Description
It is a case study based on the problem of Indian Dairy Industry, was being presented in International Case Study Conference, Amity University-Haryana-2013.
INDIAN DAIRY INDUSTRY
International Case Study Conference-2013 Amity Business School Amity University-Haryana INDIA.
Author
Bal Krishna Pandey MBA-International Business Amity Business School-GGN
[email protected] +91-8685046169
EXECUTIVE SUMMARY
As we know India is a developing country, with the biggest population of the world after the China. Our 70% of the population lives in the rural areas of India. According to the research of planning commission of India 65% of population’s livelihood is depended on the agricultural sector, it includes farming on land, dairying etc. Dairy and Dairy Industry plays a very important role in the Economy because it provides a very good source of income to the peoples who lives in the rural areas of India. India’s population is more than 121 Cr. so we can consider to the Dairy Industry of India as the God of Wealth “Kuber” for the farmers. India is the second largest producer of Milk and dairy products after the USA (89,015,200 Tons) with the production capacity of 121,848K Tones, accounting for more than 13% of world’s total milk production, and it also has the world’s largest dairy herd. As the country consumes almost all of its own milk production, India was neither an active importer nor an exporter of dairy products prior to year 2000. However, since the implementation of Operation Flood Programme, the situation changed significantly and imports of dairy products reduced to very small quantities. But after all efforts the demand and supply factor of dairy product Milk which is the focus area of case study, is not meeting the population requirement. The total production of main dairy product milk which was 121.8 Million MT in the period of 2010-12, couldn’t cross the projected production of 128 million MT in 2011-12. Demand for milk in India will rise by 29 per cent to 150 million tons in the next five years on account of the rising population, an industry body said in the conference organized by the Indian Dairy Association *. So it is require looking after the problem of imbalance between High demand and low supply of milk in India. By the help of this case study we will take a deep insight of various practices of Indian dairy Industry to find out and to discuss the various problems and their causes which are related with this industry and ultimately effecting our economy’s strengths. BAL KRISHNA PANDEY MBA-INTERNATIONAL BUSINESS AMITY UNIVERSITY, HR. INDIA.
INDIAN DAIRY INDUSTRY
Dairy industry is of crucial importance to India. The country is the world’s largest milk producer, accounting for more than 13% of worlds total milk production. It is the world’s largest consumer of dairy products, consuming almost 100% of its own milk production. Dairy products are a major source of cheap and nutritious food to millions of people in India and the only acceptable source of animal protein for large vegetarian segment of Indian population, particularly among the landless, small and marginal farmers and women. Dairying has been considered as one of the activities aimed at alleviating the poverty and unemployment especially in the rural areas in the rain-fed and drought-prone regions. In India, about three-fourth of the population live in rural areas and about 38% of them are poor. In 1986-87, about 73% of rural households own livestock. Small and marginal farmers account for three-quarters of these households owning livestock, raising 56% of the bovine and 66% of the sheep population. According to the National Sample Survey of 1993-94, livestock sector produces regular employment to about 9.8 million persons in principal status and 8.6 million in subsidiary status, which constitute about 5% of the total work force. The progress in this sector will result in a more balanced development of the rural areas and Indian Economy as well.
STRUCTURE OF THE INDIAN DAIRY INDUSTRY Dairy industry in India has witnessed an eventful journey. From being written off as a basket case a few decades back, India has today emerged as the largest milk producer in the world. More than 70% of India’s milk producers are small marginal farmers, the animals are low milk yielding and land holdings are small. By any yardstick, the progress in dairy industry in India is a remarkable feat. The story of India’s dairy development originates from the success of Gujarat Cooperative Milk Marketing Federation (GCMMF) four decades ago. The success of the business model adopted by Gujarat Cooperative Milk Marketing Federation and the subsequent “Operation Flood” program portray the story of Indian dairy industry to a significant extent. In the early 1950s, India was commercially importing around 55,000 tons of milk powder annually to meet the urban milk demand. The milk production during the 1950s and 60s was more or less stagnant. It was only much after independence that India’s Dairy industry was included in government’s development policies. The Government’s goal was to provide hygienic milk to the country’s growing urban population. The foundation for development of India’s dairy industry was the cooperative movement in the state of Gujarat. In 1952, the Kaira District Cooperative Milk Producers’ Union (currently the Gujarat Cooperative Milk Marketing Federation, (GCMMF) gained the right to supply fluid milk to the Mumbai market. This assured market allowed the cooperative to grow rapidly but also posed a challenge in maintaining a cold chain and balancing milk production with fluid milk demand. The cooperative adopted a unique tiered system of milk collection and processing – came to be known as the Anand model. The cooperative adopted the “Amul” B rand and developed nationwide brand recognition. In 1960, Amul pioneered production of milk powder and baby food from buffalo milk. Today Amul members supply more than 1 million liters of
