Overview of The Dairy Sectore PDF

PwC - Agriculture & Natural Resources Team
FICCI – Food 3600

An overview of the Dairy Sector
Presented by
Sunjay V S
6 November 2012
Scope of presentation
• Overview of global dairy sector

• Protein consumption trends
• Dairy consumption
• Supply
• Price trends
• Dairy Scenario in India
• Evolution
• Production & production systems
• Market
• Constraints
• Opportunities for investment
6 November 2012
PwC
Section 1
Overview of Global Dairy Sector
FICCI – Food 360 • An overview of the Dairy Sector in India 6 November 2012
PwC 1
Section 1 – World Overview
Globally - consumption of protein increasing faster than

population growth…
• Global consumption of protein increased from Global protein consumption by category: 1991 – 2011*
3.7 to 5.4 lakh tonnes per day - CAGR of 2% 100% 4.2% 5.0%
90%
• Global population increased from 5.4 to 7.0
billion - CAGR of 1% 80%
47.6% 41.4%
70%
60%
• Increasing proportions of this 50%

18.4%
growth is from animal protein 40% 16.4%
• meat - 2.9 % 30% 10.3%

9.8%
20%
• Dairy – 0.5 % increase 24.9%
10% 22.0%
• vegetables, soy and fruit – 2% increase 0%
1991 2011
• cereals - decreased 6.2%
Meat Dairy F&V Cereals Others
*Data extrapolated based on compound annual growth rate to forecast 2030
volumes
Source: FAOSTAT, PwC Analysis
Demand for animal proteins likely to continue to increase faster than other categories
PwC 2
3 regions are the key contributors to this rising consumption
Change in proportion of protein consumption: Regional contribution to protein consumption
Asia - increased by 4.8%

Country 1991 2011* CAGR
Africa - increased by 2.3% Asia 52.2% 57% 2%
Asia excl China 31.5% 33.9% 2%
South America - increased by 0.6%
China 20.7% 23.1% 2%
North America - dropped by 0.8%
Africa 9.9% 12.1% 3%
Europe - dropped by 6.7%
South America 5.4% 6.0% 2%
North America 10.9% 10.1% 1%
Europe 20.9% 14.2% 0%
Oceanic 0.7% 0.7% 1%
*Data extrapolated based on compound annual growth rate to forecast
2030 volumes
Source: FAOSTAT, PwC Analysis
PwC 3
These regions have driven growth in dairy consumption as well

however, per capita consumption remains much lower than developed countries
Dairy consumption – kg/capita/year (milk excl butter)

Consumption 1991 2009 CAGR
stagnant or Northern America 253.5 250.2 - 0.1%
declining in
Oceania 178.1 - 1.2%
developed 219.4
0.4%
countries Europe 202.5 219.5
Growth of South America 100.7 129.9 1.4%
Close to 3% World 75.9 87.3 0.8%
in Asia’s per India 51.4 72.2 1.9 %

capita 1.0%
Africa 36.5 43.9
consumption
Growth of Asia 32.5 54.4 2.9%
Close to 9% China 6.4 29.8 8.9 %
in China’s Source: FAOSTAT, PwC Analysis
per capita
consumption
PwC 4
Global per capita consumption estimated to be 103 Kg/year in 2011

Estimated to have grown at about 17% over the last decade
Participation in world imports (2012*)
Countries %
China 44
Algeria 24
Indonesia 6.7
Brazil 6
Russia 5.3
Total of main importers 86
* Estimates
Milk represents
17.5 % of
global beverage
consumption
Source: USDA (2012), PwC Analysis
PwC 5
World milk production expected to touch 750 MT in CY 2012

Estimated to have grown at about 2% over the last decade
Participation in world exports (2012*)
Countries %
New Zealand 55
EU - 27 21
Argentina 13
Australia 7.3
Philippines 1.1
Total of main exporters 97.4
Production in million tonnes* * Estimates

