Chapter 3: SWOT & STEEP Analysis for the Dairy

Industry in India

"We are all time travellers on a journey into the future. However, we are not tourists accompanied by a guide who can tell us just what lies ahead and will keep us safe and comfortable. Instead, we are explorers in an unknown and dangerous region that no one has ever seen before". Edward Cornish (2004)

The understanding of technology foresight sets on stage to look systematically into

long-term perspective of dairy industry in India for identification of areas, issues and

emerging technologies. The dairy industry has evolved through consistent efforts and

application of science and technology during pre and post independence period of

India. Consequently, India has become leading milk producer in the world with 104

million tonnes production in 2008-09. At the same time India is second highest

populous country with 1.027 billon persons in 2001 along with largest milk and milk

products consumer in the world. India's population rose by 21.34 % between 1991 and

2001 and this trend is, aggressively, estimated to reach at 1.17 billion by July 2009.

Majority of population is dependent on agriculture and allied sector and their future

still revolve around the agricultural sector for employment, livelihood and income.

The shaping of future has high significance for the people who are dependent on

Agriculture, first, and those who get food and nutritional security from Dairy sector.

There can't be one future of the Dairy sector, in same voice; it can't be predicted at a

certain point of time. But the future could be created through well deliberated goal

oriented efforts through technological, institutional and Governance Innovations. The

stakeholders' involvement in development of dairy sector could set path for shaping

the desired future of dairy sector in India.

The technology foresight can provide an opportunity to explore the plausible future of

dairy sector then set to achieve that through appropriate policy initiatives. The

concept of foresight does convey that there can not be a single future of the dairy

sector. Therefore, to achieve desired future it is essential to identify the major trends,

49

drivers, actors and factors of the dairy sector. Further, it needs to setup priority for

Research and Development (R&D), Technological transfer and diffusion, investment,

sociological and political agenda, governance and trade policies.

In the preceding context, this chapter is aimed at carrying out a technology foresight

exercise for the dairy sector in India. It investigates different weakness and threats of

the sector, along with the opportunities and strengths. The next section identifies and

analyses sociological, technological, economical, ecological or environmental, and

political drivers and factor for dairy industry. Furthermore, it merges the SWOT

analysis and STEEP analysis (in an effort to evolve a model) for attaining

competiveness of innovation system in the dairy sector. It discusses details of creating

future competitive dairy industry through turning weaknesses and threats in

opportunities and strength through operations of STEEP drivers. This is inorder to

pursue objectives for setting up priority for Research and Development (R&D),

Technological transfer and diffusion, investment, sociological and political agenda,

governance and trade policies.

3.1 SWOT Analysis

The dairy industry has its own strengths and weaknesses to build on present scenario

for future growth. Strengths and weaknesses are the internalities of the present

situation of dairy industry within the country. Opportunities and threats are the

externalities of the future situation, not only within the country, but also expected

from outside the borders. The analysis attempts to identify the strengths to meet the

opportunities and the threats of the future and weaknesses are going to be challenged

or shown up by these threats and opportunities. The following table of strengths,

weaknesses, opportunities and threats is to be used as a guide for the analysis that

follows.

50

Table 3.1: SWOT (Strengths, Weaknesses, Opportunities, Threats)

Strengths

o Largest milk producer

o Fast growing economy

o Annual highest milk production

growth

o Emerging competent regulatory

system and authority

o New Food safety and standard law

o Trained S&T human resource

o Research and Educational Institutes

o 'Strong successful cooperative

movement', in particular parts of

India

Opportunities

o Large rural market

o Increasing quantity of available milk for processing

o Fast growing economy

o Diversification

o large market and investment opportunity

o increasing income of consumers,

o changing life style and preference for milk and milk products,

o more number of adult consumers,

o untapped indigenous milk products market

o low cost human resource and em loyment generation

51

Weaknesses

o Low milk productivity Poor

veterinary services

o Lack of data on dairy sector

o Weak organised retailing and established cold chain

o Large unorganised dairy sector

o Poor raw milk quality

o Lack of Good dairy practices

o Weak financial services

o Low dairy plants efficiency

o Inappropriate milk collection system in certain areas

Threats

o Food safety

o Unhygienic practices by farmers at

farm

o Uncontrolled use of antibiotics and

medicines on milch animals

o Unfriendly WTO regime and

Imports from other countries

o Drought and flood

3.1.1 Strengths

Largest milk producer in the world with highest milk production growth: Since

1998-99 India has emerged as largest milk producer in the world with 75.4 MT

(Million Tonnes) by surpassing USA. India has witnessed approximately 4% growth

of milk production annually in last three decades, which far exceeds the average

global growth of about 1% (Singh, 2009). India produces 65.8% buffalo milk, 21.7%

goat milk, 7.3% cow milk, and 14.6% total milk of the total world milk production in

respective categories in year 2005 (F AO, 2007). India has attained the total milk

production of 104 MT (estimated) during the year 2007-08 as per results revealed by

Department of Animal Husbandry and Dairying, Govt of India. Growth in milk

production has exceeded the growth in India's population, elevating per capita milk

availability 114 grams per day in 1970 to 252 grams per day in 2007-08, as shown in

table 3.2.

Table 3.2 : Trend of per capita milk availability in India, 1970-20 I 0

Year Per capita availability Per capita availability

Kg/year Grams/day

1970 42 114

1980 47 128

1990 65 178 1995 72 197 1996 74 202 1997 76 207 1998 78 213 1999 78 214 2000 80 219 2001 82 226 2005-06 88 241

2007-08 92 252 20 IO(projected) 100 275 Department of AH&D, Govt oflnd1a

52

The per capita milk availability is projected to reach 275 grams per day by year 2010.

Therefore, India can be said a self sufficient milk producing country in the world.

Indian dairy can fulfil demand of the milk and milk products in Indian market. The

total milk production and per capita milk availability is a strong pillar of Indian dairy

industry.

Food Regulatory System: New Food safety and Standards law and authority

With a view to consolidate the laws relating to the Food in the country and for laying

down science based standards for articles of food and to regulate their manufacture,

storage, distribution, sale and import, to ensure availability of safe and wholesome

food for human consumption and for that purpose to establish the Food Safety and

Standards Authority of India, Parliament enacted the Food Safety and Standards Act

(FSSA), 2006. Single food law has merged the following orders/acts.

I. The Prevention of Food Adulteration Act, 1954 (3 7 of 1954).

2. The Fruit Products Order, 1955.

3. The Meat Food Products Order, 1973.

4. The Vegetable Oil Products (Control) Order, 1947.

5. The Edible Oils Packaging (Regulation) Order, 1998.

6. The Solvent Extracted Oil, De oiled Meal, and Edible Flour (Control) Order,

1967.

7. The Milk and Milk Products Order, 1992.

Further, the FSSA is amended to Food Safety and Standards (Amendment) Act, 2008

to expedite the selection and appointment of Chairperson and Members of the Food

Authority. Therefore, removing certain hurdles and ensuring a smooth constitution of

Food Safety and Standard Authority of India.