milk per day and sell 400 tons of cattle feed every month. This was supported by the Indian Government through the NDDB (National Dairy Development Board), created in 1965, at Anand. In the late 1960s, Dr V. Kurien designed the concept of Operation Flood. The purpose of Operation Flood was to create a white flood of milk throughout India by widely replicating and financially supporting the Anand model. Phase One of Operation Flood was launched in 1970 while the Second and Third Phase, in 1985 and late1990s, respectively. Operation Flood-inspired cooperatives have raised the incomes of millions of landless marginal farmers who constituted the cooperatives’ membership. It was only in the year 1991 that the dairy sector was de-licensed. The Milk and Milk Products Order 1992, was revised with controls in 2002 while the MACS Act (Mutually Aided Cooperatives Act), 1995 was introduced to strengthen cooperatives. The Indian dairy sector is a 3 tier structure - village society, district unions federated at state level. The nation's milk supply comes from millions of small producers, dispersed throughout the rural areas. These farmers maintain an average herd of one or two milch animals, comprising cows and/or buffaloes. Today, the Indian dairy Industry is at cross roads again. The industry is dominated by the Government sector and working in a co-operative mode. It is going to face keen competition from the rising private sector, which is making considerable investment in Indian dairy industry.1
PRODUCTION & CONSUMPTION PATTERN In INDIA dairy sector plays a very vital role. This sector plays a complementary role with the
agriculture and has the capability to enrich the protein diet of the predominantly vegetarian population of India. The dairy Industry in India has come a long way from dependence to self reliance as the volume of milk produced more than tripled in a span of three decades from 95 million tons to 121.848 million tons in the end of the 2011.2 The value of the Indian Dairy Industry was estimated at 5500 Billion according to the estimates of Danon.4 The current annual growth rate in milk production is pegged at between 4 to 6%. This is primarily due to the initiatives taken by the Operation Flood Programme in organizing the milk producers into Amul type cooperatives; building infrastructure for milk procurement, and the related processing and marketing activities. Operation Flood provided the much needed financial, technical and management inputs. But It is very much interesting to know that 60% of the farmers who are associated with the unorganized sector approximately 65 percent of milk of total production in India is consumed (in fluid or processed forms) on farm or by the unorganized sector including local milk vendors, wholesalers, retailers, and the producers themselves. So whole of the supply chain of milk across the country is in the hand of the 40% farmers or dairymen.3 So it is easily understandable that we are running in the shortage of Milk which is the first raw dairy product.
Now we will take an insight of milk production in India (with State wise).
STATE All India Andhra Pradesh Aruanchal Pradesh Assam Bihar Chhattisgarh Bihar Goa Haryana Himancal Pradesh J&K Karnataka 2010-11 121848 11203 28 790 6517 60 9321 60 6267 1102 1609 5114 STATE Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Orissa Punjab Rajasthan Sikkim Tamilnadu Tripura 2010-11 7514 8044 78 79 11 76 1671 9423 13234 43 6831 104 STATE Uttar Pradesh West Bengal A&N Island Chandigarh D&N Haveli Daman Diu Delhi Lakshadweep Pondicherry Kerala Uttaranchal Jharkhand 2010-11 21031 4471 25 45 11 1 480 2 47 2645 1383 1555
Table-1: Production of Milk during the period of 2010-11 (State Wise) K tons
TREND OF CONSUMPTION AND INDUSTRY CONTRIBUTION
As it is shown in the table that in India the total production of Milk in 2011 was approximately 121848 K tons. If we will look after the population of India as of now, where according to a research in India the average per capita consumption of Milk is 350gm per day, so in this way as per the structure of our current population it is not goanna to work anymore this is just able to fulfill the 65% of our daily needs in terms of milk, because milk is not only consuming directly as a nutrition product by the consumers it has various usages e.g., it is being used in clothing industry, bakery and many more which are countless. So our production rate is still weak while our consumption rate is pretty high. According to a spokesperson of IDA “The demand for the dairy products is rising 29% per annum and the production growth rate is just its half. So some efficient and adequate efforts and action are required from the side of national and state government as well. Public private partnership is required to fulfill the needs of technological changes and production system of the industry.”5 Even though milk production has increased steadily, demand for milk has increased at much faster pace due to number of reasons including rising GDP rate, increase in incomes of rural households, farm debt waiver, increase in salaries of government employees among others. International agencies have already projected that India may have to import milk products in the years to come to meet our growing demand. Keeping in view the rising population, India would need
around 150 million tones of milk by the end of the 12th Five-Year Plan (2012-17). PRODUCT WISE CONSUMPTION PATTERN
Of the milk traded, over 50 % of the milk is in the form of liquid milk, another around 35 % in the form of traditional products and the remaining 15 % is accounted for by butter, milk powders
and other western type manufactured products.
15 Liquid Milk Traditional Products Western Products
50 35
Source: NDDB
The demand for packaged, branded traditional milk products is increasing rapidly. The further growth of the market for value - added indigenous dairy products is expected largely for ethnic foods such as flavored milk, Curd, Cheese, lassi, kheer etc.6 So it was the overall overview of Indian Dairy Industry and now we will look after the major players and their competitive position in the market.
MAJOR PLAYERS IN THE INDIAN DAIRY INDUSTRY India’s milk processing industry is small compared to the large amount of raw milk produced every year. Almost 55 percent of the milk produced is consumed by the producer household. Of the remaining, two?third is sold in informal markets and 15?16 percent of the total milk produced in India is processed by the organized market, including dairy cooperatives and the private sector.7 There are some major players in Indian Dairy Industry who are well known for their market presence across the India and some across the regions. 1. AMUL Gujarat Cooperative Milk Marketing Federation (GCMMF), the largest food company in India, recorded a turnover of Rs 2882 crore ($ 0.65 bn) in 2003-04. Its flagship brand 'Amul' was the market leader in butter, whole milk, cheese, ice cream and dairy whitener. GCMMF was the largest cooperative movement in India with 2.2 million milk producers of Gujarat organized in 10,552 cooperative societies. GCMMF collected 5 million liters of milk per day from its shareholders who owned 3.2 million buffaloes, one million cows and 0.3 million crossbred cows. The Federation's extensive marketing network comprised 3000 distributors and 500,000 retailers spread across the country.
