities far outweigh weaknesses and threats. Strengths and opportunities are fundamental and weaknesses and threats are transitory. Any investment idea can do well only when you have three essential ingredients: entrepreneurship (the ability to take risks), innovative approach (in product lines and marketing) and values (of quality/ethics). The Indian dairy industry, following its delicensing, has been attracting a large number of entrepreneurs. Their success in dairying depends on factors such as an efficient yet economical procurement network, hygienic and cost-effective processing facilities and innovativeness in the market place. All that needs to be done is: to innovate, convertproducts into commercially exploitable ideas.

INVESTMENT IN DAIRY INDUSTRY

New Zealand is keen to collaborate with India. Our country is the largest milk producer in the world. But, soon it is expected that will be more than what this sector can supply. Hence, our focus should be on the the improvement of dairy sector in India.

Biotechnology Dairy food processing equipment

Food packaging equipment

Distribution channels Retailing Product development Ingredient manufacture Technology-driven units Training centres for education

What Indian Dairy Industry Has To Offer To Foreign Investors?

Potential for investment in the dairy industry

Some areas of Indian dairy industry can be toned up by the evocation of differentiated technologies and equipment from overseas. These include: Raw milk handling: The raw milk handling needs to be elevated in terms of physicochemical and microbiological properties of the milk in a combined manner. The use of clarification and bactofugation in raw milk processing can aid better the quality of the milk products. Milk processing: Better operational ratios are required to amend the yields and abridge wastage, lessen fat/protein losses during processing, control production costs, save energy and broaden shelf life. The adoption of GMP (Good Manufacturing Practices) and HACCP (Hazard Analysis Critical Control Points) would help produce milk products adapting to the international standards. Packaging: Another area that can be improved is the range of packing machines for the manufacture of butter, cheese and alike. Better packaging can assist in retaining the nutritive value of products packed and thus broaden the shelf life. A cold chain distribution system is required for proper storage and transfer of dairy products. Value-added products: There's vast scope for value-added products like desserts, puddings, custards, sauces, mousse, stirred yoghurt, nectars and sherbets to capture the dairy market in India.

TRADE IN DAIRY INDUSTRY

EXPORT, IMPORT AND DOMESTIC SALES

EXPORT
Export of certain milk products like milk powder, ghee and butter was canalised uptil 1993. With the objective of promoting exports of milk products, the Govt. have dechannelised the export of these milk products with effect from mid 1993. Major Destinations- UAE (43%), Nepal (19%), Bangladesh(12%) FUTURE MARKETSouth East Asia, Russia and Africa will be the emerging market for Indian dairy products.

Products for exports

1.Skimmed Milk Powder, 2.Whole Milk Powder, 3Ghee, 4.Butter, 5.Cheese, 6.Condensed Milk, 7.Casein etc. are some of the milk products being exported from India

Potential for value added products

Ethnic Indian dairy products like Sweets Shreekhand,Rusgulla, Khoya and Ready-to-Eat-Kheer, Haluwa, etc. have good demand in the countries where ethnic Indian population is settled. For promotion of these products, we require export worthy consumer packing, which also improves the shelf-life of the product

MILK PRODUCTION IN INDIA

YEAR 2001-02 2002-03 PRODUCTION (Million tonnes) 80.5 84.4 Per capita availablity (gms/day) 220 225

2003-04
2004-05 2005-06 2006-07

86.2
88.7 90.1 94.6

230
231 229 220

IMPORT
Commercial imports of dairy commodities were significant until the early 1970s, comprising of about 50% to 60% of throughput, but declined significantly in the 1980s and 1990s. However, the imports of milk powders and butter/butter oil increased substantially in the late 1990s, mainly due to low import duties on these two products as a commitment under the WTO Agreement. Although imports of cheese are still low, they grew at a rapid rate during the 1990s.

