7 December 2017 . 11 min read

Dairy Industry: Market Analysis And Marketing Strategies

When marketing a dairy product, the most important aspect of your strategy is determining your competition and audience. By establishing these parameters, you can decide what aspect of your dairy business to highlight and where will be the most effective place to advertise to capture your target audience. Understanding the dairy business and products thoroughly will help you discern your advertising assets and weaknesses.

If you thought that all the action in business was concentrated around the e-commerce sector, you could not be more wrong. The unlikely category of milk and dairy products has been seeing some of the most frenetic activity over the past couple of years. Multinational and Indian corporate giants have jumped into the market. Start-ups have cropped up.

Fundraising is taking place at a frenzied pace, both from the equity markets and via private equity funding. And new products and innovations are being launched fast and furious. Meanwhile, the Rs 31,000 crore Amul, managed by the Gujarat Cooperative Milk Marketing Federation (GCMMF) – is aggressively throwing resources to protect its turf. It wants to hit Rs 65,000 crore in revenues by 2020.  But Amul is facing unprecedented challenge from all sorts of players. Groupe Lactalis SA, the world’s largest dairy products company, picked up Hyderabad-based Tirumala Milk. A few months ago, ITC had pitched in with its Aashirvaad brand of ghee and a promise to add a lot more products.

Private equity players have pumped in Rs 900 crore already in the past couple of years. Meanwhile, Danone, Nestle and other existing private sector players are adding to their product line-ups and pushing in big money into the market while home-grown dairy cooperatives such as Mother Dairy and Nandini, among others, are also expanding their operations rapidly. And other big global dairy companies are all eyeing the market. Experts estimate that investments worth Rs 15,000 crore will flow into the milk business in India in the next two years.

Milk Market Dynamics

dairy industry, global dairy market, pixelsutra

Image source: http://www.imarcgroup.com/files/images/global-dairy-market.png

India has always been the largest producer (an estimated 400 million litre per day currently) and consumer of milk in the world. But it remained a boring market largely because the per capita consumption was low, and most of the milk was consumed in its basic, liquid form, or at best as ghee and some butter.

Out of the 400 million litres of milk that India produces per day, 160 million litres per day (48 per cent) is retained by the producers for their own consumption. The surplus milk that is available for sale is around 240 million litres per day, and out of that only 70 million litres per day is being used by the organised sector – consisting of co-operatives such as Amul, Mother Dairy and Nandini (a brand owned by the Karnataka Cooperative Milk Producers Federation (KMF), as well as private sector players such as Nestle and Danone. Over 170 million litres of the surplus milk continues to be with the unorganised sector, comprising traditional domestic. In value terms, the Indian milk economy is worth Rs 5 lakh crore, growing at a CAGR of 15-16 per cent, out of which the organised milk economy is worth Rs 80,000 crore.

Betting on Value Addition

The value added market chart

milk products, value added market, pixelsutra

Image source: http://media2.intoday.in/btmt/images/stories//March2016/milk1_051716031019.jpg

Over 80 per cent of milk consumption in India is that of liquid milk and over 55 per cent of the revenue of large co-operatives, such as Amul and Nandini, comes from selling liquid milk.

milk industry, who gets what, pixelsutra

(Image source reference):  http://media2.intoday.in/btmt/images/stories//March2016/milk2_051716031019.jpg

There are still limited takers for value-added dairy products such as cheese, yogurts or flavoured milk, but this is where much of the action is taking place today simply because of its higher margins, and the ability to differentiate and introduce new products. Equally, the fact that the milk cooperatives did not tap this market until the multinationals came in made it an area where the competition was relatively equal. The Indian consumer – especially the affluent urban consumer – is consuming more value-added products, which bring in bigger profits for dairy companies than raw milk. The phenomenon of working couples, single men and women with high disposable income also provided the impetus to look at the category with fresh eyes. The fact that the Indian cooperatives had largely stuck to basic milk, butter, processed cheese slices and ice cream for many decades, had left a gap in the market that allowed some of the new players to come in with new product offerings.
By taking an in-depth look at your dairy products and the process that goes into producing them, your product’s advantages will become clear. Look at how the product is created, whether you produce, milk, butter, cheese or any other dairy product. If the cows used are fed only natural, hormone-free feed, this is something you will want to promote. If the owners and operators are third-generation dairy farmers or an extension of a business with deep roots and extensive experience, highlight this in your advertising. Understanding the product, the business and the process will help to form your overall marketing strategy. The new players are carving out their place in the segments that include cheese, ice creams, varieties of yogurt and milk-based beverages.

The Chairman of Parag Milk Foods gave out that their strategy is to differentiate and not directly compete with big, entrenched players like Nandini and Amul therefore they decided to move up the value ladder and grab that category completely.