Market Share Amul India has a very strong presence in Indian Dairy market; it is the consideration of industry bodies that only Amul’s model has been successful in the Dairy market. Amul has a very strong presence in North India. It collects 5 million liters on daily basis from 2.2 million milk producers across the Gujarat organized in 10,552 cooperative societies. The Federation's extensive marketing network comprised 3000 distributors and 500,000 retailers spread across the country.RS Sodhi, the new managing director of Gujarat Co-operative Milk Marketing Federation, wants to convert Amul into a strong food brand by pushing categories such as icecream, beverages, paneer, dahi and fruit lassi.8 Now Amul has targeted Rs 30,000-crore sales by 2020 and it is on the road to be the world top 20 dairy company in 2015. 2. Hatsun Agro Products Ltd. Hatsun often called Hatsun Agro Products is the largest private sector dairy Company in India based in Chennai. It was founded by R. G. Chandramogan in the year 1986. It is projected to become a dollar billion company by mid 2013. The Company was also awarded "The Fastest Growing Asian Dairy Company". During the Financial Year of 2011-2012, the Company grew at an rate of 23.6%.Future Expansion plans in the Middle East and North America has pushed the company to an faster rate of capitalizing these regions.
Market Share: Hatsun Agro Products Pvt Ltd has a very strong presence in southern part of India. They are one of the Indian private dairy product producer organizations. They sell the milk and other dairy product under the brand name of ARUN. They export the dairy product in 38 countries of the world. Their total worth value was more than 700Million USD in 2011.
3. Mother Dairy Mother dairy was setup in 1974 under the operation flood. It is an wholly owned company of NDDB. Safal is the one of the brand and market leader in organized fruits and vegetable retail business in Delhi/NCR. Market Share Mother dairy sources significant part of its requirement of liquid milk from Dairy Cooperatives. It markets approximately 3.2 Million liter milk per day in New Delhi, Mumbai, Saurastra, and Hyderabad through 1400 outlets and 1200 exclusive stores. The total worth value of the Mother Dairy is 4000 Cr INR in 2011. Mother dairy has a very strong fight with Amul India. Amul is the major competitor of Mother dairy. 4. Sudha The Bihar State Milk Co-operative Federation Ltd is a dairy cooperative established in 1983
is an enterprise of the government of Bihar. It markets its products under the label "Sudha Dairy" Market Share:
The Bihar State Co-operative Milk Producers’ Federation Ltd. (COMPFED) was established in 1983 as the implementing agency of operational Flood programme of dairy development on “Anand”pattern in Bihar. The brand Sudha has avery strong presence in Bihar. Recently Sudha has been launched in New Delhi. So it is gonna to make the completion very tough for Amul and Mother Dairy who are already hae strong presence in the market. 9 CRITICAL FACTORS OF INDIAN DAIRY INDUSTRY 10
1. Competitiveness cost of production, productivity of animals etc. The demand for quality dairy products is rising and production is also increasing in many developing countries. The countries which are expected to benefit most from any increase in world demand for dairy products are those which have low cost of production. Therefore, in order to increase the competitiveness of Indian dairy industry, efforts should be made to reduce cost of production. Increasing productivity of animals, better health care and breeding facilities and management of dairy animals can reduce the cost of milk production. The Government and dairy industry can play a vital role in this direction. 2. Production, processing and marketing infrastructure If India has to emerge as an exporting country, it is imperative that we should develop proper production, processing and marketing infrastructure, which is capable of meeting international quality requirements. A comprehensive strategy for producing quality and safe dairy products should be formulated with suitable legal backup. 3. Focus on buffalo milk based specialty Dairy industry in India is also unique with regard to availability of large proportion of buffalo milk. Thus, India can focus on buffalo milk based specialty products, like Mozzarella cheese, tailored to meet the needs of the target consumers. 4. Import of value-added products and export of lower value products With the trade liberalization, despite the attempts of Indian companies to develop their product range, it could well be that in the future, more value-added products will be imported and lower value products will be exported. The industry has to prepare them to meet the challenges. 5. Provisions of SPS and TBT At the international level, we have to ensure that provisions of SPS and TBT are based on application of sound scientific principles and should become defacto barriers to trade. Operation Flood Era Dairy sector witnessed a spectacular growth between 1971-1996, i.e. Operation Flood era. An integrated cooperative dairy development programme on the proven model of Anand pattern was implemented in three phases. The National Dairy Development Board was designated by the Government of India as the implementing agency. The major objective was to provide an assured market round the year to the rural milk producers and to establish linkage between rural milk production and urban market through modern technology and professional management. Milk production grew from 21 million tons in 1970 to nearly 69 million tons in 1996 - more than threefold, at the compound growth rate of 4.5 per cent. Some ten million farmers were enrolled as members in about 73000 milk cooperative societies. By 1996, milk cooperatives attained a dominating share of the Indian dairy market - butter 96%, pasteurized liquid milk over 90%, milk powder 59%