53

The Food Safety and Standard Authority of India (FSSAD has been established under

Section 4 of the Food Safety and Standards Act, 2006 as a statutory body for laying

down science based standards for articles of food and regulating manufacturing,

processing, distribution, sale and import of food so as to ensure safe and wholesome

food for human consumption. The authority came up at a time when there was urgent

need to club together numerous laws and regulations in single law. Therefore, it may

create a vibrant regulatory system when food safety and regulation is a major concern

world over. FSSA and FSSAI are the major strength of the dairy sector in India.

FSSAI has drafted the recall regulation in exercise of powers conferred by section 28

(4) read with section 92 (2) (m) of Food Safety and Standards Act, 2006 (34 of2006),

with the previous approval of the Central Government and after previous notification.

The regulations are called Food Authority's Food Recall Procedures Regulations,

2009 and have come into force from date of notification. The Recall can be of two

types Firm Initiated and Food Authority Initiated. Recall may be carried out

voluntarily by manufacturers and distributors to remove unsafe food from the market

to prevent injury to consumers. Seizure or other court action may be taken when a

finn refuses to undertake a recall directed by the LCA, or where the LCA/Food

Authority has sufficient reasons to believe that a recall would not be effective,

determines that a recall is ineffective, or discovers that a violation is continuing. The

efforts for evolving food recall rules in case of food contamination and other

outbreaks have further strengthen the food regulatory system in India for dairy

industry.

Strong institutional set up and Technical and skilled human resource: India has

more than 25 institutes dedicated to train and educate technical human resource in

Dairy science and technology. In addition, there are more than 50 veterinary

educational institutes specifically dedicated to training of veterinarians. The

educational institutes chum out thousands of trained technologists, veterinarians,

managers, and technicians.

54

'Strong successful cooperative movement' and National Milk Grid: The AMUL

model of cooperative system in India has been highly successful in certain areas.

India's 96,000 dairy cooperatives were integrated through a three-tier cooperative

structure known as "The Anand Pattern." The farmers organize themselves into

village level cooperatives, which in tum are organized into district-level cooperatives

(comprising about 400 to 1,000 primary village cooperatives). The district-level

cooperatives federate into a state-level cooperative organization. At the apex is the

National Cooperative Dairy Federation, India (NCDFI), which coordinates the

marketing efforts of all the state-level cooperatives. The cooperative movement has

brought about paradigm shift in Indian dairy industry through creating of new

institutions in dairy sectoral system of innovation. ANAND model has been

successful in certain parts of the India (Singh, 2004). Over the years, brands created

by cooperatives have become synonymous with quality and value. Brands such as

Amul (GCMMF), Vijaya (AP), Verka (Punjab), Saras (Rajasthan), Nandini

(Kamataka), Milma (Kerala) and Gokul (Kolhapur) are among those that have earned

customer confidence (Bhatnager et al, 2002). Cooperative movement is proved as

strength of the dairy sector in India. In addition, the modernization and expansion of

the dairy industry and its infrastructure has created a national milk grid. A fleet of

insulated rail milk tankers operates throughout India. This whole network has

provided great strength to dairy industry for supply of raw material and finished milk

products all over India.

3.1.2 Weaknesses

Highest numbers of livestock with low milk productivity

The structure of milk production worldwide is diverse. The farming system differ in

farm size (1-3000 cow per farm), milk yield (< lOOOkg to > 10,000 kg I cow per

lactation), feed basis, milking technology and the linkage to the dairy chain. Small

scale farms dominate the South Asia, Switzerland, Australia, Norway, Finland and

Poland whereas large farm provide most of the milk production in USA, Israel,

Argentina, Oceania, Hungry, Czech Republic, Estonia, Denmark, Netherlands and

55

UK. In India the livestock keeping system is more complex. According to the 2003

Census data, India, had 485 million livestock population, have the second highest

numbers of cattle (185 million), the highest number of buffaloes (97 million), and

second highest number of goats (124 million) in the world. Despite being a largest

milk producer, India has very low per cattle milk productivity per lactation period. Per

animal productivity in Indian dairy industry is the lowest in the world that is around

8-9-times lower than dairy-developed countries.

The average yield of non-descript cows, Indigenous breeds, is less than 2 kg per day

as shown in table 3.3.

Table 3.3: Productivity of Milch Animals in India

Years Average Yield per Animal in Milk (Kg/day)

Crossbred NonDescript Buffalo Goat

Cows Cows

1999- 6.434 1.886 3.96 0.31

2000

2000-01 6.441 1.919 4.05 0.33

2001-02 6.437 1.913 4.09 0.33

2002-03 6.52 1.903 4.126 0.314

2003-04 6.528 1.923 4.241 0.323

2004-05 6.395 1.945 4.287 0.325

2005-06 6.437 1.97 4.3 0.346

. . Source: Department of Ammal Husbandry, Dmrymg & F1shenes, Govt. oflndm .

However, crossbred cows have better performance but it can not be called an

optimistic scenario for milk productivity.

Small Dairy herd size with Jack of efficient dairying practices: Dairying, in India

is more than a business, has broader social and economical dimensions. Dairy herd is

56

small but largely a rural-based activity involving 750 lakh rural families in dairying

and about 98% of the milk is produced by them. It involves tens of millions of small

farmers, each with 1-3 milch animals and is more equitable. It is based on family

labour, crop residues and natural grasses. On the other hand, high producing animals

are supplemented with concentrate feed. Moreover, it is considered as a

supplementary source of income to producers. The farmers do not have training and

knowledge on modem dairying. They practice traditional dairy farming, not as core

activity but a subsidiary to agricultural cropping system.

Poor veterinary and animal health services: Indian farmer do not get veterinary

services for their animal at farm gate. They have to travel either to the city or distant

place where veterinary hospitals or dispensaries are located. It discourages farmers to

get access to advanced available technologies in dairy sector. Artificial insemination

technology is yet to reach the appropriate destination in such condition (Singh, 2008).

Table 3.4: Number of Veterinary Institutions in India

Year Veterinary Veterinary Veterinary Aid Centre Hospitals/Polyclinics Dispensaries (Stockmen Centres/Mobile

Dispensaries)

2006 8732 18830 25195

As on 9009 19162' 26443 31/03/07

As on 9578 20443 26583 31/03/08

Source: Mmutes of Meetmg of the T echmcal Commmee of DirectiOn for Improvement of Animal Husbandry & Dairying Statistics during 2006,2007, 2008; DAHD&F, Govt. oflndia

The numbers of veterinary hospitals are not sufficient for the total livestock

population of India i.e. 485 millions. Each veterinary institute has to serve

approximately 10,000 livestock population. Veterinary services are poor in villages

where farmers live as field visit and government report suggest. When the institutions

for animal health conceived were based in towns or urban part of India. The rural part

57

could not get those institutions and they remained in the urban where farmers have to

visit to get animal health facilities for their animals. It has created a number of

troubles for the farmers. The farmer has to take animal to urban area where as animal

needs such services in villages or on farm. Farmer losses a working day along losing

economically in terms of farm work which s/he could have done in case services

would have been provided in rural area close to fanner's fann or village. Even,

farmers do not prefer to visit to veterinary hospitals in urban and prefer to follow

some traditional system of animal health practices. Hence, animal does not receive

any appropriate health services. The net result is absence of veterinary services for

farmers even government has created them to provide benefits to farmers. It results in

under utilisation of animal health services in India (Singh, 2008). The veterinarians

too prefer urban living and postings which create more obstacles in providing quality

animal health services. The private investment is also a challenge in the veterinary

services. The private individuals do not find incentives in making any investment due

to low demand of such services in India. The farmers are not much educated.