Expand product range in Beverage segment

Dairy products maker Parag Milk Foods expanded its product range with the launch of “Slurp”, a mango fruit milk juice, as part of plans to become one of the largest FMCG dairy organisations.  Parag Milk Foods Ltd., Chief Marketing Officer, Mahesh Israni said the company had “technology” at the Palamaner factory to manufacture the fruit juice drinks. The domestic fruit drink market is valued at Rs 10,219 crore of which juice segment constitutes Rs 7,150 crore.

Only 18 per cent of the Rs 1,440 crore revenue of Prabhat comes from fresh milk, while the rest is from value-added products such as cheese, milk beverages and yogurts. The company has as many as 67 varieties of cheese, which it sells at retail outlets as well as in institutes.

The retailer’s fastest moving dairy product from her shelves is probiotic milk, but other fast growing segments include greek yogurts, fresh paneer, farm fresh milk and nut-based milk.

Analyzing demand

One big change, says Jochen Ebert, Managing Director, Danone Foods and Beverages India, the company that introduced a few new sub-categories, such as flavoured yogurt and ready-to-eat custard, is that many things that were earlier made at home are now bought by urban couples and single working women. “Young females who are working find it a good idea to get the yogurt or dahi from outside instead of setting it at home. That means there is an opportunity for commercially produced yogurt and we are focusing on that opportunity,” says Ebert. Danone was among the first to introduce a series of yogurts, but its innovations were quickly copied by his rivals, including Amul. Let us take a look at their promotional video:

Danone India entered the market with its array of yogurts and the conventional dahi in 2009. Its products did get accepted but only in niche stores and among a certain class of consumers. But Danone, says Ebert, entered India with a mindset of creating a market for yogurts and focus on increasing the per capita consumption. Yogurt in India, he says, has a per capita consumption of just 3-4 litre, as opposed to France, Holland and Germany, which are at 30-40 litre. “The first intention is to share with the Indian population that yogurt or dahi is a fantastic contribution to their diet.” Since cold food supply chain is a challenge in India, Danone innovated and created products with greater shelf lives. In the past year, it has introduced ambient yogurt and milk-based products with six months of shelf life. It has innovated products, such as smoothies, chaas and lassi, which are packaged in ultra-high temperature (UHT) packs. Take a sneak peek at Danone’s promotion of their fruit flavoured curds:

The most recent launch from the Danone stable has been ready-to-eat-custard. Meanwhile, more stores have started accepting these products now. From being available in just 10,000-odd stores about a year ago, Danone is today available in over 50,000 stores.

( Video link and description: Danone, a leading food company, has launched an innovation in the packaged food industry with its ‘ready-to-eat custard.’ Made with 80% toned milk, it is a 100% vegetarian product and is extremely convenient to use.)

What sells your product? Added values.

Value-added, in fact, is the place where the bulk of the innovations and new product launches are taking place. Both Prabhat Dairy and Parag Milk Foods have set up cheese production units and facilities to produce Ultra High Temperature (UHT) milk and milk-based beverages. Since they are already into production of cheese, they have also tapped into whey protein (a cheese by-product) – much sought after by bodybuilders and fitness freaks around the globe says Shah of Parag.

Nestle, the largest and oldest private milk player globally, has recently launched Greek yogurt, Nestle-a+ GREKYO. Greek yogurt, which is a super concentrated yogurt, is a swooping category in India and is stocked by premium retailers. It is priced considerably higher than other yogurts, but Arvind Bhandari, General Manager (Dairy), Nestle India, is confident that it will pick up. Nestle is present in the entire array of dairy product categories, especially in the value-added space.

Similarly, ITC Foods‘ much talked about entry into the dairy segment finally happened late last year, and that also in the value-added dairy segment, with the launch of ‘Aashirvaad Svasti Pure Cow Ghee’. ITC, in the last few years, has invested significantly in setting up a robust milk procurement network.

Amul’s Forging ahead

But even as private companies are betting on the value-added dairy products, big milk cooperatives have also matched them step for step. The country’s largest dairy products company, Amul, has been investing Rs 800 crore-1,000 crore year-on-year in setting up new milk processing facilities, as well as building its value-added products infrastructure.

Product portfolio

amul product, protfolio in graph

image source: https://image.slidesharecdn.com/historyofamul-141108054735-conversion-gate01/95/amul-history-and-stats-8-638.jpg?cb=1415425731

Be it ghee, cheese, butter or yogurt, Amul is clearly the market leader in most value-added dairy categories. The branded ghee market, for instance, is Rs 5,275 crore and Amul and Sagar (Amul’s second ghee brand) together command a 30 per cent market share.

Apart from cheese, yogurt and smoothies, many of the state-run co-operatives are also looking at traditional Indian mithais. There is a good opportunity to push healthy Indian sweets into the market that has the promise of being unadulterated. Nandini Milk Products, for instance, is pushing healthy sweets.

