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An Indian Dairy Marketing Perspective

India is among the top milk producing countries in the world and add to it there is a huge domestic demand for milk and milk products in the country. This means here is a huge potential in the marketing of milk and milk products, which is where Niryas Food Products comes in with its hygienic and quality products and other services, to fulfill the needs of the consumer, says its CEO, Kailashchandra Gahir.


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 with 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. The initiative involved linking rural milk shed areas to urban markets through the development of a network of village cooperatives for procuring and marketing milk. Excess to veterinary services, artificial insemination (AI), feed and education also enhanced production and productivity.


India ranked first in world in 2014-15 with an annual output of 146.3% in 2014-15, which is 18.5% of total production in the world. This is a growth of 6.26% from 137.69 million tonnes in 2013-14 during 2014-15 as compared to recording a growth of 6.26 %. 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. This represents a sustained growth in availability of milk and milk products for the growing population. The Milk market scenario


India’s dairy market is multi-layered, shaped like a pyramid with the base made up of a vast market for low-cost milk. The bulk of the demand for milk comes from the poor in urban areas whose individual requirement though small, it adds up to a sizable volume – millions of litres per day. On the other hand, with barely 778 out of 3,700 cities and towns connected with packed milk distribution networks, there is immense growth potential in these areas. According to one estimate, the packed milk segment would double in the next five years, giving both strength and volume to the modern sector.


One of the major challenges of the Indian dairy sector is how to make milk affordable for the large majority with limited purchasing power? 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 Niryas Food products to venture in to this high growth opportunity sector which is growing at around 12-15% every year.


Dairy Milk Products Basket

  • Bread Spreads
  • Butter
  • Margarine
  • Flavored Bottled Milk
  • Buttermilk
  • Spray Infant Milk Food
  • Instant Full Cream Milk Powder
  • Skimmed Milk Powder
  • Dairy Whitener
  • Fresh Milk
  • Double Toned Milk


Milk Marketing Medium

  • Cream
  • Toned Milk
  • Cheese Spreads
  • Cheese
  • Ghee
  • Cooking Butter
  • Condensed Milk
  • Ice Cream
  • Shrikhand
  • Chocolates
  • Health Food Drink

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-consumer 0 Producer-milk hawker-consumer

1 Producer-processor- retailer-consumer

2 Producer-processor-distributorretailer-consumer

3 Producer-dairy co-operative/VLC -processor- retailer- consumer

4 Producer-milk transporter-processor – retailer-consumer

From the consumer point of view, the shorter the marketing chain, the more low and affordable retail price is likely to be. But 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 as it ensures prompt payments and also because formal market outlets are not available to them and there is lack of nearby milk processing factory. The biggest disadvantage of direct milk sales is the total lack of quality control and the frequent rate of adulteration of milk with (dirty) water. An efficient milk marketing chain is one which enables 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

  1. Marketing Information System and Research Before processing and marketing any dairy product, it is important to know the potential market for each 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 important to supply goods in the right form, place and times else 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 conditions


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. Several national and international brands have entered the market and expanded consumers’ expectation of quality – although only among a small proportion of the population. 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 an 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 Market structure Until 2002, cooperatives were traditionally 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 (approximately 41%) are sold through the informal channel (Table 3) which accounts 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 constraining 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 periurban 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 as it is often adulterated with several additives to control spoilage.



1) 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 the end consumer

2) 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 retains its goodness, quality and taste

3) Society Impact

  • Niryas with its cattle finance sister concern offer small loans to the village dairy farmers and entrepreneurs for a ulation at the bottom of our social 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. (The author is CEO, Niryas Food Products Private Ltd, Delhi. Views expressed are personal.)
  • Quality assurances and the nurtured business atmosphere claims of it being better than amongst the underserved pop-its competitors