1.

4 INDUSTRY PROFILE

Milk is a pale liquid produced by the mammary glands of mammals. It is the primary
source of nutrition for infant mammals before they are able to digest other types of food.
Early-lactation milk contains colostrum‘s, which carries the mother's antibodies to its young
and can reduce the risk of many diseases. It contains many other nutrients including protein
and lactose.

As an agricultural product, milk is extracted from non-human mammals during or

soon after pregnancy. Dairy farms produced about 730 million tonnes of milk in 2011, from
260 million dairy cows. India is the world's largest producer of milk, and is the leading
exporter of skimmed milk powder, yet it exports very few other milk product. The ever
increasing rise in domestic demand for dairy products and a large demand-supply gap could
lead to India being a net importer of dairy products in the future. [6] New Zealand, the
European Union's 28 member states, Australia, and the United States are the world's largest
exporters of milk and milk products. China and Russia were the world's largest importers of
milk and milk products. Both countries were self-sufficient by 2016 contributing to a
worldwide glut of milk.

Dairy Industry In India

India has the highest livestock population in the world with 50% of the buffaloes and
20% of the world‘s cattle population, most of which are milk cows and milk buffaloes.
India‘s dairy industry is considered as one of the most successful development programmes
in the post-Independence period.

In the year 2006-07the total milk production in the country was over 94.6 million
tonnes with a per capita availability of 229 gms per day. The industry had been recording an
annual growth of 4% during the period 1993-2005, which is almost 3 times the average
growth rate of the dairy industry in the world. Milk processing in India is around 35%, of
which the organized dairy industry account for 13% of the milk produced, while the rest of
the milk is either consumed at farm level, or sold as fresh, non-pasteurized milk through
unorganized channels.

India has emerged as the largest milk producing country in the world with present
level of annual milk production estimated as 94.5 million tonnes. We expect a production
level of 135 million tonnes by the year 2015.

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 India has a large livestock population base constituting 278 million livestock
including 180.5 million cattle, 82.8 million buffaloes, 4 million sheep and 9.2 million goats.
The livestock population is projected to increase to 322 million by the year 2015. The large
livestock population is raised primarily on crop residues and grazing in the common property
including basement. The forest area, which was a major source of grazing, is no longer
available to livestock breeders especially landless people. As a consequence, the available
feed resources fall short of the nutritional requirement. The shortfall is estimated as 59.9
million tonnes for the green fodder and 19.9 million tonnes for dry fodder. This shortfall is
likely to increase by 2015 to 63.5 million tonnes of green fodder and 23.56 million tonnes of
dry fodder.

The landless people are, therefore, likely to face severe shortage of resources to raise
cattle and other species of livestock. There is a real danger that in the absence of resources to
maintain their stock, these under-privilege rural people may give up livestock farming. This
could be a serious setback to lakhs of rural families who derive income as well as
employment opportunities from livestock sector.

India prepares to tackle the international market following Japan, where milk
consumption today, has more than trebled to 70 kg per capita from a mere 20 kg in the 'sixties
- the consumption of dairy products in other Asian 'tiger' nations is also growing. As a
consequence - creating excellent export opportunities for India, as these nations are deficient
in milk by at least 3 million tonnes per year. India, with some 27 per cent of Asia's
population, accounts for more than half of the milk output with enough growth potential to
explore foreign markets. In anticipation of the export opportunities and in view of the post
GATT scenario, India is gearing up to tackle the demands of the international market.

Indian companies are preparing themselves to meet international standards and other
non-tariff barriers. Planners are taking measures to meet the sanitary and phyto-sanitary
specifications - prescribed by Office International des Epizooties (OIE) under the auspices of
the World Trade Organization (WTO) -, which range from the quality assurance of processed
dairy products to the health status of livestock.

Lead Players

Nestle, Amul, Britannia, Dynamix Diary, Sterling Agro, Haryana Milk Foods, Mohan
Food, Modern Dairy, K Dairy.

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 Market Growth Rates

1990-91 - 1996-97 3.6%

1996-97 - 2001-02 10.1%

2001-02 - 2006-07 8.7%

2004-05 - 2009-10 8.3%

2009-10 - 2014-15 8.0%

Dairy Whiteners

About 15% of the total milk output in India is estimated to be processed in the
organized dairy. The industry has maintained a high growth profile, especially in the wake of
the Operation Flood, colloquially also termed as White Revolution, initiated in early 1980s.
Today, India produces over 85 mn tonnes of milk annually. The total milk economy is
estimated at Rs 1300 billion in terms of value.

