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Future business scope for foreign dairy brands in India
Monday, 23 December, 2019, 08 : 00 AM [IST]
Ankita Kataria
“India remains a massive opportunity for [us] once it inevitably shifts to being a dairy importer,” Fonterra, the world’s number one dairy exporter

The socioeconomic development of a country depends upon the price of the basic needs. Milk and milk products control a country’s economy wherein decisions regarding the market need to be taken wisely according to the requirements of both the urban and rural populations.

India has a diverse population of 1.3 billion and is a wonderland for brands targeting investment opportunities in the dairy sector. The milk production of India is 176.3 million metric tonne and is the highest in the world. There is high availability of cheap labour and technological infrastructure.

The Indian diaspora is a perfect blend of all age groups with the highest youth population which is ready to experiment with novel products with good nutritional and organoleptic properties. The dairy sector of India is highly chaotic has a large untapped potential. Only 25% of the milk produced by more than 70 million rural households in the country is sold in the organised market of Rs 100,000 crore.

Value-added products
The milk industry in India is dominated by liquid milk followed by indigenous value-added products. Only a handful of other products like cheese, yogurt, skimmed milk powder and ice cream are produced in India. Milk is highly perishable and must be processed at the earliest.

Moreover, surplus milk in India needs to be transformed into value-added products to prevent it from degrading. The nutritive quality of milk can further be improved by incorporating probiotics, prebiotics as well as other plant-based products. These are highly common internationally but only available to the niche population in India. Thus, foreign brands can provide higher value to milk due to improved nutritional and functional quality.

Global dairy giants like Danone and Fonterra have earlier invested but found it difficult to get their recipe perfect and had to exit. But they re-entered with the former launching Epigamia, a gourmet yogurt brand of Rs 182 crore and the latter equally partnering with Future Consumer Products as a joint venture. Fonterra-Future Dairy target value-added products which is a Rs 25,000 crore market.

Significant investments

Lactalis followed the acquisition route initially acquiring Tirumala Dairy (Chennai) followed by Anik Dairy (Indore) and Prabhat Dairy (Maharashtra). French cheese maker Fromageries Bel, Mexico’s Grupo Lala, Dutch dairy cooperative FrieslandCampina, Germany’s Hochland Group and Denmark’s Arla and have tageted the Indian market for opportunities to set up own units or to partner with local players. Significant investments have been made by global dairy majors like Schreiber (US) with Dynamix Dairy (Maharashtra), Nestle and Danone among others in India.

“It takes a generation for a farmer family to set up a small dairy farm but the government will destroy this by the stroke of a pen when it signs the RCEP agreement, which will devastate India’s dairy sector,” said Ajit Nawale, a dairy farmer leader and CPIM activist who led protests in Maharashtra, in 2017-18. (Grain, 2019)

But, the lifeblood of Indian countryside is milk. The 150 million dairy farmers of India are small landowners owning just two or three cows or buffaloes. Dairy is a particularly important source of income for Indian farmers with little access to land. Apart from farming, dairy is a livelihood source for millions of more people in India who bring milk from the farmers to consumers or who process it into yoghurts, cheeses and other foods for sale. These small-scale processors, often referred to as the 'unorganised sector,' handle over 75% of India's milk supply and bring nearly twice as much milk to market as the private sector and cooperatives combined. If high tariff and non-tariff barriers are not instituted, the dairy sector will be taken over by global dairy giants and the small-scale dairies would be vanished rapidly.

Global skimmed milk powder glut
The global skimmed milk powder glut has already reduced the prices creating high anxiety among the Indian farmer. The Regional Comprehensive Economic Partnership (RCEP) would have led to further distress to already resource-strapped farmers. "We were assured that the interests of dairy farmers will be protected. So we are happy that the imports of New Zealand or Australia will not be allowed. In the current form …it (RCEP) would have been disastrous for farmers in India," said R S Sodhi, MD, Gujarat Cooperative Milk Marketing Federation, while thanking the Prime Minister of India.

Undoubtedly, India, a young country, has a huge scope of foreign brands which should be targeted wisely. The demands of the Indian farmer should be taken care of while allowing these companies to establish themselves in India. Rather than imports, ‘Make in India’ should be followed by establishment of milk plants with a cooperative purchase of milk from the Indian farmers which would help to improve their economy and thus further the country’s development. India needs value-added products but not at the cost of livelihood destruction.

(The author is Ph D (food technology) scholar, Punjab Agricultural University, Ludhiana. She can be contacted at
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