Consolidating India Dairy Industry

India: In the dairy industry fresh round of consolidations are taking place under which smaller firms are selling to the bigger ones in order to cope with the rising input costs, falling production and tougher competition. Hyderabad based Dodla Dairy, which is backed by Black River Asset Management, has done a latest deal by acquiring a milk processing facility in the Dharmapuri district of Tamil Nadu. Other deals include acquisition of Hyderabad based Jyothi Dairy by Chennai-headquartered Hatsun Agro Products. ITC, a Kolkata-based conglomerate has recently announced that the company will ether in the dairy business by doing small acquisitions in certain markets. On the other hand, Kwality, a Delhi headquartered company, is also eyeing on some small buyouts.

Lactalis, a French dairy giant, has acquired the dairy business of Indore-based Anik Industries and further planning to acquire few more attractive and smaller dairy businesses. The continuous losses are compelling smaller firms to either sell off or shut down their business, otherwise merge with big players who can absorb the losses which are caused by falling retail prices of milk for a long period or any type of increase in the procurement cost.

The sustainability issues of the smaller firms arise due to lack of expertise by them in managing the business, increased competition raised from global and domestic players and rising capital expenditure requirements. Some years back Lactalis acquired Tirumala Milk Products a Hyderabad based dairy company, according to the founder’s non-interest of latest generation in managing the business was the reason for the merger as the second generation is not interested in carrying forward the family business.

According to TechSci Research, the market for dairy products in growing and Indian market has a huge potential as the companies require different dairy products for their value added product segment and the dairy sector is likely to witness huge investments in the coming years which will help the domestic and the global players to earn significant revenues from this sector.

According to a recent report published by TechSci Research, “India Dairy Products Market, Competition Forecast and Opportunities, 2011 – 2021”, the market for dairy products in India is projected to grow at a CAGR of over 7% during 2016 - 2021. In 2015, North India dominated the country’s dairy products market, on account of increasing per capita expenditure, rising youth population, introduction of value added dairy products, changing consumption patterns, and growing penetration of international players. India dairy products market is witnessing a shift towards healthier products such as probiotic drinks, yogurts, etc. Few of the leading players operating in India dairy products market include Gujarat Cooperative Milk Marketing Federation Ltd., National Dairy Development Board, Karnataka Cooperative Milk Producers Federation Ltd., and Tamil Nadu Co-operative Milk Producers' Federation Limited, among others.