1st 2nd
3rd
144
129 4th
91 34 32 31
EU-27 India USA China Russia Brazil

Source: USDA (2012), PwC Analysis
PwC 6
Prices of dairy products remain high despite increased production -

due to increasing demand and higher cost of production
FAO – Dairy Price Index (2002-2004 = 100) • Price volatility is likely to remain in the near future
thin volumes of global milk trade
few players dominate global market
Index derived from a trade weighted average of a selection of

representative internationally traded dairy products
Source: FAO
PwC 7
Section 2
Indian Dairy Scenario
PwC 8
Section 2 – Indian Dairy Scenario
Indian dairy sector has evolved from rags to riches ....
1940s 2012
• Per capita milk • Per capita milk
availability – 132 g/day White Revolution availability – 276 g/day
(> WHO recom.dtion)
• Milk rationing and Cooperative dairying
scarcity • 17% of global output
countrywide milk grid – linking
producers to consumers
• Dependent on import • Net exporter
Cutting out middle men
• High intermediation Strengthening production, • Increased share of
procurement, infrastructure & producers share in
technology transfer consumer price (<40% in
Europe, USA)
Made dairy farming India’s
largest self-sustainable rural
employment generator
PwC 9
... making the country #1 in milk production
• Production – 123 million tonnes in CY2011 (USDA) Top 7 milk producing states contribute
more than 65% of milk production
• Estimated to reach 170 million tonnes by 2020
• Grew at CAGR of 3.7 % in the last decade*

• Milk is India’s largest agricultural commodity
• UP contribute to about 18% of milk production

Milk production trends (million tonnes) 116.2
100.9
92.5
80.6
FY FY FY FY FY FY FY FY FY FY FY
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
* DAHD Estimates, Source: GoI, PwC analysis (E) - UP – 18%
Commodity wise production in million tonnes** - AP & Rajashtan – 9% each
123
103 91 - Punjab & Gujarat – 8% each
31
- Maharashtra – 7%
22 17
- MP – 6 %
Milk Rice Wheat Maize Oilseeds Pulses
** Estimates, Source: GoI, USDA, Industry, PwC analysis Source: GoI, PwC analysis
PwC * 2000 to 2011 decadal CAGR estimate 10
Bovine production system dominated by buffalos with “1 to 2

animal” households contributing major share
• Bovine population – about 115 million Species wise contribution to production system
120%
• Indigenous cows account for 40% of in-milk
population but only 24% production
100%
Percentage contribution
• Buffalo milk - 55% of production
80%
• Average daily milk yield/ animal – 4.4 ltrs / animal 46%
55%
• Wet animals – 69.3% (increased by about 12% over 60%
the last decade)
14%
40%
21%
Bovine type Average daily yield/
animal (2009-10) 20% 40%
Indigenous cow 2.1 24%
0%
Crossbred 6.9
Milch Population Milk production
Buffalo 4.6 Indigenous cow Crossbred Buffalo
Source: DAHD, ICAR, PwC analysis Source: DAHD, ICAR, PwC analysis
PwC 11
Indian dairy market estimated to have grown by 6.8% over the last
decade*
Consumer spend on food Milk consumption pattern
6.9%
6.6% 27.5%
6.0% 8% Others
17%
8.1% Curd
30%
12.8% Liquid Milk
16.2%
45% Tea & Coffee
15.8%
Cereals Milk & products F&V Beverages

Edible oil Pulses & products Egg, Fish, Meat Others
*Source: CSO- 2008 census, CII Dairy Industry Report, PwC analysis
• Dairy contributes to 16% of consumer spend on food – 18% in Urban, 15% in rural
• Estimated value of market - INR 3.6 lakh crores.
• Driven by increasing population, life expectancy and preference for dairy products
• High value processed products estimated to be growing at 15 to 25%
• Market dominated by unorganised sector (80%)
*CSO- 1997 and 2008 census, value terms, PwC analysis
PwC 12
Milk procurement price has grown by about 2.5 times in the last
decade ...
trend expected to continue in the near future
Average milk procurement rate (farmgate) – INR/Kg fat
500
470
450
400 401
350
337
300
250 239
200 184
150
100
50
0
FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12
*Source: GCMMFL-Gujarat Agri-convention
PwC 13
Key sector constraints across the value chain
• Breeding and Genetics resources

