Dairy products market size
APAC dairy products market is expected to grow at a CAGR of over 10% during the forecast period owing to rising awareness for healthy lifestyle & wellness, rising disposable income, improved product availability and quality. Also, dairy products of improved varieties and hybrids have become consumer’s preference these days according to the latest trends.
Dairy products market in India witnessed robust growth over the last few years and is expected to grow at a higher rate than the other Asian countries during the forecast period. Dairy market in India expected to grow at a high rate because of huge popularity and increasing consumer preference for dairy products. Increasing disposable income, urbanisation, changing food habits and increasing consumption of milk-based processed foods are expected to be the key drivers for growth of dairy products market in India during the forecast period.
Value-added products such as yogurt and ice cream are expected to penetrate country’s consumer markets further over the coming years and packaged dairy products segment is anticipated to witness significant growth in the Indian dairy market. The growth in this segment can be attributed to the domestic factors such as growing preference for a healthy lifestyle and preference for good quality dairy products, increasing middle-class population base and a shift in consumption pattern, with an inclination towards branded dairy products.
Primary factors for the growth of dairy industry before Covid-19
India has recorded high demand from the dairy industry due to the increase in per capita income and disposable income of the consumers. These two factors have improved the purchasing power, which fueled growth in the Indian dairy industry. Additionally, due to rapid urbanisation, there is a significant increase in the share of organised dairy market in the Indian dairy industry.
Urban consumers prefer products from organised sectors and opt for digital platforms to fulfil their daily needs. In recent years, e-commerce platforms such as Milkbasket and BBdaily (Segment of Big Basket Grocery) have been delivering dairy products at the doorsteps of the consumers. Moreover, there is an increased demand for the subscription-based dairy products, which are opted by majority of urban consumers. All these factors turn them into regular buyers for organised dairy produces.
Additionally, another reason for increasing demand in the milk industry is on account of addition of value-added milk products as manufacturers are focussing on improving the product quality and variety of value-added milk products to attract the consumers. Moreover, consumer these days buy different types of milk (toned, ultra toned, skimmed and so on) as per their needs and show significant interest in high protein diets.
The government’s initiative of milk fortification in India has been taken positively by the organised sector. There is an increased demand for fortified milk with Vitamin A and D at retail platforms. This is yet another reason for the increase in share of organised dairy products in India. Milk industry in India was previously dominated by milkmen (dhudwala) and the milk they delivered, also did not meet the laid nutritional standards due to excess adulteration.
Among all the other reasons, there has been robust improvement in cold-storage and supply chain for dairy-based products. This is helping regular convenience and retail stores to maintain sufficient inventory on a regular basis. Thus, modern infrastructure and transportation techniques have offered significant growth opportunities to the milk industry in India.
Source: Basic Animal Husbandry Statistics, DAHD&F, GoI
The Indian dairy market has been dominated by the home-grown players such as Amul and Mother Dairy. Also, there has been an increase in number of domestic dairy players in the country. They are providing hi-tech deliveries at home, with the help of direct marketing to the consumers, through door to door delivery mechanism and trying to capture significant areas, especially the ones in the urban setup.
Impact of Covid-19 on the dairy industry in India
Due to the imposed lockdown to stop the spread of Covid-19 in India, milk industry has shown around 30% dip in demand for the dairy products. A large portion of the milk industry contributed to the out-of-home sales establishments, which include restaurants, sweet and ice cream shops, and other small manufacturing units. All of these establishments have been shutdown due to lockdown, leading to a dip in their sales. This has caused a reduction in the consumption of milk products as well.
Although, there was a significant surge in milk consumption during the first 2-3 days, due to panic driven buying and customers stocking milk. After a few days, home consumption decreased significantly due to unavailability of milk at the local stores and at the same time e-commerce deliveries also stopped. As a result, there was no option available for people to buy milk for next few days.
Milk products such as paneer and curd, also showed a decrease in the consumption and availability as people did not went out due to the lockdown. Moreover, shopkeepers also couldn’t store milk products for long due to their limited shelf life without the cold storage.
Plans for businesses after normal life is restored
Companies have already started business activities to fulfil dairy needs of customers through different methods even during lockdown. Despite the dipping demand, big companies are procuring milk from small farmers. They are now using surplus milk for skimmed milk powder production as earlier there was a shortage of skimmed milk in India.
FMCG and dairy companies are finding out new ways to reach their customers. Creamline Dairy and Lactalis India have started direct distribution of milk & milk-value-added products through personalised vans in residential societies, for which they have received a positive response. Earlier, this was done through a distributor channel.
Amul has also started direct delivery of products for its customers as the consumers are also opting for the online delivery channels up to some extent, but the deliveries are still not fully possible because of current restrictions. Amul has observed the trend for increasing consumption of products like paneer and dairy whiteners, where dairy whiteners are especially witnessing more demand from metropolitan cities on account of surging demand for baby milk powder.
Online shopping apps such as milk basket are also ensuring on-time delivery of dairy products to their customers. They do not have any option for minimum order size, which has been highly appreciated by the consumers.
(The author is research director, TechSci Research. He can be contacted at sales@techsciresearch.com)