and processed cheese 85%. India was reckoned as a major threat in the dairying world. In retrospect, it was by no means an easy task. Let us all salute the visionary and the architect of the white revolution in India, Dr. Verghese Kurien, without whose dynamic leadership all this may not have been possible. The dairy cooperative movement has continued to grow in the post Operation Flood-era. New Challenges of Globalization and Trade11 Liberalization - Perspective 2010 the NDDB has recently put in place Perspective 2010" to enable the cooperatives to meet the new challenges of globalization and trade liberalization. Like other major dairying countries of the world, the Indian cooperatives are expected to play a predominant role in the dairy industry in future as well. However, India is in the mean time, attaining its past glory and is once again becoming DOODH KA SAGAR. But, what percentage of this SAGAR is handled by the cooperatives - just a little over 7%. Since liberalization of the dairy sector in 1991, a very large number of private sector companies / firms have, despite MMPO, established dairy factories in the country. The share of the total milk processing capacity by private sector is 44% of total installed capacity of 73 MLPD (Million Liters per Day) in the country. Therefore, the total share of the organized sector, both cooperatives as well as the private sector is barely 12%. What is, therefore, disquieting is that as much as 88% share of the total milk production is commanded by the unorganized sector - which specializes in selling substandard, unpasteurized milk more often than not adulterated with harmful chemicals. Besides, growth in milk production is likely to continue at the present rate of 4.4% in the near future. Who is going to handle this incremental milk? We must bear in mind is both income and price what we must bear in mind both income & price elasticity account for approximately 15% of the total expenditure of food. Demand for milk, at current rate of income growth is estimated to grow at 7% per annum. Interestingly, demand for milk is expected to grow steadily over the next two decades as the low income rural and urban families who have higher expenditure elasticity would also increase their income due to new economic environment. Let us now look at some other economic indicators. According to the World Bank, India is the fourth largest economy in the world going by the purchasing power parity estimates. Further, India has been identified as among the first 10 emerging markets in the world. India has the vastest domestic market in the world with over one billion consumers - a majority of whom are vegetarians with drinking of milk as habit. The untapped potential of the dairy sector is immense and opportunity to set up a new dairy venture is great. In the works of Dr. Amrita Patel, Chairperson, NDDB, there is enough place under the scheme for both private and cooperative sectors. Notwithstanding the above potential it is cautioned that, entering dairy sector is not going to be a cakewalk. Conclusion Globalization and Liberalization are the Mantras of the new economy today, which is now on the fast track. Industrial production is rapidly moving forward. The dairy industry is no exception. With the World Trade Organization (WTO) coming into effect, from 01 April 2001 and the imports and exports getting liberalized in the global economy, the dairy industry, which includes dairy products, faces both an opportunity for growth as well as a threat for its growth. There is no doubt that there is tremendous scope for the growth of the dairy industry in the new millennium. The product mix of world dairy trade is likely to shift further towards cheese. This has been
developed in the world markets. As the market opens up, consumption trends associated with these markets will have increasing influence on the world trade. Whole milk powder is likely to continue to be a substantial beneficiary and growth substantially in the Middle Eastern countries. As standards of living in the importing country rises, exporting countries will increasingly concentrate on whole milk powder and cheese with the assistance of butter and skimmed milk powder. There is vast potential for the export of dairy products, the cost of milk production in India being the lowest. The major factor influencing production of bye products is the newer uses that may be developed through R & D support. Milk proteins are being utilized increasingly replacing animal and vegetable proteins in special bakery products and instant foods. Through the application of membrane proven process, milk proteins isolates are being produced. These are being utilized for ice milk mixes and other such applications. Most of the dairy plants in the Government, Cooperatives and Private Sector produce almost similar dairy products like varieties of milk, butter, ghee, skimmed milk powder and whole milk powder. There are 7 largescale cheese manufacturers and 14 manufacturers are producing infant foods and malted milks. There is immense scope for the broadening of the products range and some of the products, which are likely to have considerable demand in the coming decade, have been identified. The cheese market, presently valued at about Rs.80 crore is growing at about 9% annually. There are more than thousand varieties of cheese, which has been listed out of which cheddar; mozzarella, and processed cheeses are being manufactured in India. Pizza is becoming a very popular item in the market. This segment alone commands 5% of the share in the cheese market and other area is fermented milk products. Dahi even though is an Rs.15000 crore market.
REVIEW QUESTIONS.
1. Do the SWOT analysis of Indian Dairy Industry. 2. Who are the major players in Indian Dairy Industry and what your experience with brand is which are mentioned in the case. 3. How the globalization is affecting the performance of Industry and what are their pros and cons? 4. 60% of the production of milk has been consumed by the producers itself and only 40% production goes through the market. The production capacity is increasing 3 to 4% per annum but demand is rising with the rate of 24% per annum. Explain this situation. 5. What are the major Key Areas of Concern in the Dairy Industry?
REFERENCES
1. Market opportunity in Indian Dairy value chain, report of Victorian government. 2. FICCI report on Indian Dairy Industry, Economics Times. 3. IUF dairy division report ”Analysis of Indian Dairy Industry” 4. Denon seminar in New Delhi (Self Attended) 5. Press conference of Indian Dairy Association, NDL, ET. 6. Market opportunity in Indian Dairy value chain, report of Victorian government. 7. National Dairy Development Board press conference, NDl, ET Articels. 8. Dairy Industry, Article (17Jan11) ET. 9. Dairy Industry, Article published in Times of India. 10. Opportunities and Challenges in the Indian Dairy Industry (Dr K.G. Karmakar 1 and Dr G.D. Banerjee) 11. Opportunity and challenge in Indian Dairy Industry, WTO report. 12. Article on Indian Dairy Industry published in Financial Exp.
Useful Links 1. 2. 3. 4. 5. 6. 7. 8. http://articles.economictimes.indiatimes.com/keyword/dairy http://www.financialexpress.com/ http://www.nddb.org/ www.indairyasso.org/ www.planningcommission.nic.in/ www.amul.com www.hatsun.com www.nationaldairycouncil.org/
doc_697801222.pdf
It is a case study based on the problem of Indian Dairy Industry, was being presented in International Case Study Conference, Amity University-Haryana-2013.
