Of the Indian Dairy Industry, 80% remains unorganized even today, indicating the potential that can be tapped by Dairy Companies. Valued at INR 5,000 billion in 2016, 60% of the market comprises liquid and powdered milk, while value added products such as butter, ghee and curd comprise the remainder. Highly premiumized products such as branded yogurt, probiotic dahi, specialty cheeses etc., account for only 5% of the revenue; they nevertheless, hold the maximum margin potential for dairy industry companies and tend to be the focal point for private MNCs like Nestle and Danone.
This industry docket provides a bird’s eye view of the dairy industry in 2016 and re-segments the market to gain strategic insights with respect to growth opportunities in the market. The docket further includes market projections, key trends, drivers and restraints. The docket also delves into the major challenges faced by current competitors and what typical steps are taken to overcome them.
Key questions this Docket looks at:
- How big is the dairy market in India?
- What is the current level of organization in the market?
- Who are the major organized players in this market?
- What does the industry ecosystem look like?
- What are the roles of various stakeholders?
- What are the key challenges plaguing the dairy industry currently and what are the major players doing to overcome these?
- Where do the growth opportunities for suppliers lie?
1. Scope & Limitations
- Scope & Limitations
2. Indian Dairy Industry: Key Takeaways
- An INR 5,000 Bn Market of which 80% is still Unorganized; however, Opportunities abound in both organized and unorganized segments
- Re-segmenting the market provides a strategic view of growth opportunities
- Wellness and premium products are a key focus area for private dairies… despite being only 5% of the market
- Two pronged strategy logical: Rural penetration in basic products; Category expansion in premium products for indulgent customers
- Basic Product Opportunities: Ice cream and Paneer most lucrative individual products due to ease of entry and market growth
- Basic Product Opportunities: Rural Penetration will require new strategies / business models for success… boom has just started
- Wellness and Premium Opportunities: Premium Variants of Ice cream and Probiotic based products offer high opportunity as they do not require established brands.
- Wellness and Premium Opportunities are better suited to new entrants, especially as short-term focus
- Wellness and Premium Opportunities: Top 5 reasons to Invest indicate its potential
3. Market Outlook: India
- Value-added Products market growing 1.5 times faster than the milk market
- Consumer preference for convenient, healthy yet indulgent products to see increased adoption of value-added premium products
- Growth will be driven by Value-added products… however, milk to continue to dominate as the largest category in the sector
- Inthe organized sector, state cooperatives dominate packaged milk, while private dairies focus on UHT and powdered milk
- Major dairy competitors have consistently grown well above the industry growth rate; should continue so in the near and medium terms
- Margin pressures are driving competitors to improve volumes… Recombined milk and rural penetration are top two focus areas
- Organized market: Coops* dominate mass market ghee, butter, curd, ice-creams variants; private dairies firmly fixed on premium variants of these
- Growing adoption of niche, premium products among urban consumers to drive value-added products category
4. Dairy Industry: Opportunities & Challenges
- Opportunity focus in both rural and urban markets driven by increasing margin pressures for processors
- Key Challenges in Dairy: Complexity and related indirect costs of milk procurement are a major pain point for most competitors
- Challenges faced by Dairy in: Farming/procurement, result in dairy processors incurring heavy costs to streamline operations for their business
- Key Challenges in Dairy: Additionally, low yields, animal health issues and (mis)use of hormones result in poor returns… forcing farmers to increase prices
- Key Challenges in Dairy: With Farming inputs costs on the rise, price increases are passed on to processors
- Key Challenges in Dairy: Procurement price increases often squeeze processors profit margins: processors look to diversify into premium, high margin segments
- Key Challenges in Diary: Inadequate cold chain infrastructure compels companies to keep bulk of the TCL services in-house resulting in high costs for dairy processors
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