The market for dairy whiteners (commercially know as beverage milk powders and
condensed milk) and creamers is around Rs 3,000 mn. Apart from MNCs like Nestle and
companies like Britannia, the Indian enterprises have also made perceptible progress. Names
like Amul, Sapan, Vijaya, Mohan, Parag and several others have been seen in the
marketplace with their whiteners. These are available mostly in pouches, tetrapacks, and in
the near future, may be in miniportion cups.

SWOT ANALYSIS OF INDIAN DAIRY INDUSTRY

Strengths:

Demand profile: Absolutely optimistic.

Margins: Quite reasonable, even on packed liquid milk.

Flexibility of product mix: Tremendous. With balancing equipment, you can keep on adding
to the product line.

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Availability of raw material: Abundant. Presently, more than 80 per cent of milk produced
is flowing into the unorganized sector, which requires proper channelization.

Technical manpower: Professionally-trained, technical human resource pool, built over last
30 years.

Weaknesses:

Perishability: Pasteurization has overcome this weakness partially. UHT gives milk
long life. Surely, many new processes will follow to improve milk quality and extend its shelf
life.

Lack of control over yield: Theoretically, there is little control over milk yield.
However, increased awareness of developments like embryo transplant, artificial
insemination and properly managed animal husbandry practices, coupled with higher income
to rural milk producers should automatically lead to improvement in milk yields.

Logistics of procurement: Woes of bad roads and inadequate transportation facility

make milk procurement problematic. But with the overall economic improvement in India,
these problems would also get solved.

Competition: With so many newcomers entering this industry, competition is becoming

tougher day by day. But then competition has to be faced as a ground reality. The market is
large enough for many to carve out their niche.

Opportunities:

"Failure is never final, and success never ending‖. Dr Kurien bears out this statement
perfectly. He entered the industry when there were only threats. He met failure head-on, and
now he clearly is an example of ‗never ending success. If dairy entrepreneurs are looking for
opportunities in India, the following areas must be tapped:

Value addition: There is a phenomenal scope for innovations in product development,

packaging and presentation. Given below are potential areas of value addition:

Steps should be taken to introduce value-added products like shrikhand, ice creams,
paneer, khoa, flavored milk, dairy sweets, etc. This will lead to a greater presence and
flexibility in the market place along with opportunities in the field of brand building.

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 Addition of cultured products like yoghurt and cheese lend further strength - both in
terms of utilization of resources and presence in the market place. A lateral view opens up
opportunities in milk proteins through casein, caseinates and other dietary proteins, further
opening up export opportunities. Yet another aspect can be the addition of infant foods,
geriatric foods and nutritionals.

Export potential:

Efforts to exploit export potential are already on. Amul is exporting to Bangladesh,
Sri Lanka, Nigeria, and the Middle East. Following the new GATT treaty, opportunities will
increase tremendously for the export of agri-products in general and dairy products in
particular.

Threats:

Milk vendors, the un-organized sector: Today milk vendors are occupying the pride of
place in the industry. Organized dissemination of information about the harm that they are
doing to producers and consumers should see a steady decline in their importance.

The study of this SWOT analysis shows that the ‗strengths‘ and ‗opportunities‘ far
outweigh ‗weaknesses‘ and ‗threats‘. Strengths and opportunities are fundamental and
weaknesses and threats are transitory. Any investment idea can do well only when you have
three essential ingredients: entrepreneurship (the ability to take risks), innovative approach
(in product lines and marketing) and values (of quality/ethics).

The Indian dairy industry, following its delicensing, has been attracting a large
number of entrepreneurs. Their success in dairying depends on factors such as an efficient yet
economical procurement network, hygienic and cost-effective processing facilities and
innovativeness in the market place. All that needs to be done is: to innovate, convert products
into commercially exploitable ideas. All the time keep reminding yourself: Benjamin
Franklin discovered electricity, but it was the man who invented the meter that really made
the money.

Despite being the world's largest producer, the dairy sector is by and large in the
primitive stage of development and modernization. Though India may boast of a 200 million
cattle population, the average output of an Indian cow is only one seventh of its American
counterpart. Indian breeds of cows are considered inferior in terms of productivity.

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 Moreover, the sector is plagued with various other impediments
like shortage of fodder, its poor quality, dismal transportation facilities
and a poorly developed cold chain infrastructure. As a result, the supply
side lacks in elasticity that is expected of it.

On the demand side, the situation is buoyant. With the sustained

growth of the Indian economy and a consequent rise in the purchasing
power during the last two decades, more and more people today are able
to afford milk and various other dairy products. This trend is expected to
continue with the sector experiencing a robust growth in demand in the
short and medium run. If the impediments in the way of growth and
development are left unaddressed,