INDIAN DAIRY INDUSTRY
International Case Study Conference-2013 Amity Business School Amity University-Haryana INDIA.
Author
Bal Krishna Pandey MBA-International Business Amity Business School-GGN
[email protected] +91-8685046169
EXECUTIVE SUMMARY
As we know India is a developing country, with the biggest population of the world after the China. Our 70% of the population lives in the rural areas of India. According to the research of planning commission of India 65% of population’s livelihood is depended on the agricultural sector, it includes farming on land, dairying etc. Dairy and Dairy Industry plays a very important role in the Economy because it provides a very good source of income to the peoples who lives in the rural areas of India. India’s population is more than 121 Cr. so we can consider to the Dairy Industry of India as the God of Wealth “Kuber” for the farmers. India is the second largest producer of Milk and dairy products after the USA (89,015,200 Tons) with the production capacity of 121,848K Tones, accounting for more than 13% of world’s total milk production, and it also has the world’s largest dairy herd. As the country consumes almost all of its own milk production, India was neither an active importer nor an exporter of dairy products prior to year 2000. However, since the implementation of Operation Flood Programme, the situation changed significantly and imports of dairy products reduced to very small quantities. But after all efforts the demand and supply factor of dairy product Milk which is the focus area of case study, is not meeting the population requirement. The total production of main dairy product milk which was 121.8 Million MT in the period of 2010-12, couldn’t cross the projected production of 128 million MT in 2011-12. Demand for milk in India will rise by 29 per cent to 150 million tons in the next five years on account of the rising population, an industry body said in the conference organized by the Indian Dairy Association *. So it is require looking after the problem of imbalance between High demand and low supply of milk in India. By the help of this case study we will take a deep insight of various practices of Indian dairy Industry to find out and to discuss the various problems and their causes which are related with this industry and ultimately effecting our economy’s strengths. BAL KRISHNA PANDEY MBA-INTERNATIONAL BUSINESS AMITY UNIVERSITY, HR. INDIA.
INDIAN DAIRY INDUSTRY
Dairy industry is of crucial importance to India. The country is the world’s largest milk producer, accounting for more than 13% of worlds total milk production. It is the world’s largest consumer of dairy products, consuming almost 100% of its own milk production. Dairy products are a major source of cheap and nutritious food to millions of people in India and the only acceptable source of animal protein for large vegetarian segment of Indian population, particularly among the landless, small and marginal farmers and women. Dairying has been considered as one of the activities aimed at alleviating the poverty and unemployment especially in the rural areas in the rain-fed and drought-prone regions. In India, about three-fourth of the population live in rural areas and about 38% of them are poor. In 1986-87, about 73% of rural households own livestock. Small and marginal farmers account for three-quarters of these households owning livestock, raising 56% of the bovine and 66% of the sheep population. According to the National Sample Survey of 1993-94, livestock sector produces regular employment to about 9.8 million persons in principal status and 8.6 million in subsidiary status, which constitute about 5% of the total work force. The progress in this sector will result in a more balanced development of the rural areas and Indian Economy as well.
STRUCTURE OF THE INDIAN DAIRY INDUSTRY Dairy industry in India has witnessed an eventful journey. From being written off as a basket case a few decades back, India has today emerged as the largest milk producer in the world. More than 70% of India’s milk producers are small marginal farmers, the animals are low milk yielding and land holdings are small. By any yardstick, the progress in dairy industry in India is a remarkable feat. The story of India’s dairy development originates from the success of Gujarat Cooperative Milk Marketing Federation (GCMMF) four decades ago. The success of the business model adopted by Gujarat Cooperative Milk Marketing Federation and the subsequent “Operation Flood” program portray the story of Indian dairy industry to a significant extent. In the early 1950s, India was commercially importing around 55,000 tons of milk powder annually to meet the urban milk demand. The milk production during the 1950s and 60s was more or less stagnant. It was only much after independence that India’s Dairy industry was included in government’s development policies. The Government’s goal was to provide hygienic milk to the country’s growing urban population. The foundation for development of India’s dairy industry was the cooperative movement in the state of Gujarat. In 1952, the Kaira District Cooperative Milk Producers’ Union (currently the Gujarat Cooperative Milk Marketing Federation, (GCMMF) gained the right to supply fluid milk to the Mumbai market. This assured market allowed the cooperative to grow rapidly but also posed a challenge in maintaining a cold chain and balancing milk production with fluid milk demand. The cooperative adopted a unique tiered system of milk collection and processing – came to be known as the Anand model. The cooperative adopted the “Amul” B rand and developed nationwide brand recognition. In 1960, Amul pioneered production of milk powder and baby food from buffalo milk. Today Amul members supply more than 1 million liters of
milk per day and sell 400 tons of cattle feed every month. This was supported by the Indian Government through the NDDB (National Dairy Development Board), created in 1965, at Anand. In the late 1960s, Dr V. Kurien designed the concept of Operation Flood. The purpose of Operation Flood was to create a white flood of milk throughout India by widely replicating and financially supporting the Anand model. Phase One of Operation Flood was launched in 1970 while the Second and Third Phase, in 1985 and late1990s, respectively. Operation Flood-inspired cooperatives have raised the incomes of millions of landless marginal farmers who constituted the cooperatives’ membership. It was only in the year 1991 that the dairy sector was de-licensed. The Milk and Milk Products Order 1992, was revised with controls in 2002 while the MACS Act (Mutually Aided Cooperatives Act), 1995 was introduced to strengthen cooperatives. The Indian dairy sector is a 3 tier structure - village society, district unions federated at state level. The nation's milk supply comes from millions of small producers, dispersed throughout the rural areas. These farmers maintain an average herd of one or two milch animals, comprising cows and/or buffaloes. Today, the Indian dairy Industry is at cross roads again. The industry is dominated by the Government sector and working in a co-operative mode. It is going to face keen competition from the rising private sector, which is making considerable investment in Indian dairy industry.1
