Food & Beverage News: F&B Specials - Coops, the mainstay of India's dairy model

India is the largest producer and consumer of milk in the world. The Indian dairy sector is characterised by a very large number of small herds. Production of milk from buffaloes exceed that of cows, which are considered sacred by Hindus. India has an extensive government-supported dairy cooperative structure. Milk from the small herds is collected by the cooperatives at centralised cooling facilities and transported to the end-users in urban centres. Also typical of smallholder dairying, most of the milk produced (over 80%) is distributed as liquid milk for home consumption or manufacturing of traditional products like ghee, paneer and mithais. From burfi to kulfi, from kalakhand to shrikhand, from yogurt to ice creams extend the delectable world of Indian milk delicacies. India surpassed the US in 1998 with a production of 92 million tonnes to become the largest milk producing country in the world. In 2006, India's milk production crossed 100 million tonnes, representing 15% of world milk production. From being a milk impoverished nation to the top producer has been an astonishing success, which was achieved through the cooperative movement.

Dairy industry plays a dynamic role in India's agro-based economy. Dairy is now a highly specialised field today that involves production, procurement, storage, processing and distribution of dairy products. The dairy industry involves processing raw milk into products such as consumer milk, butter, cheese, yogurt, condensed milk, skimmed milk powder and ice cream, using processes such as chilling, pasteurisation, and homogenisation.

Overall, the Indian dairy sector is experiencing an upheaval with new product launches, repositioning of brands and entry of newer players. This will also prompt several global players to enter the Indian market. The growth of disposable incomes, change in family structures, more women joining the work force and focus on healthy-nutritious and quality products are likely to result in demand for a shift towards dairy products that are not just functional and convenient but also meet the consumers' aspirational needs.

The credit of the huge success behind the dairy industry must be attributed in great measure to Operation Flood which was a rural development programme started by India's National Dairy Development Board (NDDB) in 1970. One of the largest of its kind, the programme objective was to create a nationwide milk grid. It resulted in making India one of the largest producers of milk and milk products. The success behind Operation Flood was the Gujarat-based Amul (Anand Milk Union Limited) which in turn became a mega company based on the cooperative approach. Dr Varghese Kurien gave the professional management skills and necessary thrust to the cooperatives and is considered as the architect of India's White Revolution.

Milk production is primarily a supplementary occupation for small landholders or landless labourers. There are no official counts of dairy farms and estimates vary widely . Some estimates indicate that approximately 70 million rural households are engaged in milk production. The average herd size is two milking animals and average daily milk production per herd is about four litres. The average yield per cattle is very low in the country, because cattle are fed primarily on dried straw or residues from crop production.

Dairying is practised throughoutb India, but concentrated in the north-western states where the climate is temperate. The milk surplus states in India are Uttar Pradesh, Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu.

The top 6 states, viz Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan, Tamil Nadu and Gujarat together account for 58% of the national production.

Dairy sector, mainly an offshoot of agriculture sector in India, has taken shape of an industry in a big way today. Intimately interwoven with the socio-economic fabric of rural people in India, dairying has played a crucial role in providing nutritional security to the millions of households. It has also strengthened our economy all along by supplementing family incomes and generating gainful employment in the rural sector. All this is substantiated by the fact that Livestock accounts for 4.36% of India's total GDP and 24.72% of Agricultural GDP as of the figures available for 2004.

Indian dairy industry of late has become the major growth area and goes far beyond being an important agri-business sector of the national economy. Besides being the largest milk producing country with 5 per cent annual increase in milk production, India has a large market of dairy products due to the constantly increasing demand for variety of milk products in the urban as well as rural sectors. The rising demand for value added milk products at the national level and opening of the markets at the international level under the changing global scenario and WTO have opened up new opportunities and threats alike for the Indian dairy industry.

Consuming Pattern
In India about 46 % of the total milk produced is consumed in liquid form and 47 % is converted into traditional products like cottage butter, ghee, paneer, khoya, curd, malai, etc. Only 7 % of the milk goes into the production of western products like milk powders, processed butter and processed cheese. Among the milk products manufactured by the organised sector some of the prominent ones are ghee, butter, cheese, ice creams, milk powders, malted milk food, condensed milk infants foods etc. Of these ghee alone accounts for 85%.

