indian dairy industry overview
TRANSCRIPT
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Group 6
Dhiraj Bonda (1301-067)
Oli Ghosh (1301-144)
Sounak Basu (1301-221)Abhishek Dhull (1301-302)
Jai Shankar Rai (1301-348)
Praveen Shrivastava (1301-386)
Poornima Sharma (1301-548)
DAIRY AND MILK PRODUCTS INDUSTRY IN INDIA:
UNDERSTANDING STRATEGIES OFAMUL INDIA & PARAG MILK FOODS
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Indias Dairy & Milk Products Industry:
Worlds largest milk producer: Contributing nearly 18 percent of the worldsproduction by volume
0
5000
10000
15000
20000
25000
Production (000 tons) 2012
0
50
100
150
200
250
300
350
1950-51 1968-69 1998-99 2000-01 2005-06 2007-08 2009-10 2011-12
Per Capita Availability (gms/day)
0
50
100
150
2004 2005 2006 2007 2008 2009 2010 2011
Production in million tons
16.25%
12.15%
5.71%4.93%4.46%4.42%4.12%3.36%2.36%1.94%
0.00%
5.00%
10.00%
15.00%
20.00%
Share in Production 2010
Source: NDDB
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According to Investor Relations Society (IRS), the IndianDairy Industry is currently pegged at USD 70 billion (bothorganized and unorganized)
It is expected to double to USD 140 billion by 2020
According to Rabobank report, the country's total organizeddiary sector is about USD 10 billion in 2012-13, comprisingcooperatives and private players who control the supply chain
linkages Market would grow at 15-20 percent annually till2019-20
The market share of value-added products is likely to increaseto 31 per cent from the current 21 per cent during this timeperiod
Milk is the country's biggest agricultural produce,contributing 22 per cent to agricultural GDP. India overtookthe US in 1998 to become the world's leading milk producer,accounting for over 15 per cent of the global output
Growing since
past 30 years
Futuredemand to
remain high
Highest Milkproducer inthe world
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Indian DairyIndustry
Organized
PrivateDairies
CooperativeSocieties
Unorganized
Small MilkProducers
MARKET STRUCTURE
Organized sector: Dairy units registered to Milk &Milk Products Order 1992, each having capacity
to handle more than 10,000 litres per day areCo-operatives, private or others (like governmentDiaries)
Rest of all are unregistered small milk producersor traders selling raw/boiled milk and other milkProducts at local levels but have a major share in
the market.
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Source: NDDB Annual Report 2012-13
Successfulnessof Indian Dairy
industry
Processing &value adding
Management
Nationalpolicies Animal/
Breeds
Marketing
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The demand for packaged,Branded traditional milk is rapidlyIncreasing and also for value-addedProducts like flavored milk,Dahi, Paneer, lassi, kheer etc.