PRODUCTION & CONSUMPTION PATTERN In INDIA dairy sector plays a very vital role. This sector plays a complementary role with the
agriculture and has the capability to enrich the protein diet of the predominantly vegetarian population of India. The dairy Industry in India has come a long way from dependence to self reliance as the volume of milk produced more than tripled in a span of three decades from 95 million tons to 121.848 million tons in the end of the 2011.2 The value of the Indian Dairy Industry was estimated at 5500 Billion according to the estimates of Danon.4 The current annual growth rate in milk production is pegged at between 4 to 6%. This is primarily due to the initiatives taken by the Operation Flood Programme in organizing the milk producers into Amul type cooperatives; building infrastructure for milk procurement, and the related processing and marketing activities. Operation Flood provided the much needed financial, technical and management inputs. But It is very much interesting to know that 60% of the farmers who are associated with the unorganized sector approximately 65 percent of milk of total production in India is consumed (in fluid or processed forms) on farm or by the unorganized sector including local milk vendors, wholesalers, retailers, and the producers themselves. So whole of the supply chain of milk across the country is in the hand of the 40% farmers or dairymen.3 So it is easily understandable that we are running in the shortage of Milk which is the first raw dairy product.
Now we will take an insight of milk production in India (with State wise).
STATE All India Andhra Pradesh Aruanchal Pradesh Assam Bihar Chhattisgarh Bihar Goa Haryana Himancal Pradesh J&K Karnataka 2010-11 121848 11203 28 790 6517 60 9321 60 6267 1102 1609 5114 STATE Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Orissa Punjab Rajasthan Sikkim Tamilnadu Tripura 2010-11 7514 8044 78 79 11 76 1671 9423 13234 43 6831 104 STATE Uttar Pradesh West Bengal A&N Island Chandigarh D&N Haveli Daman Diu Delhi Lakshadweep Pondicherry Kerala Uttaranchal Jharkhand 2010-11 21031 4471 25 45 11 1 480 2 47 2645 1383 1555
Table-1: Production of Milk during the period of 2010-11 (State Wise) K tons
TREND OF CONSUMPTION AND INDUSTRY CONTRIBUTION
As it is shown in the table that in India the total production of Milk in 2011 was approximately 121848 K tons. If we will look after the population of India as of now, where according to a research in India the average per capita consumption of Milk is 350gm per day, so in this way as per the structure of our current population it is not goanna to work anymore this is just able to fulfill the 65% of our daily needs in terms of milk, because milk is not only consuming directly as a nutrition product by the consumers it has various usages e.g., it is being used in clothing industry, bakery and many more which are countless. So our production rate is still weak while our consumption rate is pretty high. According to a spokesperson of IDA “The demand for the dairy products is rising 29% per annum and the production growth rate is just its half. So some efficient and adequate efforts and action are required from the side of national and state government as well. Public private partnership is required to fulfill the needs of technological changes and production system of the industry.”5 Even though milk production has increased steadily, demand for milk has increased at much faster pace due to number of reasons including rising GDP rate, increase in incomes of rural households, farm debt waiver, increase in salaries of government employees among others. International agencies have already projected that India may have to import milk products in the years to come to meet our growing demand. Keeping in view the rising population, India would need
around 150 million tones of milk by the end of the 12th Five-Year Plan (2012-17). PRODUCT WISE CONSUMPTION PATTERN
Of the milk traded, over 50 % of the milk is in the form of liquid milk, another around 35 % in the form of traditional products and the remaining 15 % is accounted for by butter, milk powders
and other western type manufactured products.
15 Liquid Milk Traditional Products Western Products
50 35
Source: NDDB
The demand for packaged, branded traditional milk products is increasing rapidly. The further growth of the market for value - added indigenous dairy products is expected largely for ethnic foods such as flavored milk, Curd, Cheese, lassi, kheer etc.6 So it was the overall overview of Indian Dairy Industry and now we will look after the major players and their competitive position in the market.
MAJOR PLAYERS IN THE INDIAN DAIRY INDUSTRY India’s milk processing industry is small compared to the large amount of raw milk produced every year. Almost 55 percent of the milk produced is consumed by the producer household. Of the remaining, two?third is sold in informal markets and 15?16 percent of the total milk produced in India is processed by the organized market, including dairy cooperatives and the private sector.7 There are some major players in Indian Dairy Industry who are well known for their market presence across the India and some across the regions. 1. AMUL Gujarat Cooperative Milk Marketing Federation (GCMMF), the largest food company in India, recorded a turnover of Rs 2882 crore ($ 0.65 bn) in 2003-04. Its flagship brand 'Amul' was the market leader in butter, whole milk, cheese, ice cream and dairy whitener. GCMMF was the largest cooperative movement in India with 2.2 million milk producers of Gujarat organized in 10,552 cooperative societies. GCMMF collected 5 million liters of milk per day from its shareholders who owned 3.2 million buffaloes, one million cows and 0.3 million crossbred cows. The Federation's extensive marketing network comprised 3000 distributors and 500,000 retailers spread across the country.
