Scope Of Private Players In Indian Dairy Market And Its Negative Effects – eDairyNews
Countries India |23 enero, 2018

Dairy | Scope Of Private Players In Indian Dairy Market And Its Negative Effects

India is producing more than 17% of world`s milk worth of around Rs 5 lakh Cr. Out of 40 Cr. Litre per day of milk production only 7 Cr. Litre per day is being utilized by the organized sector…

By: Akshay Jadhav

Source: LinkedIn

Link: https://www.linkedin.com/pulse/scope-private-players-indian-dairy-market-its-negative-akshay-jadhav/?trackingId=1vP6tsVuG3m3D%2FOx0ZcYbA%3D%3D

India is producing more than 17% of world`s milk worth of around Rs 5 lakh Cr. Out of 40 Cr. Litre per day of milk production only 7 Cr. Litre per day is being utilized by the organized sector- consisting of co-operatives such as Amul, Nandini as well as private players such as Hatsun Agro, Nestle etc. Currently, dairy per capita demand is going up by 4.5 % each year and also the investment in this sector will be around Rs 9,000 Cr. in the next five years. Almost 41% i.e. 16.4 crores lpd surplus milk comes to urban areas through the unorganized sector, therefore, private players are trying to enter this sector. During the past one and a half decades, Nestle, Britannia, Heritage Foods, Hatsun Agro, VRS Foods Limited, Creamline Dairy are trying to strengthen their presence.

while a few multinational companies like ITC, Mahindra, Godrej Agrovet, Walmart have already entered Indian dairy sector. The entry of these players is having their own positive and negative effects. There are some negative effects due to the entry of private players which are witnessed in recent years (2015-16). The farm gate prices of private dairies are said to have reduced in North India which caused much concern amongst farming community. Some dairy farmers have diverted from private players and are supplying to dairy cooperatives. This has resulted in the excessive supply of milk to the dairy cooperatives resulting in the accumulation of a large quantity of Skimmed Milk Powder (SMP) which lock up of working capital for the cooperatives and even loss of capital if they are spoilt or sold under duress. Also, there are adulteration practices done by the unorganized channel to compete with the organized sector. The animals are being treated badly to get the high yield. The new private entrants coming with both their arms open to capture the market and strong capital support. So, to fight them out of the competition, it is high time for cooperatives to bring dynamism to their operating style.

HOW INDIA’S MILK PRODUCTION IS DIVIDED UP ON DAILY BASIS :

INTERESTING FACTS AND SCOPE OF PRIVATE PLAYERS IN INDIAN DAIRY MARKET :

India is producing more than 17% of world`s milk worth of around Rs 5 lakh Cr.
Milk production in India has risen by a historic 5.3% to reach 163.3 million tonnes in 2016-17 against 155.5 million tonnes this is the highest growth rate achieved in the past.
India’s per capita consumption of milk at 97 liters a year is way below that of western countries like the US, which boasts per capita consumption of 285 liters per year. And per capita monthly consumption expenditure on Milk and Milk Product ( India) of Rural – Rs. 116.38 and of Urban Rs. 187.14.
Currently dairy per capita demand is going up by 4.5 % each year cause of growth in population, urbanisation, changing demography, increasing per capita GDP, widespread and 24 × 7 availability of liquid milk and milk products, changing food consumption patterns, high income elasticity of demand for milk and regional imbalances in income/consumption.
Over 80 % of milk consumption in India is in the form of liquid milk and over 55 % of the revenue of large co-operatives, such as Amul and Nandini comes from selling liquid milk only.
Almost 41% i.e. 16.4 crores lpd surplus milk comes to urban areas through unorganized sector channels include milkmen distributing fresh milk to households etc.
Over 80 % of milk consumption in India is in the form of liquid milk only.
List of value-added product of the milk are increasing i.e. flavored milk, milkshake, pouch curd, set curd, all types of cheese, yoghurt, buttermilk, lassi, paneer, butter, ghee, shrikhand, misti doi, ice cream, dairy whitener, cream, baby foods,
More then 1,200 SKUs (stock-keeping units) is available through organized retail.
Amul alone wants to hit Rs 65,000 crore in revenues by 2020 having a network more than 26 lakh farmers.
Liquid milk generates an EBITDA of 6-7 percent, a product like curd generates margins as high as 25-30 percent, ice-creams 30-35 percent, and cheese 35-40 percent.
Investments in the dairy business will broadly range between Rs 9,000 crore and Rs 10,000 crore in the next five years.” The major share of the investment will be for creating infrastructure at farm level and for collection and storage of milk.

THE NEGATIVE EFFECT OF PRIVATE PLAYERS

The farm gate milk prices are reduced in 2015-16.

The farm gate prices are said to have reduced by private dairies in North India and Maharashtra.The recent drop in price has caused much concern amongst farmers

The accumulation of a large quantity SMP with the dairy cooperatives.

Because of low price realization the dairy farmers diverts the milk from private to dairy cooperatives in 2015-16. This has resulted in the excessive supply of milk to the dairy cooperatives resulting in the accumulation of a large quantity of Skimmed Milk Powder with them.

The adulteration practices are increased by unorganized channel.

The adulteration is a practice done either to substitute the cheaper ingredients or to impress the buyer to think the product is more valuable or of better quality by different marketing channels. This adulteration is happening mainly by the unorganized channel to compete the organized sector.
CONCLUSION

Almost 41 % of surplus milk from villages comes to urban areas through unorganized sectors. The unorganized channels include milkmen distributing fresh milk to households as well as manufacturers of traditional milk products. Currently, dairy per capita demand is going up 4.5 % each year also investment in this sector will be around Rs 9,000 Cr. in the next five years therefore private multinational players like Mahindra, ITC, Lactalis SA, Nestle, Britannia and many regional players trying to strengthening their base. Some negative effect of this private player is can be seen in recent years. The dairy cooperatives however, have continued to support the dairy farmers by ensuring that the price paid to the farmers is protected. But near future, this private player will definitely affect the Indian dairy industry positively or negatively, therefore current cooperatives should prepare themselves to compete the private players.

 

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