Source: NDDB
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Demand for Milk & Milk Products
Households
Milk, curd, butter, ghee, buttermilk andLassi
Unorganized Sector
Urban liquid Milk, Sweet productionand other traditional products
OrganizedSector
Pasteurized liquid milk & products forexports
Demand
Factors
HighProteinDiets
Lifestyle
Change infood habits
due toeducation
levels
Urbanization
Awareness &Availability
DisposableIncome
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E
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Global dairy products trade
India dairy products trade
Source: Emerging challenges and strategic references
2000-01 India is the Net Exporter
increase in Exports from USD 3.45MM
in 1996 to 270 MM in 2008& decreased
in 2009
Increase in income levels, urban centers
resulted in rapid growth in demand
for processed dairy products reduced
surplus for exports and increased in
imports from USD 1.48 MM in 1996 to
USD 169 MM in 2010
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Key Issues & Challenges
Average Milk Yield per cattle remains very low when compared to developed
and other developing countries
Small size of the cattle per producer makes it difficult to adopt mechanized system
of milking, cooling and storage facilities which hampers the quality at the
production stage
Large vegetarian population and dependent on the only source of essentialnutrient milk causing huge domestic demand and low surplus left for exports
In developed countries only cow milk is suitable for human consumption where as
India produces substantial quantity of buffalo milk
Health and disease prevention and control of the cattle is to be given high
importance
Competitive Pricing Points & maintaining high international standards, quality
assurance, clean milk production, reduction of antibiotics, pesticides, and other
contaminant residues in milk & up gradation of the technical processes
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Political MMPO Act 1991 & liberalizing the same act by removing Milk Shed for more private investments. Programs & projects to develop infrastructure, clean milk production scheme, National Dairy
Development Board research projects in training and awareness on hygienic milk production & cattle Other welfare programs by rural development agency and womens SHGs Import duties, quotas, restrictions & domestic subsidies
Economic availability of finance to the farmers, availability and cost of labor to feed, milk and market the product
and its priority in relation to other demands on the household , depreciation of rupee increasing exports, growing consumption & disposable income at the semi
urban and rural level Rise in retail industry has given consumer a wide choice of brands
Technological Production and processing stages technologies to meet the International standards to boost exports Consumers are empowered with the technology that provides information about anything they
consume or use
Socio-Cultural Growing nutrition consciousness , changing lifestyle of urban and rural households increased
consumption of ready-made dairy products Exposure to different forms of media has resulted in increased brand consciousness in the consumers
Environmental & Legal Climatic conditions in which cattle are raised; Input to the cattle in terms of the disease control and
healthcare Center for Analysis & learning in livestock and food under NDDB, carries out a wide range of analyses
on dairy and food products, feed and feed ingredients, acquired diseases and chromosomal andgenetic disorders.
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Threats of New Entrants Economies of Scale Cost and Resource
advantages Brand Preferences and
Consumer Loyalty Access to Distribution
Channels Inability to match the
technology and specializedknow-how of firms alreadyin the industry
Capital Requirements
Threat Of Substitutes Changing consumer
lifestyles preferringsupplements for nutritionalover dairy products
Local Vendors and Smalltime producers offering atlow prices
Indirect threat from theother product categories inthe food & beveragessegment
Bargaining power of buyers Switching to competitors
brands in the high margined
value added productscategories like Ice cream,curd, milk powders,confectionary products.
Large no. of buyers & theproducts have occupiedregular share in the pockets
Bargaining power ofsupplier No or low level of
exploitation as cooperativesare run for the benefit ofthe milk farmers
Suppliers are protected byrules & regulations
Rivalry among competitors Firms operating in high
margined value addedproducts market are
expanding into other productcategories with consistentinnovation
International Players M&Awith domestic firms
More Product lines andbrands in the value added
products market
PORTERS
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The Anand Milk Union Limited (Amul) cooperative formedin 1946; but it has become a brand name managed by theGujarat Cooperative Milk Marketing Federation (GCMMF)
Year of Establishment 1973
Members
17 District Cooperative MilkProducers' Unions (16Members & 1 NominalMembers)
No. of Producer Members 3.18 Million
No. of Village Societies 16,914
Total Milk handling capacityper day
16.8 Million litres per day
Milk Collection (Total - 2012-13)
4.66 billion litres
Milk collection (Daily Average2012-13)
12.7 million litres
Cattle feed manufacturing
Capacity
5890 Mts. per day
Sales Offices 48
Dealers 5000
Retailers 1 Million across the country
Sales Turnover -(2012-13)Rs. 13735 Crores (US $ 2.54
Billion)
Product Categories:
Bread spreadsCheese RangeFresh & UHT MilkMilk PowdersGhee ProductsCurd ProductsFlavored Milk Products
Ice-creamChocolate & Confectionary ProductsSweetsHealth Drink
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From selling milk to cities, Amul now selling value-added products back to villages
EEE Strategy: Expand, Expand & Expand; Expand in the procurement and
distribution lead to 20 percent compounded annual growth rate for the last 5 years
Investment in increasing milk procurement, processing capacities and distribution
Recent Capital Investments of Rs. 3000 crores Kheda district union recently
inaugurated a new plant in Virar, near Mumbai, and is setting up another processing
facility in Kolkata. The Sabarkantha district union has invested in Rohtak, while the
Banaskantha union is investing in creating capacities in Faridabad and Kanpur
Liquid milk constitutes more than half of Amul's turnover, which is a low margin
business. More focus on the value-added/higher margin products like ghee, butter
milk, curd and ice cream
Decentralizing to increase the reach of these value added products to small towns of
population less than 20,000. due to increase in disposable incomes of the people in
the towns with population less than 100,000 & 1-10 lac towns
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Creating & extending the cold chain for distribution of
the value-added products like flavored milk into the
hinterlands of the country (products like Masti
buttermilk, Kool milk shakes)
Investing in setting up new company-owned depots in
smaller towns. For example, Kharagpur, which was
earlier under Asansol, now has a depot of its own and
so does Aurangabad, which was fed from Pune
Introduced a new layer in the distribution channel
called a 'super distributor', who operates at district level
and supplies to sub-distributors at the taluka level.