Market Share Amul India has a very strong presence in Indian Dairy market; it is the consideration of industry bodies that only Amul’s model has been successful in the Dairy market. Amul has a very strong presence in North India. It collects 5 million liters on daily basis from 2.2 million milk producers across the Gujarat organized in 10,552 cooperative societies. The Federation's extensive marketing network comprised 3000 distributors and 500,000 retailers spread across the country.RS Sodhi, the new managing director of Gujarat Co-operative Milk Marketing Federation, wants to convert Amul into a strong food brand by pushing categories such as icecream, beverages, paneer, dahi and fruit lassi.8 Now Amul has targeted Rs 30,000-crore sales by 2020 and it is on the road to be the world top 20 dairy company in 2015. 2. Hatsun Agro Products Ltd. Hatsun often called Hatsun Agro Products is the largest private sector dairy Company in India based in Chennai. It was founded by R. G. Chandramogan in the year 1986. It is projected to become a dollar billion company by mid 2013. The Company was also awarded "The Fastest Growing Asian Dairy Company". During the Financial Year of 2011-2012, the Company grew at an rate of 23.6%.Future Expansion plans in the Middle East and North America has pushed the company to an faster rate of capitalizing these regions.
Market Share: Hatsun Agro Products Pvt Ltd has a very strong presence in southern part of India. They are one of the Indian private dairy product producer organizations. They sell the milk and other dairy product under the brand name of ARUN. They export the dairy product in 38 countries of the world. Their total worth value was more than 700Million USD in 2011.
3. Mother Dairy Mother dairy was setup in 1974 under the operation flood. It is an wholly owned company of NDDB. Safal is the one of the brand and market leader in organized fruits and vegetable retail business in Delhi/NCR. Market Share Mother dairy sources significant part of its requirement of liquid milk from Dairy Cooperatives. It markets approximately 3.2 Million liter milk per day in New Delhi, Mumbai, Saurastra, and Hyderabad through 1400 outlets and 1200 exclusive stores. The total worth value of the Mother Dairy is 4000 Cr INR in 2011. Mother dairy has a very strong fight with Amul India. Amul is the major competitor of Mother dairy. 4. Sudha The Bihar State Milk Co-operative Federation Ltd is a dairy cooperative established in 1983
is an enterprise of the government of Bihar. It markets its products under the label "Sudha Dairy" Market Share:
The Bihar State Co-operative Milk Producers’ Federation Ltd. (COMPFED) was established in 1983 as the implementing agency of operational Flood programme of dairy development on “Anand”pattern in Bihar. The brand Sudha has avery strong presence in Bihar. Recently Sudha has been launched in New Delhi. So it is gonna to make the completion very tough for Amul and Mother Dairy who are already hae strong presence in the market. 9 CRITICAL FACTORS OF INDIAN DAIRY INDUSTRY 10
1. Competitiveness cost of production, productivity of animals etc. The demand for quality dairy products is rising and production is also increasing in many developing countries. The countries which are expected to benefit most from any increase in world demand for dairy products are those which have low cost of production. Therefore, in order to increase the competitiveness of Indian dairy industry, efforts should be made to reduce cost of production. Increasing productivity of animals, better health care and breeding facilities and management of dairy animals can reduce the cost of milk production. The Government and dairy industry can play a vital role in this direction. 2. Production, processing and marketing infrastructure If India has to emerge as an exporting country, it is imperative that we should develop proper production, processing and marketing infrastructure, which is capable of meeting international quality requirements. A comprehensive strategy for producing quality and safe dairy products should be formulated with suitable legal backup. 3. Focus on buffalo milk based specialty Dairy industry in India is also unique with regard to availability of large proportion of buffalo milk. Thus, India can focus on buffalo milk based specialty products, like Mozzarella cheese, tailored to meet the needs of the target consumers. 4. Import of value-added products and export of lower value products With the trade liberalization, despite the attempts of Indian companies to develop their product range, it could well be that in the future, more value-added products will be imported and lower value products will be exported. The industry has to prepare them to meet the challenges. 5. Provisions of SPS and TBT At the international level, we have to ensure that provisions of SPS and TBT are based on application of sound scientific principles and should become defacto barriers to trade. Operation Flood Era Dairy sector witnessed a spectacular growth between 1971-1996, i.e. Operation Flood era. An integrated cooperative dairy development programme on the proven model of Anand pattern was implemented in three phases. The National Dairy Development Board was designated by the Government of India as the implementing agency. The major objective was to provide an assured market round the year to the rural milk producers and to establish linkage between rural milk production and urban market through modern technology and professional management. Milk production grew from 21 million tons in 1970 to nearly 69 million tons in 1996 - more than threefold, at the compound growth rate of 4.5 per cent. Some ten million farmers were enrolled as members in about 73000 milk cooperative societies. By 1996, milk cooperatives attained a dominating share of the Indian dairy market - butter 96%, pasteurized liquid milk over 90%, milk powder 59%