Trace your potential customers

Sodhi of Amul has a word of caution for the new-age dairy companies. He says while India does have surplus milk for dairy companies to build a robust business, to be successful in India and get the much-needed volume growth, one has to have a presence in liquid milk. After all, 80 per cent of Indians consume only liquid milk!
“The bread and butter has to be milk,  the business model will not work,” insists Sodhi.
Discern who exactly you are marketing to and what segment of the market would be most inclined to purchase your dairy products. If your dairy products are produced by hormone-free cows that are free to graze and are provided healthy lifestyles, then you need to determine who these facts will resonate with and who may be willing to pay a little extra for these features. Families in middle to upper income brackets are likely to be your best clientele. Those interested in what goes into the foods and drinks their children consume and willing and able to pay a little more for your natural and chemical free products are likely a good fit.

Multinationals on the other hand are used to operating in a very different way around the globe. In western markets, dairy companies depend on an ecosystem of large corporate dairy farms and bulk of the procurement is done from a single farm. The game, in India,  is to aggregate milk from many small-sized farmers, which could lead to inconsistencies in both supply volume as well as supply quality.

More private players are getting into value-added dairy products. Is this the big opportunity now?

Milk demand is growing by 6 million to 7 million tonnes per year. Last year, we even exported 100,000 tonnes of skimmed milk powder. With increasing disposable income, milk’s product profile is changing in urban centres. You will see more yoghurt, ice cream, butter and cheese being consumed. Even Amul has diversified into the value-added segment. Smaller cooperatives are still largely restricted to liquid milk, though they are diversifying into traditional sweets. With overall growth, we will see more such diversification. The pasteurised and organised sector is growing base. This is where private players are also finding space and opportunity.

What are the other opportunity areas?

There is increasing emphasis on health. We are seeing preferences shifting from sugared milk drinks to chhach or yogurt-based beverages, even slim milk. Cooperatives are already enriching milk with Vitamin A. Mother Dairy’s token milk, for instance, has Vitamin A.

While Shrirang Sarda, Sarda Dairy Farms, is a third-generation entrepreneur, Rajesh Singh, of Blissfresh, is a former banker who quit his cushy job to become a milk entrepreneur. Both Sarda and Singh have created a farm-to-home model, where all the milk is sourced from a single farm owned by them, processed and delivered at the doorsteps of the consumer. A one-litre pack of Blissfresh costs Rs 70 and since all the milk is sourced from a single farm, Singh claims that the protein and fat content of the milk is far higher than other mass brands which follow the collection method. Video link:

Be it Sarda Farms, Blissfresh or Faridabad-based Murginns, most entrepreneurial activity is happening at the premium end. Murginns, for instance, sells a premium range of yogurts, flavoured milk and flavoured butter in Delhi. In 2013, when the brand launched flavoured butter in different flavours, there was hardly any competition. However, when the likes of Amul got into the space, managing scale became a challenge.

Though premium milk delivered to homes straight from the farm enriched with proteins and vitamins or a tub of gourmet butter, does have takers, but as businesses they will continue to remain niche. According to industry experts, these are not scalable models.

With global dairy majors looking at India as a lucrative investment destination and home-bred dairy companies all set for the next level of growth, the sector is expected to witness some real action with far too much place for multiple players to operate. After all, two-thirds of the surplus milk available is still with the unorganised sector.

Marketing techniques and campaigns of Top players:

Promotional videos

When someone visits your website, video is an exciting and excellent method of communicating with them. Watching and listening to well-produced video content is more engaging than reading pages of text and requires much less effort. Most people also remember information which is conveyed in an audio/visual format better than information they read. Many website owners who currently use video marketing find that adding video increases return visits to their website, especially if they are adding videos regularly.

Many providers or dairy manufacturers have resorted to advertise or launch their new products in the form of storytelling or promotional videos.

Let us take a look at how Nestle emphasized their #Shareyourgoodness motto through this beautiful video:

Nestle at the event of their 150th anniversary released this informative and engaging video, incorporating every bite with surprise and their journey:

Amul slays it with this slice of life Facebook ad revolving around two grandparents preparing for a visit from their grandchild. It is honest, relatable and sweet as hell! Receiving millions of views within days of the release—–

Nestle also puts in new recipe videos by gourmet chefs, using Nestle products for promoting their produce. Let us peruse some of these interesting and groovy videos:

Mango Cheesecake using Nestle milkmaid:

Chilled Lime Pie:

India’s per capita consumption of milk at 97 litres a year is way below that of western countries like the US, which boasts per capita consumption of 285 litres per year, or the European Union, which consumes 281 litres per capita per year. The second reason is that  finally, global prices of milk are dipping because of overcapacity, while the Indian market is still growing, both for basic milk as well as for value-added products. India is strategically a great place to be in, especially for international players. With milk available in surplus and consumption of milk products on the rise, they can not only tap the Indian market, but also use India as a base to serve other global markets. 

This was an analysis about various modern marketing techniques for your Dairy industry. if you would like to have a detailed discussion, please get in touch with us at hello@pixelsutra.com. We would be glad to assist you.

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