MARKETING(Reaching the target customer)

MILK MARKETING CHANNELS

CHANNELS Producer-consumer Producer-milk hawker-consumer Producer-processor-consumer Producer-processor- retailer-consumer Producer-dairy co-operative -processorretailer consumer Producer-milk transporter-processor retailer-consumer Producer-milk trader-processor-retailerconsumer Producer-dairy coop - milk transporterprocessor-retailer-consumer NO. OF INTERMEDIARIES 0 1 1 2 3 3 3 4

PRICING
The price of a product in the market is an important factor influencing consumer demand. Hence to be marketable, a dairy product must be competitively priced. This implies that the costs involved in raw material procurement, processing, packaging, storage, marketing and distribution must be kept as low as possible. generally the price of a dairy product will involve the following costs: Cost of raw milk Cost of raw milk collection and transportation Cost of processing Cost of packaging Cost of marketing and distribution Taxes and tariffs Profit margins at each stage of the marketing channel (Collection, Processing and marketing margins)

Feasibility Study for Milk Marketing and Processing

Before one decides to invest in the business of milk marketing and/or processing one should carry out a feasibility study to establish the economic viability of the planned business. this should include a realistic business plan. The essential elements of a feasibility study should include: Establish the amount of milk produced, both in the morning and evening, at the proposed site, throughout the year Identify the current market outlets available for milk products in the area Determine the average fresh milk and various milk products prices being charged by local producers. Test various product samples for taste to determine acceptable products being produced in the proposed area Locate sources of energy (fuel-wood, charcoal, electricity, etc. and water) Determine the capital investment required (be sure to include land, building, equipment and power). Draw up a clear business plan that will establish the viability of the proposed milk marketing or processing enterprise

Overall dimensions
Dairying is an important part of the Indian agricultural economy. At the national level, about 17% of the total value of output from agriculture derives from this sector, placing Indian milk sector in first place followed by rice (14.4%) and wheat (8.7%) in 1998-99 (CSO, 2001). Dairying is dominated by smallholder production systems; almost 70% of the milk producers in India are landless small and marginal farmers who own one or two animals India initiated major macro-economic reforms in the early 1990s that encourage the liberalization of all sectors of the economy, and the dairy sector was no exception. This increasingly exposed the Indian dairy sector to world dairy markets that have been highly distorted by policies of high tariffs, domestic support, and export subsidies in developed countries. There is likely to be restructuring of the dairy sector.

Contribution to the National Economy (income and employment)

Dairy enterprise is considered a "treasure" of the Indian economy, particularly for rural systems. It provides nutrition, draft animal power, organic manure, supplementary employment, cash income, and a 'cushion' for 'drought proofing' in India The sector involves millions of resource-poor farmers, for whom animal ownership ensures critical livelihood, sustainable farming, and economic stability Dairying at the micro-level provides employment and income to more than 70 million farm families directly in India.

sustainable farming

cash income

supplementary employment

ensures critical livelihood

nutrition

organic manure

draft animal power,

Socioeconomic Profile of Dairy Farmers

Indian dairy farming is basically a smallholder production system, characterized by milk production by the masses rather than mass production of milk. More than 80 million households (about 73% of rural households) keep some type of livestock Although dairying is becoming more commercialized in some areas, it predominantly remains subsistence farming constituting a complementary/supplementary enterprise to crop farming, with regular sales of surplus production. The base for Indian dairying is provided by millions of landless agricultural laborers and marginal and small farmers who maintain one or two milch animals of low genetic potential for milk production, primarily fed on crop residues and byproducts, and reared with the help of under-employed family members, mostly female workers. Dairy farmers in India are by and large illiterate, resource-poor, and low risk-bearers. They often exhibit a low level of farming innovation; in the majority of cases, they are either non-adapters or late adopters of modern technologies

Operation Flood

OPERATION FLOOD
INTRODUCTION
Operation Flood was a rural development programme started by India's National Dairy Development Board (NDDB) in 1970. One of the largest of its kind, the programme objective was to create a nationwide milk grid. It resulted in making India the largest producer of milk and milk products, and hence is also called the White Revolution of India.

