An Indian dairy marketing perspective
Kailash chandra Gahir
CEO , Niryas Food products private ltd ,Delhi
India has transformed from a country of acute milk shortage to the world’s leading milk producer, with production exceeding 140 million tonnes in 2016 and a per capita availability of 337 gm/day . This phenomenal success is attributed to Operation Flood (1970–1996) and its intense focus on dairy development activities. In that initiative, rural milk shed areas were linked to urban markets through the development of a network of village cooperatives for procuring and marketing milk. And milk production and productivity were enhanced by ensuring the availability of veterinary services, artificial insemination (AI), feed and farmer education.
The Economic Survey 2015-16 presented in the Parliament by the Union Finance Minister Arun Jaitley emphasizes that the Indian agricultural system is predominantly a mixed crop-livestock farming system, with the livestock segment supplementing farm incomes by providing employment, draught animals and manure.
India ranks first in milk production, accounting for 18.5 % of world production, achieving an annual output of 146.3 million tones during 2014-15 as compared to 137.69 million tonnes during 2013-14 recording a growth of 6.26 %. Whereas, the Food and Agriculture Organization (FAO) has reported a 3.1 % increase in world milk production from 765 million tones in 2013 to 789 million tones in 2014.
The per capita availability of milk in India has increased from 176 grams per day in 1990-91 to 322 grams per day by 2014-15. It is more than the world average of 294 grams per day during 2013. This represents a sustained growth in availability of milk and milk products for the growing population Dairying has become an important secondary source of income for millions of rural households engaged in agriculture.
The Milk market scenario :
India’s dairy market is multi-layered. It’s shaped like a pyramid with the base made up of a vast market for low-cost milk. The bulk of the demand for milk is among the poor in urban areas whose individual requirement is small, maybe a glassful for use as whitener for their tea and coffee. Nevertheless, it adds up to a sizable volume – millions of litres per day. In the major cities lies an immense growth potential for the modern sector. Presently, barely 778 out of 3,700 cities and towns are served by its milk distribution network, dispensing hygienically packed wholesome, quality pasteurized milk. According to one estimate, the packed milk segment would double in the next five years, giving both strength and volume to the modern sector. The narrow tip at the top is a small but affluent market for western type milk products.
Of the three A’s of marketing – availability, acceptability and affordability, Indian dairying is already endowed with the first two. People in India love to drink milk. Hence no efforts are needed to make it acceptable. Its availability is not a limitation either, because of the ample scope for increasing milk production, given the prevailing low yields from dairy cattle. It leaves the third vital marketing factor affordability. How to make milk affordable for the large majority with limited purchasing power? That is essence of the challenge. One practical way is to pack milk in small quantities of 250 ml or less in polythene sachets. Already, the glass bottle for retailing milk has given way to single-use sachets which are more economical. Another viable alternative is to sell small quantities of milk powder in mini-sachets, adequate for two cups of tea or coffee.
A Mackinsy study on various food products opportunity in 2010 showed that in next 10 years the opportunity of Dairy sectors as well as packed milk segment going to be as high as Rs 43,300 crores ..This propelled many players including us to venture in to this high growth Opportunity sector and this sector annually grow at around 12-15% every year.
Milk is often regarded as being nature’s most complete food. It earns this reputation by providing many of the nutrients which are essential for the growth of the human body. Being an excellent source of protein and having an abundance of vitamins and minerals, particularly calcium, milk can make a positive contribution to the health of a nation. The realization of its nutritional attributes is clearly illustrated by the implementation of numerous ‘school milk programmes’ worldwide.
Fermented-milk products such as yoghurt and soured milk contain bacteria from the Lactobacilli group. These bacteria occur naturally in the digestive tract and have a cleansing and healing effect. Therefore the introduction of fermented products into the diet can help prevent certain yeasts and bacteria which may cause illness.
Many people suffer from a condition known as ‘lactose intolerance’. This means that they are unable to digest the milk fat (lactose). Such people can, however, tolerate milk if it is fermented to produce foods such as yoghurt. During fermentation, lactic acid producing bacteria break down lactose, and in doing so eliminate the cause of irritation.
Dairy Milk Products Basket :
- Bread Spreads
- Flavored Bottled Milk
- Spray Infant Milk Food
- Instant Full Cream Milk Powder
- Skimmed Milk Powder
- Dairy Whitener
- Fresh Milk
- Double Toned Milk
- Toned Milk
- Cheese Spreads
- Cooking Butter
- Condensed Milk
- Ice Cream
- Health Food Drink
Milk Marketing Medium:
A study of the milk marketing system has shown that there are at least 8 different marketing channels as shown below:
|Milk Marketing Channels||Number of intermediaries|
|Producer-dairy co-operative/VLC -processor- retailer- consumer||3|
|Producer-milk transporter-processor – retailer-consumer||3|
|Producer-dairy coop/VLC –processor-Distributor-retailer-consumer||4|
From the consumer point of view, the shorter the marketing chain, the more likely is the retail price going to be low and affordable. This explains why, following the liberalization of the dairy industry, direct sales of raw milk from producers to consumers (channel 1) or through hawkers (channel 2) has been on the increase despite the public health risks associated with the consumption of untreated milk and milk products. Milk producers may not necessarily benefit from a short marketing chain i.e. milk processors in channels 5 – 6 may be paying farmers the same price as hawkers. However, farmers sometimes prefer selling milk to hawkers because other factors such as prompt payments and inaccessibility to formal market outlets such as producer co-operatives or lack of nearby milk processing factory. The biggest disadvantage of direct milk sales to consumers by hawkers is the total lack of quality control and the frequent rate of adulteration of milk with (dirty) water, which is illegal. An efficient milk marketing chain is one which enable farmers to receive at least 50% of the retail price of milk.