It is estimated that around 20% of the total milk produced in the country is consumed at producer-household level and remaining is marketed through various cooperatives, private dairies and vendors. Also of the total produce more than 50% is procured by cooperatives and other private dairies. While for cooperatives of the total milk procured 60% is consumed in fluid form and the rest is used for manufacturing processed value added dairy products; for private dairies only 45% is marketed in fluid form and the rest is processed into value added dairy products like ghee and makhan.

Still, several consumers in urban areas prefer to buy loose milk from vendors due to the strong perception that loose milk is fresh. Also, the current level of processing and packaging capacity limits the availability of packaged milk. The preferred dairy animal in India is buffalo unlike the majority of the world market, which is dominated by cow milk. As high as 98% of milk is produced in rural India, which caters to 72% of the total population, whereas the urban sector with 28% population consumes 56% of total milk produced. Even in urban India, as high as 83% of the consumed milk comes from the unorganised traditional sector. Presently only 12% of the milk market is represented by packaged and branded pasteurised milk, valued at about Rs. 8,000 crore. Quality of milk sold by the unorganised sector, however, is inconsistent and so is the price across the season in local areas. Adulteration of milk with water, caustic soda, and some whitening agents is a common complaint.

Export Potential
India has the potential to become one of the leading players in milk and milk product exports. Locational advantage: India is located amidst major milk deficit countries in Asia and Africa. Major importers of milk and milk products are Bangladesh, China, Hong Kong, Singapore, Thailand, Malaysia, Philippines, Japan, UAE, Oman and other gulf countries, all located close to India.

India's exports of milk and milk-based products showed a significant drop of nearly 55% during the past year and was estimated at Rs 436 crore in 2006-07. Concentrated milk and cream products such as skimmed milk powder continues to be the largest item of export, which together accounts for nearly 78% of net milk and milk products exports during the year 2006-07. The exports of skimmed milk power reached Rs 343 crore in 2006-07 as against Rs 78 crore in 2001-02. On the other hand butter, butter oil, ghee and other milk fat together accounted for just over 10% of the net milk and milk product exports from India during 2006-07.

Leading players
Amul
Amul being the largest dairy cooperative realised market potential and entered into the dairy beverage segment by launching flavored milk under the brand name of Amul Shakti during September 2002.Amul recently launched a range of probiotic and sugar-free ice creams to cater to health-conscious customers.

The Anand-based Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), India's largest food products marketing organization which markets the Amul brand , has embarked upon a major e-marketing plan with a focus on increasing its sales and customer reach in India. The plan envisages formation of new Amul Icecream Cyberstores in 100 cities, launch of Amul Cyber clubs in 125 cities, and create four global e-commerce hubs in US, Dubai, India and Singapore. In addition, it will also upgrade gifting services and to evolve the Amul family site as a customied portal for kids, teens and homemakers. With an annual turnover of Rs 5,000 crore, Amul products are sold over 40 countries.

Nestle
The Rs 2,800-crore foods major Nestle India has further strengthened its leadership in the dairy industry with the launch of Slim Dahi, a first of its kind low fat dahi in India.

Britannia
Britannia entered the dairy category with the launch of Britannia Milkman range of dairy products. Britannia Milkman launched its Daily Fresh Dahi in Bangalore. Anupam Dutta, Head of Dairy Business, Britannia Milkman, said: "This launch is in line with the emerging trends of quality, convenience and wellness that consumers are seeking, coupled with newer retail formats. Even products that were "made at home" now have a growing presence in the branded and packaged goods segment.

Mother Dairy
Mother Dairy markets milk-based beverage products like flavoured milk, dahi and lassi. Mother Dairy flavored milk captures all the goodness of Mother Dairy's pure and fresh milk combined with the magic of special flavours. Made from double toned milk, and available in kesar elaichi, chocolate and vanilla flavours - these drinks are light and refreshing and capture the great taste of these unique flavours without being heavy or too filling.

PepsiCo India
If the new PepsiCo India CEO, Sanjeev Chadha, is to be believed, the cola major could soon hit the retail shelves near you with localised milk beverage offerings. PepsiCo is keenly looking at the traditional options to expand its product basket in the Indian market. The company had recently activated its Gurgaon-based R&D lab, one of the two outside the US, to work overtime and lead the Indian subsidiary to such localised products. "We are looking at all the needs that a beverage can fulfill," Chadha said.