Therefore, they do not have much awareness about benefits of animal health services.

The findings in case study on Rajasthan by author and evidence from UNCTAD -

F AMER study indicate willingness on the part of the farmers I entrepreneurs to pay

for veterinary services. Therefore, availability of efficient veterinary services at fann

gate is a weak area in Indian dairy Industry.

Lack of efficient cold chain: India does not have a sufficient cold chain

infrastructure to cater the dairy industry and maintain the low temperature from

'milking to mouth' (M2M). Milk is highly perishable product and it can not sustain

without contamination for more than 5 hours in higher temperature conditions of

India. Therefore, milk and milk products can not reach to consumer safely and in

good condition in such a scenario.

Quality raw milk collection: Quality milk production is always a challenge for dairy

industry because of lack of good dairy practices from the stage of milk collection at

farm to processing plant. The milk that comes at milk reception dock always has high

58

microbial count, acidity and dirt, barring few regions and places in India. The poor

quality of raw milk hampers the scope of producing exportable quality milk products.

Lack of data and information availability on dairy sector: Indian dairy sector does

not have appropriate and accurate data which could be used for proper planning and

development of the sector. There is no practice of recording milk production, feed

demand, animal health, and productivity related data. Policy makers always face

problem of right information at right time to provide best policy for the sector.

Therefore, "database on dairy sector is a major weakness in India" (Patel A, 2009) 10.

Weak organised retailing: India has witnessed a significant growth of organised

retailing after year 2004, but still, it's a weak part of the supply chain in dairy sector.

However, Gujarat Cooperative Milk Marketing Federation (AMUL), Mother Dairy,

and some other cooperatives have their milk booths in different cities. They could

deliver up to some extent in metro cities and few other cities in the country, but well

developed retail chain, to deliver and provide access to quality milk and milk

products, is a distant dream, to consumers in India.

Efficiency of cooperative dairy plants: All the registered dairy plants under

cooperative dairy sector are unable to operate to their full capacity. There are 246

registered dairy plants in cooperative sectors. Out of that 141 are registered by Central

authority Government of India and remaining 1 05 are registered with different state

authorities, as shown in table 3.5. They can process up to 36.5 million litres milk per

day. India has got 98 million litres per day processing capacity in fonn of registered

plants in cooperative, private and other sector.

10 Dr Amrita Patel, Chairperson, NDDB, interviewed on 13 March 2009 at NDDB Head office, Anand, Gujarat.

59

Table 3.5: Number of Registered Dairy Plants under MMPO* in India (As on 31st March, 2006)

(capacity '000 Litre per day)

Cooperative Private Other**

No. Capacity No. Capacity No.

By Central Authority 141 31204.5 103 28289 26

By State Registering Authority 105 5365 390 17796 24

Total 246 36569.5 493 46085.3 50

.. Source: Mtmstry of Agnculture, Govt. of Indta

Note:*Milk and Milk Product Order **includes Govt. Milk Scheme, Govt. Dairies, & Mother Dairies.

Figures don't include trading/marketing capacity, unit closed & cancelled. Registered capacity in total solid form is not included.

Capacity

14490

906

15396

Total

No. Capacity

270 73983.5

519 24067

789 98051

All the dairy plants are not sufficient to process the available liquid milk in the

market. Therefore, the full capacity falls short of required capacity. In addition, the

dairy cooperative plants have ample scope for cutting cost and bringing more

efficiency as compared to what majority of the dairy plants under dairy cooperatives

are performing at present. The results indicate that there is a significant scope for

efficiency improvement in the dairy industry wherein mean cost could be reduced by

37 per cent. However, privatisation alone is not the answer to higher performance in

the processing sector of the industry (Singh S. et al, 2000). But, private sector needs

to make more investment in setting up dairy plants. Plant managers and public policy

makers need to make efforts to achieve higher performance through actions on both

the demand and supply side of the milk and milk products industry.

3.1.3 Opportunities

India has large market and investment opportunity in dairy industry which is still

not competitive and has enough possibilities for higher profit on investment. The

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private sector investment is less than the cooperative and government investment in

milk processing and distribution. India has one billion plus market which largest milk

and milk product market in the world (Singh, 2009). The food processing segment has

shown highly positive performance for all food processing companies. This sector has

minimal effect of economic slow down. Therefore, India with a population of 1.17

billion presents huge market which is growing at 7%.

Increasing quantity of available milk for processing: the milk production in India

has persistently been growing with more than 4% annual growth during last three

decades. The dairy industry data demonstrate that the pattern will be continuing in

future as well. It has provided more surplus milk with farmer for processing and

manufacturing diversified dairy product mix. Less than one-fifth of the milk produced

is processed in India, compared with a world average of over 50 per cent. Investors

and consumers have more opportunity to make investment for their interests. An

NDDB Road Map group developed a plan under which India's milk production is

projected to rise from 102 MT per year in 2006 to 170 MT per year by 2022. This

scenario would be achieved at 5% annual growth with enhanced milk productivity of

the present population of the animals.

Increasing income level of consumers: Consumer demand will also shift with rising

incomes and changing tastes; the market for milk products, for instance, is now

growing rapidly (editorial EPW, 2005). The per capita income has trebled in India

during last one decade. A per capita income has increased to USD 1000 in 2008 from

miniscule USD 418 in 1998. The growth has not been restricted to urban India, as the

per capita income in rural India has grown by 50 percent in past 10 years (KPMG

report, 2009). This phenomenal growth has provided a great opportunity for dairy

industry. This trend is likely to continue in future as well. Therefore, dairy industry

would explore this opportunity for its own phenomenal growth.

Changing life style and preference for milk and milk products: fast changing life

style in India has created new interest in milk and milk products. India is largest milk

and milk products consumer in the world. India has large numbers of vegetarian

61

consumers who find milk and milk products as major sources of protein. An estimated

demand for milk would likely to be approximately 180 million tonnes in 2021-22.

Increasing number of adult consumers: The adult proportion of Indian population

is likely to rise at approximately 20 percent decadal growth rate during coming

decade. Therefore, relative numbers of adult milk and milk products consumers are

projected to increase by 2020. The population below 15 years of age (currently 35

percent) is projected to decline to 28 percent by 2016 as shown in table 3.6. The

population in the age group 15 -59 years (currently 58 percent) is projected to increase

to nearly 64 percent by 2016. The age group of 60 plus years is projected to increase

from the current levels of7 percent to nearly 9 percent by 2016.

Table 3.6: Age Composition as Percentage of the Total Population

Below 5 years Between 0-15 Between 15-59

+ 60 years Year years

1991 12.80 37.76 55.58 6.67

2001 10.70 34.33 58.70 6.97

2011 10.10 28.48 63.38 8.14

2016 9.7 27.73 63.33 8.94

Source: NatiOnal PopulatiOn Pohcy 2000

Untapped indigenous milk products market: dairy industry has been unable to tap

the full potential of Indian dairy products market. Indigenous milk products segment

presents numerous opportunities for innovation and marketing. There are certain

products like Chhach, Lassi and Dahi, which were never marketed products in India.

