Dairy Companies to Invest High in Milk to Earn from surging demand

India: India dairy market has experienced tremendous development over the last five years. The liquid milk segment which had exhibited low margins in past compared to the Value Added Dairy Products (VADP) is now propelling better margins. With this the companies have slowly started to concentrate on the supply chain side of the industry to gain better margins and to decrease the operational costs.

The companies are now investing nearly one third of their capital in setting up cold chain and these investments are rising at the rate of 15% year-on-year. Hatsun Agro Products that is based in Chennai has recently announced an investment of nearly USD26.15 million to set up cold chain infrastructure.

Likewise, Prabhat dairy in Mumbai is investing nearly 30-40% of their capital in establishing nearly 100 bulk coolers this year and adding several chilling centres to maintain the microbial content. Other companies such as Amul, Kwality are also contributing significant investments in their business as per their requirements. Though the investments in this segment has been going for about a decade and half, however, the scale was restricted by low capacity in dairies, both in terms of investments and production.

According to TechSci Research, with stringent food safety regulations from the Food Safety and Standards Authority of India (FSSAI), continuous surveillance and checks, dairy companies are focusing on this part of supply chain to maintain the quality and keep a check on adulteration. With expansion of their portfolio, companies are also focusing on increasing their capacities, and due to consolidation, they are setting up storages for products like cheese, flavoured milk along with the processing plant, that is surging the demand for cold storages. This is expected to increase the market share of organised dairy in India vis-à-vis the revenue of dairy players will also increase which will in turn boost their growth and expansion.

According to a recent report published by TechSci Research, “India Dairy Products Market 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.