OBJECTIVES
I. II. III. IV. Operation Flood's objectives included : Increase milk production ("a flood of milk") Augment rural incomes Fair prices for consumers

Salient Features of Operation Flood

Key parameters Date of start Date of ending Investment (Rs crore) No. of milksheds No of DCSs set up No of members(lakh) Average milk procurement(mkgpd) Liquid milk marketing (llpd) Processing capacity Rural dairies (llpd) Metro dairies (llpd) Milk drying capacity (MTPD) Technical inputsNo. of AI centers No. of AI done/year Cattle feed capacity ('000 MTDP) States covered Operation Flood Phases Phase I July 1, 1970 March 31, 1981 116.50 39 13,270 17.5 2.56 27.8 45.4 29.0 Phase II April 1, 1981 March 31, 1985 277.20 136 34,523 36.3 5.78 50.0 88.0 35.0 Phase III* April 1, 1987 April 30, 1996 137.95 170 72,744 93.0 11.0 100.0 192.0 72.8

340.0 4,868 820,782 1.65 Andhra Pradesh, Bihar, Delhi, Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Uttar Pradesh, and West Bengal

507.0 7,802 1329,455 3.29

990.0 10,915 3943,890 4.80

Andhra Pradesh, Assam, Bihar, Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu & Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Orissa, Punjab, Rajasthan, Sikkim, Tamil Nadu, Tripura, Sikkim, Tamil Nadu, Uttar Uttar Pradesh, West Bengal, Pradesh, West Bengal, Andaman & Nicobar, Pondicheri, Pondicheri and Delhi and Delhi

Major Players

The dairy industry is dominated by the co-operative sector. About 60% of the installed processing capacity is in the co-operative sector. The National Dairy Development Board (NDDB) is a major player in the market with its major brand, Amul. Leading brands like Amul, Nestle, Mother Dairy and Britannia are in the race to tap the growing market. SmithKline Beecham Consumer Healthcare, Nestl India and Heinz India are amongst the large MNCs that dominate the high-value milk products market. Other players include Indiana Dairy Specialties, Jagatjit Industries Ltd and various other state cooperatives. Some dairy plants have production of mithais on a commercial scale. Some national brands like Haldiram, Bikanervala, K C Das, Chitales, Ganguram, Brijwasi, Agarwal Sweets etc are getting wide acceptance because of consistent quality Encouraged by the growing market and cashing on brand value select dairy companies are planning major expansion plans in various cities with new brands suited to local taste and preferences and realizing higher prices with higher sales volumes and product safety. The milk and dairy products segment is set for up gradation of cold-storage chains for expansion. Mother Dairy, a wholly owned subsidiary of National Dairy Development Board plans to make strong presence in the market of milk and milk products under the Mother Dairy brand through retail outlets across the country in addition to its own 300 outlets with provision of cold storage and cold chains.

AMUL- THE TASTE OF INDIA

Amul has been ranked as the best brand from India

 Amul is more than just a milk brand to the Indians. Its advertising campaign has always represented the common man's point of view on the serious national issues with a sense of beautiful humour Owned and marketed by Gujarat Co-operative Milk Marketing Federation (GCMMF), Amul has beaten all other Indian brands to notch the 89th position in a 'Top 1000 Brands of Asia' survey, conducted by Campaign magazine. The July issue of Campaign, published from Hong Kong and Singapore, ranked Amul the number one among Indian brands.

Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF) -AN OVERVIEW

Year of Establishment

1973 17 District Cooperative Milk Producers' Unions (15 Members & 2 Nominal Members) 3.03 Million 15,712 13.67 Million litres per day 3.45 billion litres 9.2 million litres (peak 12 million) 647 Mts. per day 3690 Mts. per day Rs. 9774 Crores (US $2.2 Billion)

Members

No. of Producer Members No. of Village Societies Total Milk handling capacity per day Milk Collection (Total - 2010-11) Milk collection (Daily Average 2010-11) Milk Drying Capacity Cattlefeed manufacturing Capacity Sales Turnover -(2010-11)

Our Member Unions 1. Kaira District Cooperative Milk Producers' Union Ltd., Anand 2. Mehsana District Cooperative Milk Producers' Union Ltd, Mehsana 3. Sabarkantha District Cooperative Milk Producers' Union Ltd., Himatnagar 4. Banaskantha District Cooperative Milk Producers' Union Ltd., Palanpur 5. Surat District Cooperative Milk Producers' Union Ltd., Surat 6. Baroda District Cooperative Milk Producers' Union Ltd., Vadodara 7. Panchmahal District Cooperative Milk Producers' Union Ltd., Godhra 8. Valsad District Cooperative Milk Producers' Union Ltd., Valsad 9. Bharuch District Cooperative Milk Producers' Union Ltd., Bharuch 10. Ahmedabad District Cooperative Milk Producers' Union Ltd., Ahmedabad 11. Rajkot District Cooperative Milk Producers' Union Ltd., Rajkot 12. Gandhinagar District Cooperative Milk Producers' Union Ltd., Gandhinagar 13. Surendranagar District Cooperative Milk Producers' Union Ltd., Surendranagar 14. Amreli District Cooperative Milk Producers Union Ltd., Amreli 15. Bhavnagar District Cooperative Milk Producers Union Ltd., Bhavnagar

The Product Range

Breadspreads

Amul Butter, Amul Lite, Delicious Table Margarine Amul Pasteurized Processed Cheddar Cheese, Amul Processed Cheese Spread, Amul Pizza (Mozarella) Cheese,Amul Emmental Cheese, Amul Gouda Cheese, Amul Malai Paneer (cottage cheese), Utterly Delicious Pizza Amul Gold Full Cream Milk 6% fat, Amul Shakti Standardised Milk 4.5% Fat, Amul Taaza Toned Milk 3% fat,Amul Slim & Trim, Amul Cow Milk Amul Gold 4.5% fat Milk, Amul Shakti 3% fat Milk, Amul Taaza 1.5% fat Milk, Amul Lite Slim-n-Trim Milk, Amul Fresh Cream Amul Full Cream Milk Powder, Amulya Dairy Whitener, Sagar Skimmed Milk Powder, Amulspray Infant Milk Food, Sagar Tea and Coffee Whitener Amul Kool Flavoured Milk, Amul Kool Caf, Amul Kool Koko,Amul Kool Millk Shaake, Amul Kool Chocolate Milk,Nutramul Energy Drink Stamina Instant Energy Drink

Cheese Range

Fresh Milk

UHT Milk Range

Milk Powders

Milk Drink Health Drink

Brown Beverage
Curd Products Pure Ghee Sweetened Condensed Milk Mithaee Range (Ethnic Sweets) Ice-cream Chocolate & Confectionery

Nutramul Malted Milk Food

Amul Masti Dahi (fresh curd), Amul Masti Spiced Butter Milk,Amul Lassee, Amul Flaavyo Yoghurt Amul Pure Ghee, Sagar Pure Ghee Amul Mithaimate Amul Shrikhand, Amul Mithaee Gulabjamuns, Amul Basundi,Avsar Ladoos Sundae Range, probiotic,,sugarfree and probiotic Amul Milk Chocolate, Amul Fruit & Nut Chocolate, Amul Chocozoo, Amul Bindass, Amul Fundoo

The Product Range

Sales Turnover

Rs (million)

US $ (in million)

1994-95
1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

11140
13790 15540 18840 22192 22185 22588 23365 27457 28941 29225 37736 42778 52554 67113 80053 97742

355
400 450 455 493 493 500 500 575 616 672 850 1050 1325 1504 1700 2172