The majority marketing chain followed by all stake holders are the last one in the table having 4 intermediaries and we shall follow this too.
Producers-VLC- Manufacturing Plant-Distributor-Retailer-Consumers
Information is required at all levels in the marketing channel. Before we decided to process and market any dairy product, it is important to know the potential market for each particular product. This is important to enable the processor to know which types and when, where and how much of each product to manufacture and market. It is very crucial because unless goods can be supplied in the right form, place and times, consumers may not be able to buy. This then requires securing and utilizing market information.
Marketing information addresses the following:
- Area to be covered
- Price information (Price variations, price for premium quality discount price etc.)
- Number and type of consumers (market segmentation)
- Current and future product supply levels
- Type and number of competitors
Demand for dairy products in India is likely to grow significantly in the coming years, driven by more consumers, higher incomes and greater interest in nutrition. Consumption of processed and packaged dairy products is increasing in urban areas. Because of the increasing competition from the private sector, several national and international brands have entered the market and expanded consumers’ expectation of quality – although only among a small proportion of the population. In many parts of the country, people still prefer unpacked and unprocessed milk delivered by a local milkman because of its taste and the perception of freshness. The price elasticity for milk is high, thus demand for milk is very sensitive to price changes.
|Table 1: Demand conditions|
|Market size and growth||Market growth is due to high per capita consumption, increasing population and health consciousness|
|Consumption patterns||Consumption of processed and packaged dairy products is increasing in urban areas|
|Consumption patterns||Unpackaged milk is still preferred because of taste and price|
|Sophistication of consumers||Consumer awareness on product quality is increasing but in a very small portion of the population|
|Receptivity to new products||Mostly urban consumers have a very low but increasing interest in new products|
|Price elasticity||Price elasticity is high|
|Impact of market opening on demand||Consumers now have a variety of quality products|
Until 2002, cooperatives traditionally were the dominant players in the formal sector. With liberalization of the dairy industry, private investment has increased quite significantly. However, the organized sector’s share in milk procurement is very low because a large proportion of the milk and milk products are sold through the informal channel (Table 3). The informal demand absorbs approximately 41 percent of the milk and milk products produced in the country, accounting for about 75 percent of the marketable surplus of milk. The formal channel, with its packaged milk and dairy products, accounts for only about 25 percent of the marketable surplus, which is about 15 percent of production.
|Table 2: Market Structure|
|Performance||Still large share of produce; 85% of marketable surplus goes through informal channel|
|Quality of milk through informal channel is an issue and to some extent in formal channel as well|
|Competitive structure||Little competition to cooperatives because private sector was not allowed in the sector until recently|
|Entry of supermarkets in retailing of milk is increasing the competitive structure|
|Governance (value chain type)||Governance of cooperative structures is constaining efficiency and expansion|
|Role of “lead” or organizing firms||Role of lead agency has been hampered by government interference in cooperatives|
|Farmer organization||Immense scope for improving management and governance through farmer organizations|
|Marketing chain capacity and efficiency||Scope for enhancing efficiency of distribution|
|Distribution channels||Cooperatives have a well-developed distribution channel in urban areas|
|How market signals are conveyed or distorted||Government and political interference in price setting, limits prices being determined by market forces.|
The informal sector consists of the village milk vendors who procure loose milk from farmers and sell it in urban and peri-urban areas directly to consumers, small private processors or hotels. The milk vendors also may sell processed products, such as paneer or separated cream. The quality of the vendors’ milk and milk products is not guaranteed. Largely sold in loose form, it is often adulterated with several additives to control spoilage.
What we offer at NIRYAS FOOD PRODUCTS PRIVATE LTD ,DELHI&NCR :
- Quality and Hygiene
- Niryas milk is the pure, hygienic , and above all, from 100% vaccinated cattle (we have a certification from authority )
- Ensure quality and purity of the milk till the time it reaches to the end consumer
- Quality assurances and the claims of it being better than its competitors
- End-to-end Solution
- Niryas provides end-to-end solutions to all the dairy farmers
- Supplier’s development through their training session and guidance
- Milk goes through various tests to insure the perfect taste and quality
- The supply chain for the milk is controlled which will result into zero adulteration
- Through the latest technologies we ensure that the temperature of the milk should remain under 5 degree Celsius so that it will remains its goodness, quality and taste
- Society Impact
- Niryas with its cattle finance sister concern offer small loans to the village dairy farmers and entrepreneurs for a nurtured business atmosphere amongst the underserved population at the bottom of our societal pyramid
- Trained dairy professionals at all levels to support and guide the farmers
- Based on the quality and volume of milk, farmers are paid according to a pre-defined rate
- Farmers are given a system generated slip mentioning Fat, SNF, water content and volume of the milk along with his membership code number and date. Rate of the milk and total payment is also mentioned on the slip
- It provides the farmers with Loyalty points and rewards them in cash or kind.