However, they were part of culture and every house hold practices. The last one

decade has revolutionised this sector. Therefore, the sector presents open

opportunities.

Low cost manpower and employment generation: Employment is major issue for

each economy in the world when economic recession and slow down has affected

almost each of them. However, India provides very low cost efficient human resource

62

that is an opportunity for the sector. Food processmg m dairy sector leads to

significant employment generation, not only directly but across the supply chain in

production of raw milk, storage milk and milk products, and distribution and sale of

the dairy products to consumers. Food processing creates 1.8 jobs directly and 6.4

indirectly across the supply chain for every Rs. 1 million investment. A grant of Rs.

66.7 (a total investment of approximately Rs. 250 to 300 million) to 35 food

processing units in Uttar Pradesh in 2003-04 has resulted in direct employment of

2500 and indirect employment of 20,000 (Rabo Report, 2005). Therefore, any kind of

investment and development of dairy industry creates great opportunity for creating

employment.

3.1.4 Threats

Food safety: Food safety is a major concern in India from the clean milk production

to consumption by consumer the whole chain has too many potential points of

microbial and chemical contamination. The farmers follow traditional milking and

dairying practices where hygiene practices and good dairy practices (GDPs) are not

up to the mark. Farmers do not appropriately clean the hand, milk bucket, milk cane,

and other milk handling equipments at farm level. The first environmental contact of

milk, after coming out of udders, at farm level get exposed to microbial contamination

which affects milk shelf life as raw material as well as final milk product. Therefore,

the present scenario, at farm level for clean milk production, can not support the food

safety requirements for high quality milk and milk products which can be exported. It

is a major troubling area for Indian dairy industry to ensure food safety.

The concerns for food safety are of high gravity when one observes the every day

reporting in media for adulteration of raw milk, Ghee, Khoa, Sweets and other Indian

dairy products, specifically in lean season.

Use of Drugs and pharmaceutical for animals: Animals are administered with

antibiotics and other medications without following any standard practice while they

fall ill. The veterinary practitioners have no imagination about the impact of such

practices on human health and animal health. The ignorance of farmers and non

63

professionalism in veterinarians in India pose a severe threat to safety of the milk and

milk products and consumer health. These evidences clearly emerged during

interactions and interviews with farmers and veterinarians in northern India. The

farmers do not give much importance to such issues due to their ignorance and lack of

knowledge about adverse effects on human health 11.

WTO regime and Imports from other countries: under WTO regime trade in

imports of dairy products has been threat to India dairy industry. Through

liberalisation in last two decades, India has progressively decreased the support and

protection of its dairy producers unilaterally, although commitments under the Doha

round have helped as well (Rakotoarisoa and Gulati, 2006).

Protection in other OECD markets outside of Asia (e.g., the European Union, Canada,

and the United States) has a distorting effect on India's export in dairy sector (Beghin,

C 1, 2005). Though, India has become self sufficient in milk and milk products in

recent time, but some time the supply of milk fluctuates which made India to import

certain milk products. Ihdia produces raw milk at competitive price without any

subsidy but unable to grab much international value added milk product market

because of lack of competitiveness and capability to produce such products of high

standards. Indian dairy industry has major focus on domestic market. However, in

recent time dairy industry has different cooperatives, MNCs and TNCs with a focus to

serve value added milk product market in India as well as abroad. The imports of milk

products such as dairy whitener and butter oil at some cheaper and subsidised prices

could be challenge to Indian dairy industry. Certain countries, in past, were able to

export such dairy products at cheaper prices than the domestic produce. These

countries provide huge dairy subsidies to their farmers. Indian government can not

afford the luxury of providing subsidies to farmers. The fear is real till the current

WTO negotiations fail to arrive at elimination of export subsidies by western

countries in dairy sector and provide access to Indian dairy products to their dairy

market.

11 Farmers were interviewed by the author in Haryana and Rajasthan during July and August 2008.

64

In future, such imports will pose challenge to Indian dairy industry. It has to be

competitive with other dairy products exporting countries.

Draught and Flood: India faces both adverse conditions almost every 2nd or 3rd year.

The northern parts of India i.e. Rajasthan, Gujarat, and Haryana, face drought

conditions during summers. It affects the milk production adversely for a longer

period. Even, flood has the same impact on animal husbandry activities.

It is essential for competitive dairy sector that all the weaknesses of the sector need to

convert in strengths. This is possible only through consistent and goal directed efforts

to capture the opportunities available at right time and handling the threats and

challenges of the Indian dairy industry. This process involves lots of driving factors

which have potential to make industry dynamic and vibrant.

3.2 STEEP Drivers of Indian Dairy Industry

The opportunities can be captured through timely understanding the drivers of dairy

industry from present to future. The drivers will provide momentum and direction to

growth of the dairy industry. The driving factors have potential to turnaround the

weaknesses and threats of the sector in opportunity and strength of dairy industry in

India. The drivers of the dairy industry in India are identified through the literature

survey, discussions, and interviews of the decision makers, academics, industry, and

government representatives. The STEEP (Sociological, Technological, Economical,

Environmental, Political) drivers are forces which are likely to provide ways and

thrust to technological and products innovations, market demand and supply,

investment, institutional development, cold chain development, dairy infrastructure

development and over all growth of Indian dairy sector.

There are a number of STEEP driving factors for dairy industry when they are

identified at different time horizons. The table 3.7 presents a summary of all the

STEEP factors in three different years such as 2008, 2015, and 2020. These all

driving factors are discussed in detail later.

65

Table 3.7: Summary of Sociological, technological, economical, environmental and political driving factors for dairy industry Drivers

Sociological

2008

-Favorable demographic change

-Changing consumption pattern

2015

-Favorable demographic change

-Changing consumption pattern

2020

-Favorable demographic change

-Changing consumption pattern

Vision

-Highly satisfied consumers

-Serving customised needs of healthy milk and milk

-local -Convenience and Health Consciousness

products at door -Convenience and steps to people

perceptions and traditions

Health Consciousness

regarding products

dairy -Food safety and hygiene -Food safety and

-Nutritional and -Nutritional and hygiene

food security

-Communication and exchange of

food security -Nutritional and

-Communication food security

and exchange of -Communication information, ideas and exchange of information,

ideas knowledge (among academia, farmers industry)

and and knowledge information, ideas

govt, and

(among academia, and knowledge govt, farmers and (among academia, industry) govt, farmers and

-Consumer confidence

industry)

-Consumer autonomy/choice

-consumer confidence

-More ·working

woman

Technological -Technology -Cold technologies

chain -Integrated Cold -high quality intensive infrastructure sharing , -ICTs

chain technology

-Mechanised

indigenous dairy products technology

-Bulk coolers-

small dairy farms milk -Automation of -High quality

dairy indigenous milk & -Automation at Packaged

66

Drivers 2008 2015 2020 Vision

introduction milk product farm level products

-Fodder and feed manufacturing

-Fodder and feed -Using Nano

technology -Indigenous milk technology technology for

-indigenous milk product

-Appropriate packaging

techno 1 ogi es & milk product Technology access -need based

manufacturing -Fodder and feed and transfer technology led technology technology

-Animal health milk products

-Innovative -Animal health technologies

product technologies technology- -Productivity

-Functional dairy enhancement -Appropriate product technologies-

Technology technology- biotechnology, access and probiotic embryo-transfer, transfer Artificial

