India has been the leading producer and consumer of dairy products worldwide with a sustained growth in the availability of milk and milk products. Nearly all of the dairy produce in India is consumed domestically, with the majority of it being sold as fluid milk. On account of this, the Indian dairy industry holds tremendous potential for value-addition and overall development. Despite the fall in demand for modern dairy products in 2021 due to the pandemic, the value-added dairy products segment is expected to witness a CAGR of 16 per cent during 2021-25.
Two main factors driving this growth could be the increased purchasing power and health-conscious millennial mind set which resulted in demand revival for value-added products (VAPs) post-pandemic. Functional snacking is gaining significant attention from millennials, no wonder they prefer Chhaas, skimmed milk, and even value-added probiotic beverages over classic sugar milk. This shift paves the way for dairy producers to innovate their offerings in the VAP segment.
“The traditional mental block, which emphasises the need for state-of-the-art and expensive technology in order to produce value-added milk products, has been overcome. Funding from major companies in order to set up the divergence from the production of only liquid milk to the value-added products has been of great help in the development of the value-added products sector. Companies that go along with the recent changes and go on to upgrade themselves have borne the rewards for these. Tailoring in the DNA of a dairy products’ company has vitalised their output and hence, the economy of the firm and the industry at large”, says Samarth Setia, Chief Executive Officer & Co-Founder, Mr. Milkman by EverAg.
On an expansion spree
Mother Dairy Fruit & Vegetable, a wholly owned subsidiary of National Dairy Development Board (NDDB), has embarked upon a journey to strengthen its presence and visibility in the state of West Bengal, aimed at growing its value-added dairy products portfolio with a CAGR of over 30 per cent in the next 5 years. The company has sketched a plan for its value-added portfolio to achieve a cumulative turnover contribution of around Rs 500 crore, in the next 5 years (FY 2026-27) from the Eastern market.
Sharing his views on this development, Sanjay Sharma, Business Head – Dairy Products, Mother Dairy Fruit & Vegetable says, “Over the years, we have tried to build upon the requisite infrastructure including manufacturing and distribution capacities to cater to our consumers in the east. Today, Eastern market is one of the fastest growing markets for our value-added dairy products portfolio after North, clocking a CAGR of around 35 per cent in the last 5 years. We are thankful to consumers of Kolkata and West Bengal as our Mishti Doi has received immense traction from the audience here.”
Stepping up its focus on the ghee segment, Mother Dairy plans to expand the category eyeing a growth of 20 per cent in the next three years. As a first step, the company plans to expand its distribution in the country, aiming to cover a greater number of towns and consumer touchpoints.
Next in the list, Gujarat Cooperative Milk Marketing Federation, which markets the popular Amul brand of milk and dairy products, has forayed into expanding its portfolio of protein products, starting with the recently-launched Amul Protein Lassi and Amul Protein Buttermilk or chaas. Over the next few months, Amul envisages a complete range of protein products including shakes, yoghurt, cookies, ice cream and chocolate.
According to Dr R S Sodhi, Managing Director, Amul, “As the food processing industry is shifting from the unorganised to the organised space, opportunities are increasing in terms of technology, supply chain, value addition etc. with the dairy sector being in the lead. The real purpose of value addition is to provide better processing, shelf life, packaging to the product so that the consumer is satisfied with the end result.”
The expansion of the value-added product portfolio has been a key strategy for Hyderabad-based Heritage Foods during FY 21-22. The company introduced Shrikhand and Amrakhand variants in Hyderabad and Mumbai regions, and Malai Paneer in Mumbai; Premium Badam Milk with real almond bits in Hyderabad; new pack formats of frozen dessert in vanilla, butterscotch and chocolate flavours; ‘easy-to-digest’ A2 Fresh milk; and Natural French probiotic yoghurts, to name a few.
“Heritage Foods has continued to deliver strong top-line growth riding on its value-added product portfolio expansion, widening its distribution network. VAP contributed 25.1 per cent to the overall dairy revenue of the company during Q3 FY2022 as against 23.1 per cent in Q3 FY2021”, says Brahmani Nara, Executive Director, Heritage Foods.