already appointed 250 super distributors, each with 50
subdistributors. Business from these areas has increased
by 15%
Establishmentof a direct
linkagebetween milk
producers andconsumers byeliminatingmiddlemen
MilkProducers(farmers)control
procurement,processing and
marketing
Professionalmanagement
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Strengths Largest food brand in India & Asia High Quality at affordable price Largest Distribution network Professionally managed and introduced
TQM Highly diverse product mix having high
margin value added products Responsible for White Revolution Successful marketing & advertising
campaigns created favorable brandperception
Weaknesses Strong dependency on the weak
infrastructure & completely dependenton village for its raw materials
Short shelf life of its product Low market share in confectionary and
other value added segments which aregrowing at rapid pace
Lack of control over average yield percattle
Threats Competition from international and
domestic players in high margin orientedsegments
Inconsistent export policies threateningthe pole position
Ban of plastic which is widely used inpackaging
Liberalization lead to large no. ofentrepreneurs
Creation of Non Tariff Barriers byDeveloped Nations
Opportunities Introduce new products in the chocolate
segment To tap the untapped market, increase its
reach in rural markets Rise in purchasing power of Indian people Export to Western economies if
International standard infrastructuredeveloped in value chain
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PRODUCT DIVERSITY/MIX
Lowto
High
Low to High
STRATEGIC GROUP MAPPING
Amul,
Nestle,MotherDiary
Aavin,Vijaya,Hatsun
Britannia
Parag,Heritage,
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Parag Milk Foods Parag had initially started as a Milk company with Ghee being the first product with which they
entered the customer segment Parag Milk Foods is among the largest milk producers in the country Pune based company commanding over 2% of the total $10 billion organized market
Company Exports milk products to 27 countries in West Asia, South East Asia and Africa Operates with more than 300,000 retail outlets Comprises of more than 2,000 distributors Major Areas -
Liquid Milk 20% of the revenues Cheese 25 to 30% of the revenue Skimmed Milk Products (SMP) 20% of revenues
UHT/Tetrapak 7 to 8% of the revenue Fresh Division (Dahi, yogurt, paneer) 15 to 18% of the revenues
Parag also sells byproducts such as whey protein and cheese to processed food makers in thecountry
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Strengths Hygienic Milk processing Asias largest cheese producer State of the art technology Receiving milk from different centers Full 100% use of cows to produce milk Thick dahi Selling of byproducts like whey protein
Weaknesses Improper distribution network Short shelf life of its product Use of only cow milk Positioning Not spread out as much as its domestic
rivals
Threats
Competition from well establishedinternational and domestic players in
high margin oriented segments Competition from regional and small
time players
Opportunities
Locking in with institutional clients Nofocused competition
High growth of the Indian cheese market(15-20% annually)
New market for packaged dahi Creation of more brand loyalty Rapid expansion Rise in purchasing power of Indian people Export to Western economies
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