-Nutraceutical insemination -Cross breeding products of animal technologies -ICTs

-productivity -Bulk milk coolers -Functional and enhancement healthy dairy technology- -Appropriate product biotechnlogy, Technology access technology-embrio-transfer, and transfer pro biotic Artificial -productivity insemination -Consumer needs

enhancement driven Packaging -ICTs technology- technologies'

biotechnology,

-Product embryo-transfer, -GPS and innovations Artificial Remote sensing

insemination Technologies -Packaging technology -Packaging

technology

Economical -Private -FDI -Export revenue investment

-Private investment -Skilled human -lnterest rates resource

-Rural market

67

Drivers 2008 2015 2020 Vision

-Available -Credit/Finance -Large rural

financing facilities/availabilit market

facilities y and accessibility -economy of milk

-Economic slow -Marketing and production

down retail chain- rural and urban -Competitive

-Higher mcome retail chain of the consumers -Low cost skilled

human resource -Procurement of -More surplus quality raw

available money -Marketing material for spending with

consumers -Competition for -Competition for

Procurement of Procurement of

-Cooperative quality raw milk quality raw

material -Assured Income

generation- -More demand

female/small from rural India

farmer for dairy

-Large market products

demand

-Marketing and retail chain

-Commercialisati on of indigenous

dairy products

-WTO and sanitary & phyto-sanitary

Environmental -Whey waste -Organic milk and -Organic milk and Environmentally

management milk products milk products sustainable dairy

-Dairy waste -Dairy waste -Dairy waste industry

management management management

-Converting waste -Converting waste

68

Drivers 2008 2015 2020 Vision

to commercial to commercial products products

-emission norms and obligations of Government

Political -Elections Ill -Political -Cooperative- -Politically cooperatives interference in Private sector uninterrupted

cooperatives partnership sound dairy -Govt policies sector (public, for dairy -Cooperative -Pressures for new private and development elections and parties labelling laws cooperative)

-Ministerial and -New policy for -Efficiency of political cooperative- Food recall intervention private industry system

alliance -Political parties -Politics and participation Ill -Pressures for new cooperatives cooperative labelling Jaws system elections

-Food recall system

.. Source: Author's analysis from different reports, articles, news, government VISIOn, mterviews, discussion with representatives from government, NGOs, industry, cooperatives, academics, and consumers.

3.2.1 Sociological

Favorable demographic change: India is the second largest populous country in the

world. It has majority of young population which create huge market and demand for

milk and milk products. This trend is likely to continue tiJI 2030 when India may

catch china as projected by population estimates by the government of India.

Dairy products as a culture: the milk and milk products have been part of Indian

culture from Harapan civilisation to Vedic tradition to present globalised India. The

curd and ghee are most important part of that, which are used on each occasion like

festival, religious ceremonies, and celebrations. Cultural preference for milk and milk

products create demand for indigenous milk products. Therefore, traditional Indian

69

dairy products drive growth of dairy industry. However, bottom of the pyramid is

unserved and poorly catered by dairy industry. That segment can infuse high growth

rate.

Vegetarian culture: India has a strong culture of vegetarian food consumption which

drives the dairy products demand and market, as reflected in consumer surveys and

interviews. Indians attach food habits to culture and religion (Jains, Hindus and

Budhist don't take non-vegetarian food) as well as way of life. As a result, these

become strong factors in their decisions about eating food (milk and milk products)

every day along with special occasion.

Milk sweets as a common gift:. milk sweets are most commonly exchanged as a gift

whenever people visit one another's home. On occasion of festivals like Holi, Divali,

and Id people exchanges lots of gifts in form of milk sweets as part of social customs.

Therefore, it triggers demand of milk sweets on such occasions.

Convenience and Health Consciousness: the growing numbers of educated

consumers and increasing awareness among consumers about healthy dairy products

has emerged as an important driver for development and introduction of new

functional, pro-biotic and healthy products in dairy sector. According to consumer

survey 12, people prefer the convenience dairy products which are easy to access,

purchase, carry, consume, and exchange. People give importance to easy availability,

need less time to prepare for consumption, in desired amount and size, and close to

residence.

12 Author has carried out a consumer survey in January, 2009 for studying consumer preferences for dairy products and their responses to probiotic and functional dairy products. Consumers have appreciated probiotic Dahi launched by AMUL, Nestle and other dairy firms. They are ready to accept such health beneficial products in future. The awareness spread about such products communication means have affected their decisions and view positively to probiotic and functional dairy products. High income groups give more importance to such healthy products.

70

3.2.2 Technological

Technological innovations have changed shape and size of dairy industry in India.

The first indigenous baby powder13 technology developed by CFTRI (Central Food

Technological Research Institute) has driven the dairy industry to new heights, white

revolution. The major technologies which drive, and will do so, the dairy sector are

as follows:

• Indian dairy products technology

• Packaging technologies

• Transportation

• Cold chain and low temperature technologies

• Probiotic and Nutraceutical product technology

• Information communication technologies

Due to technology Indian dairy product segment has shown very high growth rate.

This segment of products has a great demand in market but demand is not fully

catered due to lack of cold chain and storage. Therefore, cold chain related

technologies are critical driver. ICTs are applied by all cooperative dairies but AMUL

has been most advance and innovative for making payments, farmer education,

veterinary services and communication. This pattern is likely to be followed as a

major factor in the sector.

Further, animal productivity enhancement technologies are likely to be significant

drivers for dairy sector. The fact that majority of farmers have access to artificial

insemination services indicate the possibility of bringing a change in the scenario

through appropriate breeding strategies clubbed with scientific record keeping, as

results of study by FARMER - Fellowship for Agri Resource Management and

13 Buffalo milk was regard as unsuitable for manufacturing of baby powder by western scientists and experts. The buffalo was regarded as wild animal and its milk unsuitable for consumption and manufacture milk powder.

7l

Entrepreneurship Research, has shown. Crossbreeding technologies have produced

two new cross breeds namely Karan Fries and Karan Swiss at NDRI by the scientists.

NDRI research has proved that selective breeding through artificial insemination has

proved that such high pedigree cross bred cattle could be produced at farmer's door.

Hence, such technologies will be key factors in future.

3.2.3 Economical

The economic drivers of dairy industry are high growth of Indian economy, high

surplus income available with more numbers of employed young consumers,

relatively low interest rates and available financial sources with banking and capital

market, and increasing FDI. The slow down of Indian economy and recession in other

part of the world are critical factor in dairy industry. Recession has affected all

financing resources for dairy sector. Government funding is one of the factors for

taking dairy industry on next stage. Private investment is emerging key driver ofthe

sector. WTO and international trade related issues also have importance. In case

India is unable to create strong demand in its domestic market it has export market as

a major driver. In recent time, EU countries have reduced subsidies which have

provided opportunities to Gujarat Cooperative Milk Marketing Federation. AMUL

brand has shown it presence in markets of24 countries (Jesse, 2006).