Mumbai-based Parag Milk Foods is another major dairy player enhancing its product portfolio with the launch of a range of milkshakes – GO Milkshake. The company has been the pioneer of various product formats with its core positioning around cow’s milk and has already established a strong dominance in cheese with a near 35 per cent market share and ghee.
Adding on, Chennai-based dairy firm Hatsun Agro Product (HAP) is investing about Rs 450 crore in business across new manufacturing facilities to expand capacities in ice cream, milk, curd, milk products. The company has recently inaugurated ‘HAP Daily’ outlets in Indore, Madhya Pradesh and Kharagpur, West Bengal to mark its presence in these states. Besides the entire range of Arun ice creams, these outlets will also retail other products from Hatsun such as ghee, skimmed milk powder and dairy whitener.
A few international dairy players are also rubbing shoulders with the domestic ones by launching new varieties of yoghurts in the market. For example, Lactalis India, part of France’s Lactalis Group, has forayed into the yoghurt category in India by launching Lactel Turbo Yoghurt Drink in Chennai.
Novandie Foods, yet another French yoghurt maker (a subsidiary of Andros, France), has recently announced its entry into India through a joint venture with Heritage Foods.
Foray of FMCG giants
Though the competition in the domestic dairy market is high with leading companies increasing their presence in the value-added dairy products segment, a tough fight is being put up by the FMCG giants that have recently stepped in.
For instance, Dabur India has announced its foray into the ghee category with the launch of ‘Dabur 100 per cent Pure Cow Ghee’, India’s first traceable Ghee. It is prepared from milk sourced from indigenous cows bred in Rajasthan.
Beverage company Parle Agro has announced its diversification into the dairy category with the launch of a range of flavoured milk products named Smoodh. According to the brand, it is the only flavoured milk beverage in the market globally to be available in 85 ml Tetra Pak cartons and priced at Rs 10. With this offering, Parle Agro aims to grow the branded flavoured milk market in India from the present Rs 800 crore to Rs 5,000 crore in the next four years.
India’s ethnic snack-food giant Haldiram’s Nagpur is on a growth track, opening its own manufacturing facility for long shelf-life dairy products. Setting up a massive dairy facility, with an investment of over Rs 100 crore, Haldiram’s Nagpur is clearly looking to expand its footprint from its existing markets of Maharashtra, Goa and Chhatisgarh. The product offerings will include buttermilk under the name Matka Jhatka, sold in 200 ml combiblocXSlim carton packs, a variety of lassi products, and many more innovations in the pipeline.
Adding on, Kolhapur-based Ghodawat Consumer has recently expanded its product portfolio by introducing flavoured milk products under its popular brand ‘Star’ to diversify its dairy business and further strengthen its position in the dairy segment.
“The Indian dairy food market is flourishing at an unprecedented pace and is expected to grow at a CAGR of around 16 per cent during 2020-2025. Our move into the dairy business is certainly going to help us to explore new opportunities in this segment,” says Shrenik Ghodawat, Managing Director, Sanjay Ghodawat Group.
On the other hand, the dairy business of diversified conglomerate ITC will focus on east India, particularly West Bengal and Bihar, for the next few years, following the recent launch of lactose-free milk by the company.
Mondelez India, the makers and bakers of some of India’s favourite snacking brands such as Cadbury Dairy Milk, Cadbury Bournvita, Oreo etc., is currently exploring the milk food drink category with the recent launch of an all-new Cadbury Oreo Milkshake Mix.
Betting big on the Indian dairy segment is another FMCG major CavinKare that has announced the launch of protein-rich cheese under its flagship dairy brand Cavin’s in the Tamil Nadu market to start with.
There’s a constant influx of new and innovative value-added dairy products into the market by both public and private players. With product differentiation as a key strategy, the industry is, indeed, playing its cards wisely going by the pace of new value-addition, offering promising opportunities in the future.
Mansi Jamsudkar
(mansi.jamsudkar@mmactiv.com)
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