and processed cheese 85%. India was reckoned as a major threat in the dairying world. In retrospect, it was by no means an easy task. Let us all salute the visionary and the architect of the white revolution in India, Dr. Verghese Kurien, without whose dynamic leadership all this may not have been possible. The dairy cooperative movement has continued to grow in the post Operation Flood-era. New Challenges of Globalization and Trade11 Liberalization - Perspective 2010 the NDDB has recently put in place Perspective 2010" to enable the cooperatives to meet the new challenges of globalization and trade liberalization. Like other major dairying countries of the world, the Indian cooperatives are expected to play a predominant role in the dairy industry in future as well. However, India is in the mean time, attaining its past glory and is once again becoming DOODH KA SAGAR. But, what percentage of this SAGAR is handled by the cooperatives - just a little over 7%. Since liberalization of the dairy sector in 1991, a very large number of private sector companies / firms have, despite MMPO, established dairy factories in the country. The share of the total milk processing capacity by private sector is 44% of total installed capacity of 73 MLPD (Million Liters per Day) in the country. Therefore, the total share of the organized sector, both cooperatives as well as the private sector is barely 12%. What is, therefore, disquieting is that as much as 88% share of the total milk production is commanded by the unorganized sector - which specializes in selling substandard, unpasteurized milk more often than not adulterated with harmful chemicals. Besides, growth in milk production is likely to continue at the present rate of 4.4% in the near future. Who is going to handle this incremental milk? We must bear in mind is both income and price what we must bear in mind both income & price elasticity account for approximately 15% of the total expenditure of food. Demand for milk, at current rate of income growth is estimated to grow at 7% per annum. Interestingly, demand for milk is expected to grow steadily over the next two decades as the low income rural and urban families who have higher expenditure elasticity would also increase their income due to new economic environment. Let us now look at some other economic indicators. According to the World Bank, India is the fourth largest economy in the world going by the purchasing power parity estimates. Further, India has been identified as among the first 10 emerging markets in the world. India has the vastest domestic market in the world with over one billion consumers - a majority of whom are vegetarians with drinking of milk as habit. The untapped potential of the dairy sector is immense and opportunity to set up a new dairy venture is great. In the works of Dr. Amrita Patel, Chairperson, NDDB, there is enough place under the scheme for both private and cooperative sectors. Notwithstanding the above potential it is cautioned that, entering dairy sector is not going to be a cakewalk. Conclusion Globalization and Liberalization are the Mantras of the new economy today, which is now on the fast track. Industrial production is rapidly moving forward. The dairy industry is no exception. With the World Trade Organization (WTO) coming into effect, from 01 April 2001 and the imports and exports getting liberalized in the global economy, the dairy industry, which includes dairy products, faces both an opportunity for growth as well as a threat for its growth. There is no doubt that there is tremendous scope for the growth of the dairy industry in the new millennium. The product mix of world dairy trade is likely to shift further towards cheese. This has been
developed in the world markets. As the market opens up, consumption trends associated with these markets will have increasing influence on the world trade. Whole milk powder is likely to continue to be a substantial beneficiary and growth substantially in the Middle Eastern countries. As standards of living in the importing country rises, exporting countries will increasingly concentrate on whole milk powder and cheese with the assistance of butter and skimmed milk powder. There is vast potential for the export of dairy products, the cost of milk production in India being the lowest. The major factor influencing production of bye products is the newer uses that may be developed through R & D support. Milk proteins are being utilized increasingly replacing animal and vegetable proteins in special bakery products and instant foods. Through the application of membrane proven process, milk proteins isolates are being produced. These are being utilized for ice milk mixes and other such applications. Most of the dairy plants in the Government, Cooperatives and Private Sector produce almost similar dairy products like varieties of milk, butter, ghee, skimmed milk powder and whole milk powder. There are 7 largescale cheese manufacturers and 14 manufacturers are producing infant foods and malted milks. There is immense scope for the broadening of the products range and some of the products, which are likely to have considerable demand in the coming decade, have been identified. The cheese market, presently valued at about Rs.80 crore is growing at about 9% annually. There are more than thousand varieties of cheese, which has been listed out of which cheddar; mozzarella, and processed cheeses are being manufactured in India. Pizza is becoming a very popular item in the market. This segment alone commands 5% of the share in the cheese market and other area is fermented milk products. Dahi even though is an Rs.15000 crore market.
REVIEW QUESTIONS.
1. Do the SWOT analysis of Indian Dairy Industry. 2. Who are the major players in Indian Dairy Industry and what your experience with brand is which are mentioned in the case. 3. How the globalization is affecting the performance of Industry and what are their pros and cons? 4. 60% of the production of milk has been consumed by the producers itself and only 40% production goes through the market. The production capacity is increasing 3 to 4% per annum but demand is rising with the rate of 24% per annum. Explain this situation. 5. What are the major Key Areas of Concern in the Dairy Industry?
REFERENCES
1. Market opportunity in Indian Dairy value chain, report of Victorian government. 2. FICCI report on Indian Dairy Industry, Economics Times. 3. IUF dairy division report ”Analysis of Indian Dairy Industry” 4. Denon seminar in New Delhi (Self Attended) 5. Press conference of Indian Dairy Association, NDL, ET. 6. Market opportunity in Indian Dairy value chain, report of Victorian government. 7. National Dairy Development Board press conference, NDl, ET Articels. 8. Dairy Industry, Article (17Jan11) ET. 9. Dairy Industry, Article published in Times of India. 10. Opportunities and Challenges in the Indian Dairy Industry (Dr K.G. Karmakar 1 and Dr G.D. Banerjee) 11. Opportunity and challenge in Indian Dairy Industry, WTO report. 12. Article on Indian Dairy Industry published in Financial Exp.
Useful Links 1. 2. 3. 4. 5. 6. 7. 8. http://articles.economictimes.indiatimes.com/keyword/dairy http://www.financialexpress.com/ http://www.nddb.org/ www.indairyasso.org/ www.planningcommission.nic.in/ www.amul.com www.hatsun.com www.nationaldairycouncil.org/
doc_697801222.pdf