Large domestic market demand and dairy products: India's domestic market has

created huge demand of milk and milk products. The trend of market demand for

certain milk products portray highly optimistic and positive scenario. The demand for

chocolates has doubled in 7 years from 22.1 to 44.2 thousands metric tonnes in 2000-

01 and 2007-08, respectively. This fast growing market size and demand pattern has

been followed aggressively by other products such as ice cream and processed cheese

as shown in table 3.8. Cheese market demand of Rs. 3 billion has reached to 6.6

billion from 2000-01 to 2007-08.

72

Table 3.8: Past Trends and Forecasts of Demand for certain Dairy Products in India

Year Demand pattern: Past & Future

Baby Chocolates Dairy Whiteners Ice Cream Processed Foods (thMT) /Creamers (mn ltrs) Cheese (thMT) (th MT) (Rs bn)

1990-91 155 10.5 80 12.5 0.5

I99I-92 I60 Il.3 83 14.4 0.6

I992-93 165 I2.5 85 I6.5 0.69

1993-94 I85 II 86 19 0.8

I994-95 I95 13.2 89 21.9 0.9

1995-96 212 14.4 91 25.2 1.05

I996-97 229 I5.7 99 32 1.35

I997-98 247 I7.1 95 41.2 1.65

I998-99 266 .I8.6 135 56. I 2.1

I999-00 285 20.3 I83 63.3 2.5

2000-01 302 22.1 147 70.4 3

200I-02 320 24 I60 8I 3.45

2002-03 340 30 I75 92.6 3.9

2003-04 363 32.7 I90 105.3 4.45

2004-05 387 35.5 206 119.1 4.95

2005-06 413 38.4 224 134 5.5

2006-07 440 41.3 243 150 6

2007-08 470 44.2 263 I67.2 6.6

2008-09 503 47.2 284 185.5 7.2

2009-10 538 50.2 307 205 7.75

2014-15 755 67.2 450 330 11.1

Data Source: India Stat (http://www.mdJastat.com), Downloaded on 02/02/2009 (Note: MN represents Metric Tonnes)

But when it comes to the issue of future demand of dairy products in India, the

evidence from study by Jesse (2006) shows 6.7% growth per annum. The forecasts of

market demand of dairy product shows that the demand for the Ice cream in year

73

2014-15 will be 330 million litres which is almost double to 167.2 million litres in

year 2007-08.

Further, the future demand for baby foods in year 20014-15 is likely to reach 755

thousands metric tonnes from 503 thousands metric tonnes. The growth is 50% over a

period of six years that is equivalent to average 8.3% per annum. In case of processed

cheese, the demand would reach to a value of Rs 11.1 billion by year 2014-15. It is 7.2

billion in year 2008-09. This period shows a market demand growth of more than

54% which is equivalent to 9% per annum. On the other, chocolates likely to have a

demand of 67.2 thousands metric tonne in year 2014-15 that is 42.40% growth from

47.2 thousand metric tonnes during 2008-09. The annual demand for chocolate is

likely to growth at 7.7% between 2008-09 and 2014-15.

Another real growth engine driving the country's dairy industry of late is liquid milk

sold in pouches. This demand is evident from analysis of data on the supply and sale

of milk by private and cooperative players in different regions of the country. The

proportion of liquid milk sales to procurement for all cooperatives is currently over 80

per cent, while it is hardly 20 per cent for the private sector. Gujarat Cooperative

Milk Marketing Federation (GCMMF), which, till around 2003, was supplying

roughly 1.5 LLPD of "Amul" milk in Mumbai and not a single litre in Delhi or

Kolkata. The Rs 4,200-crore cooperative has attained a sale of 5 LLPD in Mumbai,

6.5 LLPD in Delhi and 2.5 LLPD in Kolkata, besides penetrating into Pune, Nagpur

and Raipur. Delhi's 50 LLPD milk market demand is fulfilled by two major players

Mother Dairy (21-22 LLPD) and Amul (6.5 LLPD), with additional supplies from

private brands such as "Param", "Paras" and "Gopaljee" together accounting for just

3-4 LLPD, in year 2007. The supply by cooperatives/public sector in Mumbai's 40

LLPD market is contributed by "Mahananda" (5.5 LLPD), "Amul" (5 LLPD),

"Gokul" (4 LLPD), "Warana" (3 LLPD) and "Aarey" (2.5-3 LLPD). The estimated

total demand, 30 LLPD, ofliquid milk in Kolkata is met by Metro Dairy (3.4 LLPD),

Mother Dairy (3.5-4 LLPD) and Amul (2.5 LLPD) along with private sector players.

Further, assumptions are substantiated by growing supply by private sector in south

74

India. Chennai has a pouch milk market demand of 16.5-17 LLPD (besides 7-8 LLPD

small vendors market in loose) in year 2007. The demand is met by Tamil Nadu

Cooperative Milk Federation's "Aavin" (9 LLPD) and other private players. Private

player Hatsun Agro Product Ltd supplies about 9.5 lakh litres per day (LLPD) of milk

under "Arokya" and "Komatha" brands along with players Heritage Foods India (5

LLPD), Creamline Dairy Products (3.5 LLPD under 'Jersey' label), Tirumala Dairy

(3.5 LLPD) and Dodla Dairy Ltd (2.5 LLPD) (The Hindu, 2007).

Out of the 70 LLPD that GCMMF and its unions procure on an average, around 40

LLPD is marketed as liquid milk and the rest converted into products. In 2006-07, the

liquid milk volumes of GCMMF grew by 26 per cent, in 2007-07, it was 3 7 per cent.

Similarly other players too followed the trend. Therefore, the milk and milk products

are likely to have an average more than 7% growth per annum till2014-15. This large

market demand is likely to drive the future dairy industry as a major economic factor.

Economic slowdown VS Growth and liquidity crunch: According to Dairy India

2007 estimates Indian dairy sector has been growing at a rate of 5 per cent a year with

a size of the US$ 62.67 (Rs. 3050) billion in year 2007. The dairy industry as whole

has not much perceptible effect of economic slow down. While year 2008 showed

growth for the food retail industry on the whole, the last quarter of2008 was impacted

by the economic slowdown and liquidity crunch, and this is expected to continue year

2009 (KPMG report, 2009). The after effects of the global economic turmoil are being

felt in India as well, and the economy is expected to grow at a significantly lower rate

over the next 2 years between 5 to 7 percent according to IMF, Cushman and

Wakefield report 2009. Finance minister of India has also claimed that Indian

economic growth may accelerate to as much as 7.75 percent in 2009 amid signs of a

"bottoming out" in the U.S. and harvests benefiting from monsoon rains. But the

realistic scenario of the economy would be 6 to 7 % growth of GDP in 2009 due to

poor monsoon and draught in many parts of the country.

The future projections of the economy are optimistic for India. The Deutsche bank

research findings through application of foresight models shows that India will be

75

growing fastest in 2020 closely trailed by Malaysian and China, as shown in figure

3.1. The economy will be growing with 5.6 % annual growth of GDP. On the other

hand, Indonesia and China will be growing at approximately 5.4% and 5.25% per

annum. The significant economic growth of India will help to growth in dairy sector

as well.

