India has been the leading producer and consumer of dairy products worldwide since 1998 with a sustained growth in the availability of milk and milk products. Dairy activities form an essential part of the rural Indian economy, serving as an important source of employment and income. However, the milk production per animal is significantly low as compared to the other major dairy producers.
Moreover, 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. According to the latest report by IMARC Group, titled Dairy Industry in India 2020 Edition: Market Size, Growth, Prices, Segments, Cooperatives, Private Dairies, Procurement and Distribution, the dairy market in India reached a value of Rs 10,527 billion in 2019.
"India's dairy industry is worth Rs 5.4 trillion by value, having grown at 15 per cent CAGR during 2010-16. Going ahead, the dairy industry is expected to maintain 15 per cent CAGR over 2016-20, and attain value of Rs 9.4 trillion on rising consumerism," Edelweiss said in a report. India has progressed from being deficient in milk production at 20 million MT in 1970 to becoming the world's largest milk producer at 160 million MT, accounting for 18.5 per cent of global milk production.
Further, India is expected to emerge as the largest dairy producer by 2020, the report said.
A dairy is a business enterprise established for the harvesting of animal milk - mostly from cows or goats, but also from buffalo, sheep, horses or camels for human consumption. A dairy is typically located on a dedicated dairy farm or section of a multi-purpose farm that is concerned with the harvesting of milk.
Importance of dairy sector in India
Dairy farming is an important way for farmers to increase their earnings and access to more nutritious food for their families. While subsistence dairy farming provides not only fresh milk and a source of basic income, value-added products, such as yogurt and cheese provide a higher source of revenue. Dairying is an important source of subsidiary income to small/marginal farmers and agricultural labourers. The manure from animals provides a good source of organic matter for improving soil fertility and crop yields. Dairy farming is now taken up as a main occupation around big urban centres where the demand for milk is high.
Products in dairy sector
Milk, Flavoured Milk, UHT Milk, Goat Milk, Camel Milk, A2 Milk, Organic Milk, Curd, Probiotic Products, Flavoured & Frozen Yoghurt, Buttermilk, Lassi, Ghee, Butter, Cheese, Paneer, Cream, Khoya, Dairy Whiteners, Skimmed Milk Powder, Ice Cream, Sweet Condensed Milk, Dairy Sweets and Whey are the different products in the dairy sector.
For years, the dairy industry was focussed only on cow and buffalo milk and milk-based products. Rising Internet penetration and increasing consumer awareness have, however, upended this long-standing norm. Today, consumers are increasingly inclined towards better, healthier alternatives such as camel milk, goat milk or donkey milk. For instance, it has become common knowledge that camel milk does not contain A1 casein and beta-lacto globulin, which makes it fit to be consumed by those suffering from milk allergies and people who are lactose- intolerant. Camel milk is also gaining popularity since it aids digestion, improves gut health, may prevent high blood pressure and may even help ease the symptoms of autism in children. Further, goat and donkey milk are also gaining favour among health enthusiasts as they are light on the stomach and packed with essential nutrients.
Niche dairy products such as flavoured camel milk powder, camel milk-based skin care products or goat milk ghee will definitely attract more consumers in 2020.
Ancient times v/s Current scenario
Milk and milk products have been a part of society for most of human history. Regional cuisines from all across the country use dairy to create a variety of dishes for all sorts of occasions. Chai and coffee are integral part of our nations morning and evening routines. The dairy has been in use since prehistoric times. In India, the presence of remnants of cows and goats in excavation sites suggest that dairy may have been in use at least since the Harappan Civilisation (33001300 BCE). In (10001500 CE) dairy-production was still in its nascent stages around this time as the distribution was restricted by socioeconomic status, geographical availability, and cultural preferences.
Some tribal folk considered dairy to be bad for their bodies; their consumption of dairy was nil. In (160020th Century) around the time that the British arrived to begin their colonial rule, dairy production had become less sporadic and had spread across the nation. By this time, local unorganised cottage industries emerged across towns and villages. They were also introduced to a beverage that would arguably change daily-routines forever. Tea was consumed for medicinal purposes by tribes in north-east India,” and was never considered the beverage that it is today.