• Availability of fodder
Inputs • Labour shortage – for increased herd sizes
• Low productivity
• Low adoption of technology (such as milking equipments)
• Animal health & sanitation
Product’n
• Finance
• Seasonality of production
• Availability of homogenous quality milk /highly fragmented supply
• Logistics infrastructure
Processing
• Manpower
• Unorganised market
• Heterogeneous consumer requirements
Market / • Lack of robust food safety standards
Consumer
PwC 14
Increasing demand and high inefficiencies across supply chain

open up diverse business opportunities
Supply Demand
• Intensive dairy farming / increasing herd size • Opportunities to address “milkman at the
doorstep” preference of Indian households
• Technology and management of dairy farms
• Growing convenience market (packaged milk)
• Opportunities to standardise Buffalo rearing –
unique to India • Niche market for high value products – high
quality ice creams, cheese etc
• Fodder cultivation
• Increasing preference of hygiene and food
• Feed & Nutrition
safety
• Breeding
• Addressing ethnic milk savouries market
• Proximity to China – leading milk importer
PwC 15
In addition to market drivers, policy interventions could play a key

role in shaping the future dairy scenario
Large
scale
Herd size
Small
scale
Low High
Policy interventions
PwC 16
To conclude ...
On the production side

• Slow growth in productivity likely to increase demand- supply gap
• There is a need to promote interventions that would increase production efficiencies
- Need to secure availability of fodder and high quality breeds
- Promoting entrepreneurship in large herd dairy farming – through PPP
• There is increasing interest in Intensive dairy farming – increasing demand & farm
gate price
On the demand side
• Indian dairy market offers diverse opportunities to tap into
• Unique nature of the market requires entrepreneurs to study it carefully before entry
PwC 17
Thank you.
This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining specific professional advice. No representation or warranty
(express or implied) is given as to the accuracy or completeness of the information contained
in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Private
Limited, its members, employees and agents do not accept or assume any liability,
responsibility or duty of care for any consequences of you or anyone else acting, or refraining
to act, in reliance on the information contained in this publication or for any decision based on
it.
©2012 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC”
refers to PricewaterhouseCoopers Private Limited, India which is a member firm of
PricewaterhouseCoopers International Limited, each member firm of which is a separate legal
entity.

Overview of The Dairy Sectore PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Overview of The Dairy Sectore PDF

Uploaded by

Copyright:

Available Formats

PwC - Agriculture & Natural Resources Team

FICCI – Food 3600

• Overview of global dairy sector

Globally - consumption of protein increasing faster than

• Increasing proportions of this 50%

• meat - 2.9 % 30% 10.3%

3 regions are the key contributors to this rising consumption

Change in proportion of protein consumption: Regional contribution to protein consumption

Asia - increased by 4.8%

These regions have driven growth in dairy consumption as well

Dairy consumption – kg/capita/year (milk excl butter)

Growth of South America 100.7 129.9 1.4%

Close to 3% World 75.9 87.3 0.8%

in Asia’s per India 51.4 72.2 1.9 %

Close to 9% China 6.4 29.8 8.9 %

in China’s Source: FAOSTAT, PwC Analysis

Global per capita consumption estimated to be 103 Kg/year in 2011

Participation in world imports (2012*)

Total of main importers 86

World milk production expected to touch 750 MT in CY 2012

Participation in world exports (2012*)

Total of main exporters 97.4

Production in million tonnes* * Estimates

EU-27 India USA China Russia Brazil

Prices of dairy products remain high despite increased production -

Index derived from a trade weighted average of a selection of

Indian dairy sector has evolved from rags to riches ....

... making the country #1 in milk production

• Grew at CAGR of 3.7 % in the last decade*

• UP contribute to about 18% of milk production

Bovine production system dominated by buffalos with “1 to 2

Cereals Milk & products F&V Beverages

Key sector constraints across the value chain

• Breeding and Genetics resources

Increasing demand and high inefficiencies across supply chain

In addition to market drivers, policy interventions could play a key

On the production side

You might also like