3.1: Who Deutsche bank research sees growing most by 2020

Foonei-G GOP fcrecasts 200&-20

lrdia l\l:>la)sia

DiN lh;jJ.;rd

uJtey ~e.;rd

lnd::n e5ia tlll::.ico J<aea Chile

!?A ~DN ~i fl Br..:li l ~ France

-.z::r A.:stria

F'atl.:gal U< ~ G-eece Wn~

!.3y B=!go.n

Gennany rl.;rd

Ne!herlxd:s

·Al~~~~ SMtEri.;rd :L.,

Sooth lfuc.3 ~ a~.;nnu

GCP grcut.h

A.Jssia +----.,,-----.------,---,-----.,---1

.o 1 ~ 2 0 1 ~ o ~ a

Source: Deutsche bank report

• Deutsche Bank Research's Foresight Model for evaluating long-term growth: Formei-G

• Finland comes out towards the bottom close to Germany, while China ond Indio mnk nem the top.

The economic growth is key factor in dairy industry and it will remain so. Therefore,

higher economic growth will be a major driver of the dairy industry in upcoming

future.

Investment: The combination of cooperative and private investment is driving the

dairy industry presently. The GCMMF 's brand AMUL has expanded its

76

manufacturing and marketing infrastructure out of Gujarat through large investments.

AMUL brand has its manufacturing unit near Delhi in Manesar. Significantly, Coca­

Cola and PepsiCo have announced plans to enter the milk-based beverage segment in

India. Probiotic dairy products maker Y akult Dan one India, having invested US$

34.09 million in setting up a dairy product manufacturing facility in Haryana, will

pump in an additional US$ 25.05 million over the next 3-4 years to expand its

presence and market its product 'Y akult'. In addition, Reliance Industries Ltd will

probably invest US$ 1.25 billion in a dairy project in India 14. Therefore, with the

domestic dairy sector slated to cross US$ 125.34 billion in revenues by 2011,

investment will remain a major economic factor for dairy industry in India.

Marketing and emerging retail chain: the major players in retail market have been

focusing on India since 2004. India, topping the list of most attractive retail

destination list for three years in a row, it had retail giants like Wal Mart, Carrefour

and Tesco sizing up potential partners and waiting to enter the fray. 15 Major retail

players like Mother Dairy, AMUL, State Cooperative Dairies, Subhiksha, Reliance

Fresh, Vishal Mega Mart, Super Bazar, Big Bazar, Apple, Food Bazar, and Spencer,

are key player who shape the retail scenario for milk and milk products. The

emerging retail chains and food chains are driving forces for the food industry,

specifically for dairy, in India during 2008. But economic slow down has moderated

the impact of this driver on development of large retailers in India. The factors like

renegotiating rentals, store rationalization, working capital management,

regionalization, cost optimization and manpower resizing are some of the key Top of

Mind (TOM) issues for retailers in the current context of the downturn (KPMG report,

2009). These all issues will be managed by retailers. The organised retailing is

continued to be a strong economic factor for dairy industry to drive it to new level in

future as well.

14 The data on investment are based on reports in news papers, news based websites, discussion forums, and articles 15 AT Kearney's Global Retail Development Index (GRDI), 2008

77

According to consultancy firm McKinsey & Co, the retail food sector in India in 2008

was worth US$ 70 (Rs. 3404) billion, which will reportedly scale up to around US$

150 (Rs. 7295) billion by 2025. Dairy products are significant part of the food retail

industry.

3.2.4 Ecological/Environmental

Green house emission, global warming and climate change are some of the

environmental issues under debate worldwide. India has been put under pressure time

and again, but India can not effort to assume responsibility for reduction in green

house gases, is such an issue that has potential to affect as a factor to dairy industry.

The methane gas production is directly related to numbers of animal who are least

productive. Each animal contributes the total methane gas production by animals.

Therefore, the question is how to make animals productive through enhancement of

yield per animal per unit emission of methane. In addition, dairy waste management is

a factor to the dairy plants. The whey, produced as by-product in process of

manufacturing paneer, cheese, chhana, srikhand, rashgola, and casein, is a waste and

it's a challenge for many dairy plants. As in Bikaner dairy plant large amount of whey

is produced in cheese making process. Suitable technologies are not accessible to the

plant. Therefore, it's an important factor for environment. However, whey can be

converted to the value added products. There are instances where whey is converted

to different kind of proteins, minerals, and whey based fruits drinks. Such innovative

utilisation of waste could be of great help to minimise the environment hazards.

3.2.5 Political

The politics have been important factor in success of dairy industry in India. The

AMUL has been successful a cooperative with it large market presence and

membership with best performance. On the other hand some cooperatives e. g.

Rajasthan Cooperative Dairy Federation could not be as much successful as GCMMF

due to political factors (Singh, 2004). The Anand model based cooperative system in

Indian dairy sector has elected member's representatives who fonn important part of

governing body. There have been involvement of political parties in election of dairy

78

cooperative and still it will be continue m future. The political involvement of

ministers of state government in affairs of dairy cooperative management is an

important factor in shaping and creating dairy cooperatives as part of dairy industry.

Such involvement directly affects the autonomy, financial condition, marketing

strategies, price of raw milk and final products, professionalism, and other key policy

decisions (Singh, 2008). The political factor has been important in setting up prices of

raw milk as assured minimum price in Rajasthan, a first case in India. This issue can

be picked up by other state as and when it becomes political need.

Political factor are likely to play important role in further liberalisation of dairy sector

and investment friendly policy for dairy sector in India. The present government has

food processing sector as major focus of its political manifesto for the coming five

years. The food processing sector is considered as most promising sector for the

future. Therefore, political will and devotion for setting up and formulation of future

food regulatory system, dairy policy, R&D policy, investment policy, financial

support package for the dairy sector will drive the dairy sector.

3.3 Creating Competitiveness: STEEP operations on SWOT

The SWOT analysis has revealed a numbers of opportunities and threats for dairy

industry in upcoming future. In addition, a numbers of STEEP driver are identified for

the industry. These STEEP drivers can be named as STEEP operators which perform

a number of operations in a sector. In a new model STEEP drivers or operators are

made to operate on Weaknesses and Threats of the industry under current part of

chapter. While such operators 16 perform certain operations on identified weakness

and threats of the industry they are bound to generate competiveness of the focussed

industry. The operations of operators either convert the weaknesses and threats to

strength and opportunities or minimise the weaknesses and threats from their present

level of severity for the dairy industry. The model is presented in figure 3.2.

16 Here the operator name is identified and designated to a number of drivers such sociological, technological, economical, environmental, and political (STTEP).

79

Figure 3.2: Process of attaining competitiveness of Dairy Industry

I

r

--·-·-·-·-Innovation System

Dairy Sector

Operators= STEEP Drivers

·-·-·-·-·-·-.. .. ........

\

l

-, I I I I I

Dairy Sector :

\

Operators= STEEP Drivers

.. ~·~ ................ ]'"•· •:T"••..! •••• •••••• ••••••-;-.• •'

Innovation System

......,·-·-·-·-·-·-·-·-·-·-·-·----Such identified operator's operations and functions make the focussed industry or

sector competitive by way of enhancement of overall productivity, efficiency,

networking, accessibility, and mobility in the sector. However, it may be presented as

a functional equation.

