Indian dairy market offers strong potential for premium and wellness products

While multiple opportunities exist for dairy companies, rural focus and wellness/premium products will be primary. The complexity and indirect costs of milk procurement drive private companies toward low-volume, high-margin premium products. Cooperatives, on the other hand, will leverage their strength in rural areas. The exceptions are large players like GCMMF (Amul) and Mother Dairy that play across the spectrum. Opportunities in both rural and urban markets will be bolstered by increasing margin pressures for dairy processors.

“Rising dairy farming input costs are passed on to processors. Coupled with the costs for collecting, storing and transporting milk, this squeezes processors’ profit margins, encouraging them to diversify into high-margin products and to improve volumes for basic products by using recombined milk,” said Govind Ramakrishnan, Consultant, Visionary Science (Chemicals, Materials & Foods) Practice, Frost & Sullivan. “Rural market opportunities will involve upgrading consumers to branded products. Urban focus will be on offering a combination of convenience, indulgence and health—a package the dairy industry is well-positioned to provide given the ‘healthy’ and ‘nutritious’ tag attached to milk and dairy products in India.”

The Indian Dairy Industry examines opportunities, trends, drivers and restraints in the Indian dairy market along with key challenges faced by market participants.

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“Basic dairy products such as standardized/toned milk, butter, packet curd, ghee, paneer, and branded ice creams, account for 95% of the Indian market, but remain the stronghold of state cooperatives,” noted Ramakrishnan. “Private companies are dissuaded by issues like price pressure, low margins, and requirement for extensive distribution networks.”

Major competitors in the market include Amul, Mother Dairy, Nestle, Danone, Kwality, Hatsun Agro, Heritage Foods, Paras Dairy, Parag Milk Foods, Creamline Dairy, Aavin, and Nandini. Trends supporting market growth include:

Steady expansion of the organized sector

Opportunities to differentiate basic products

Urban consumer preference for convenient, healthy yet indulgent products that increase premiumization

User disposition toward the taste of dairy-based health products despite the availability of several non-dairy substitutes

Demand for and hence opportunity to create new categories in functional products and single serving units; and

High acceptance of new brands in the wellness and premium segment, which enables easy market entry for new players.

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Source: The Hindu Business Line

Link: http://www.thehindubusinessline.com/business-wire/indian-dairy-market-offers-strong-potential-for-premium-and-wellness-products/article9778015.ece

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