Current scenario
The White Revolution in India started in 1970 with the organising of small holder dairy farms under a three-tier co-operative system for organised production, procurement, processing and marketing of milk. It was implemented in three phases: 1970-81, 1981-85 and 1985-2000.
The consumption pattern of dairy products in India is quite unique as compared to some of the Western countries. It has been noticed that Indian consumers are increasingly getting health- conscious and that the value-added dairy products industry is seeing a marginal growth. A change in consumer mindsets has led to various changes. Lifestyle alterations have led to an increase in the demand for value-added dairy products as compared to just the base product, liquid milk. As the spending capacity of Indians is increasing, so is their willingness to buy healthier, super foods which we like to call as value-added products. Value-added products in the dairy industry are products like “cheese, paneer, ghee, yoghurt, probiotic drinks etc.
There is a strong increase in the demand for milk in India, partly due to the growing number of inhabitants. People are more attracted towards healthy food in one pack which can be fulfilled by the dairy products. The country is expected to count 1.5 billion inhabitants by 2035.
Economic
The Indian dairy industry has grown consistently ever since the White Revolution of the 1970s, making India, the worlds largest producer of milk with 17% global share. With an annual production of 146 million tonne of milk India generates approximately US$70 billion of revenue.
As of 2018, India is the leading milk producing country in the world, accounting for ~19% of the global market share. The milk processing industry in India is expected to expand at a compound annual growth rate (CAGR) of ~14.8% between FY 2018 and FY 2023, and will reach Rs 2,458.7 bn in FY 2023.
Being one of the primary dairy consumables in India, the increased demand for milk in the country is owed to the increasing population. As of FY 2018, ~81.1% of the Indian dairy and milk processing market was part of the unorganised sector, which produces milk in unhygienic environments. This reduces the overall quality and nutrition levels of the milk produced.
State-wise segment insights
Uttar Pradesh, Rajasthan and Gujarat have been the major milk producing states in India. Uttar Pradesh is the largest dairy and milk-producing state because it is home to the highest buffalo population and the second-highest cattle population in the country. The majority of rural population in the state is engaged in livestock rearing and dairying. Gujarat has numerous cooperative dairy milk unions, private dairy plants, and primary milk cooperative societies, which play crucial role in the production of milk in the state.
Value-added product-wise segment insights
Apart from milk, the revenue of the Indian dairy and milk processing industry is generated from several value-added products such as butter, curd, paneer, ghee, whey, flavoured milk, ultra-high temperature (UHT) milk, cheese, and yogurt. During the period FY 2016 to FY 2020, the market size of butter is expected to grow by 14.5%, curd by 14.4%, paneer by 14.1% and ghee by 14.1%, among others.
Export-import
From India, the export of dairy products has increased to countries like Bhutan, Afghanistan, Canada, Egypt and the United Arab Emirates. India has also imported a significant amount of dairy products from countries like France, New Zealand, Ireland, Ukraine and Italy.
Key growth drivers of the market
India's livestock sector is regarded as one of the largest in the world with a bovine population of 299.9 mn, which comprises of cattle, buffalo and yak. The growth of the Indian dairy and milk processing market is ensured by the steady supply of milk which is the primary raw material for this industry.
Key deterrents to the growth of the market
Despite having a significant livestock base of milch animals, India lacks in terms of availability of cold storages which results in wastage of dairy output. Thus, the lack of sufficient storage facilities and inefficient distribution are hampering the growth of the Indian dairy and milk processing industry.
Recurring droughts and floods affect the production of fodder in India. Sufficient quantities of feed and fodder are required for proper animal rearing and milk production. Lack of proper feed and fodder for milch animals, due to high usage of agricultural crop residues by producers of fibreboard, paper and liquid fuels, affect its availability for dairy production and milk processing.
(Kamble is founder & CEO, Shah is head consultant, Patel is intern at Farm to Fork Solutions, Mumbai. They can be contacted at umeshretail@gmail.com)