Competitiveness= f /STEEP Drivers {11 (Weakness + Threat)}] = f [STEEP Driver

(Strength+ Opportunities)]17

17 This equation is proved by a case of dairy sector development in India between 1970 and 2000. The dairy sector had a group of weakness such as lack of available technology, net importer of dairy products, lack of any significant value addition to raw milk, lack of any national milk grid and milk collection system, etc. At the same time sector had threats like large volume of imports of dairy products and lack of any ensured supply of milk and milk products. The operation Flood program

so

I /

This foresight process enhances General and overall competitiveness along with

specific competitiveness such as technological, product, market and institutional

competitiveness. Consequently, the Sectoral System of innovation acquires

competitiveness and dynamism. The Indian dairy sector is analysed m previous

sections to identify a number strengths, weaknesses, opportunities and threats

alongside STTEP drivers.

The threats such as food safety, uncontrolled use of drugs and pharmaceutical

products for animals, cheap imports due to subsidies in US, Canada, Australia, and

EU countries, and famine, draught and flood, unclean milk production or lack of good

dairy practices have to be controlled at first instance. Secondly, there need to be

systemic efforts to minimise their severity through adopting best dairy practices at

farm level, adoption of appropriate technologies, training of farmers, providing

incentives for best practices by farmers and milk handlers, policy reforms,

implementation of food safety and standard acts, bringing up new law on use and

administration of animal health services and use of drugs. Further, India needs to

pursue its interest in ongoing WTO negotiations on reduction of subsidies by EU

countries, USA and Canada. India needs to shape up the future scenario of world trade

regime through negotiating as a leading member of G20 with its other members for

the interest of group. The recent G8 meeting of heads of nations made some positive

signs about taking WTO negotiations taking to the conclusions.

The weaknesses of the dairy sector like low milk productivity per animal, poor raw

milk quality, ineffective milk collection system in certain part of the country, fragile

cold chain, largely unorganised dairy sector, weak organised retailing, poor veterinary

designed a numbers of identified operators (STEEP drivers) to apply them in the dairy sector through three phases. The STEEP drivers, such as buffalo milk baby powder technology, a numbers of milk processing technologies, transportation technologies, investment (government, cooperative and private), restrictive trade policies, institutional R&D, political non interference in cooperative system, and expanding milk processing capacity, have turned the some of the weakness and threats of the sector in strengths and opportunities. For example India became largest milk producer in the world in year 1998 with 97.4 MT. In addition, India has become self sufficient in milk and milk products. India could process it's approximately 17% of total milk production in organised sector dairy plant. This could have been possible only through key role of all the drivers of dairy industry.

81

servtces at farm gate, and paucity of data and information, need to be turned to

strength and opportunities of the sector. This task can be accomplished by operations

of STEEP drivers, identified in earlier parts of the present chapter, as crucial operators

and sectoral shaping forces. The articulation of such future shaping forces and

providing them right direction through participative approach and converting them in

principal outcome can ensure the competitive dairy industry. However, research and

educational institutes like NDRI and CFTRI and along with setting up such new

Institutes can also help in managing weakness and threats of the dairy sector.

At the same time some operator such private investment in dairy industry and cold

chain, consumer's consciousness for quality milk products, and large market demand

will help in shaping the challenges of the dairy sector in right direction. The identified

sociological drivers such as rising health consciousness, customised products

preferences, increasing awareness about milk and milk products, communication and

exchange of knowledge, consumer confidence and faith, more working women, and

changing perception about exiting and new dairy products will shape, directly or

indirectly, the future weaknesses and threats such as lack of organised retailing, weak

cold chain, large unorganised dairy sector. The demand of good quality and healthy

milk and milk product would infuse the competition for providing such products at

lower prices through satisfying the future sovereign and free consumer. As a result, it

will help to develop an organised dairy sector to provide high quality milk products at

high food standards.

Economic drivers like FDI, Private and cooperative investment, large demand milk

and milk products would likely to help in creating, setting and expansion of cold

chain, organised retailing, and milk collection system. These weaknesses would be

turned to strength through application and operations of technological drivers such as

availability of technologies on cold chain, transportation and storage, and ICTs.

In addition to already highlighted factors which drive dairy sector in India, there are

more drivers identified by the expert for future through Delphi Survey.

82

3.4 Summary

The Strengths of the Indian dairy industry are Largest milk producer in the world with

highest milk production growth, Emerging competent regulatory system and

authority, New Food safety and Standards law and authority, Strong institutional set

up and Technical and skilled human resource, 'Strong successful cooperative

movement' and National Milk Grid. Further, weaknesses are largest numbers of

livestock with low milk productivity , small dairy herd size with lack of efficient

dairying practices, poor veterinary and animal health services, lack of efficient cold

chain, challenge of quality raw milk collection, lack of data and information

availability on dairy sector, weak organised retailing, and low efficiency of

cooperative dairy plants. On the other hand, the identified opportunities for the diary

industry are large market and investment opportunity, increasing quantity of available

milk for processing, increasing income level of consumers, changing life style and

preference for milk and milk products, increasing number of adult consumers,

untapped indigenous milk products market, and low cost human resource and

employment generation. Additionally, the dairy industry faces some of the threats

and challenges. The food safety is a major concern in India from the clean milk

production to final consumption by consumer the whole chain has too many potential

points of microbial and chemical contamination. That can be addressed through robust

food safety & regulatory system and awareness campaigns. Some additional threats

are unfriendly WTO regime and Imports from other countries, poor practices m

process of use of drugs and pharmaceutical for animals, and drought and flood.

Further, application of STEEP method has produced a numbers of drivers which drive

the dairy industry in India. The major sociological drivers are favorable

demographical change, dairy products as a culture, vegetarian culture, milk sweets as

a common gift, and convenience and health consciousness. Whereas identified

technological drivers are Indian dairy products technology, Packaging technologies,

Transportation technologies, Cold chain and low temperature technologies, Probiotic

and Nutraceutical product technology, and Information communication technologies.

83

Further, large domestic market demand and dairy products, economic slowdown VS

growth, investment, marketing and emerging retail chain are the economical drivers

which will drive the dairy industry. Additionally, Green house emission, global

warming and climate change are some of the environmental issue with may affect the

dairy industry. Finally, some of the political factors in dairy industry are elections in

cooperative, political parties' participation in elections of cooperative and political

interference in cooperative system. The political will and devotion for setting up and

formulation of future food regulatory system, dairy policy, R&D policy, investment

policy, financial support package for the dairy sector will drive the dairy sector.

Further, a new model is created wherein SWOT and STEEP analysis methods are

merged to create future competitiveness of dairy industry, as results competitiveness

of innovation system. In a new model STEEP drivers or operators are made to operate

on Weaknesses and Threats of the industry. While such operators perform certain

operations on identified weakness and threats of the industry they are bound to

generate competiveness of the dairy industry. The operations of operators. either

convert the weaknesses and threats to strength and opportunities or minimise the

weaknesses and threats from their present level of severity for the dairy industry.

84