DAIRY AND MILK PRODUCTS INDUSTRY IN INDIA:

UNDERSTANDING STRATEGIES OF
AMUL INDIA & PARAG MILK FOODS

Group 6
Dhiraj Bonda (1301-067)
Oli Ghosh (1301-144)
Sounak Basu (1301-221)

Abhishek Dhull (1301-302)

Jai Shankar Rai (1301-348)
Praveen Shrivastava (1301-386)
Poornima Sharma (1301-548)

Indias Dairy & Milk Products Industry:

Worlds largest milk producer: Contributing nearly 18 percent of the worlds
production by volume
Production (000 tons) 2012

Share in Production 2010

25000

20.00% 16.25%
15.00%
12.15%
10.00%

20000
15000

5.71%4.93%4.46%4.42%
4.12%3.36%
2.36%1.94%

5.00%
0.00%

10000
5000
0

Production in million tons

150

Per Capita Availability (gms/day)

350
300
250

100

200
150

50

100
0
2004 2005 2006 2007 2008 2009 2010 2011

Source: NDDB

50
0
1950-51 1968-69 1998-99 2000-01 2005-06 2007-08 2009-10 2011-12

 According to Investor Relations Society (IRS), the Indian

Dairy Industry is currently pegged at USD 70 billion (both
organized and unorganized)

Growing since
past 30 years

It is expected to double to USD 140 billion by 2020

According to Rabobank report, the country's total organized
diary sector is about USD 10 billion in 2012-13, comprising
cooperatives and private players who control the supply chain
linkages Market would grow at 15-20 percent annually till
2019-20
The market share of value-added products is likely to increase
to 31 per cent from the current 21 per cent during this time
period
Milk is the country's biggest agricultural produce,
contributing 22 per cent to agricultural GDP. India overtook
the US in 1998 to become the world's leading milk producer,
accounting for over 15 per cent of the global output

Future
demand to
remain high

Highest Milk
producer in
the world

MARKET STRUCTURE

Indian Dairy
Industry

Organized

Private
Dairies

Cooperative
Societies

Unorganized

Small Milk
Producers

Organized sector: Dairy units registered to Milk &

Milk Products Order 1992, each having capacity
to handle more than 10,000 litres per day are
Co-operatives, private or others (like government
Diaries)
Rest of all are unregistered small milk producers
or traders selling raw/boiled milk and other milk
Products at local levels but have a major share in
the market.

National
policies
Management

Processing &
value adding

Successfulness
of Indian Dairy
industry

Source: NDDB Annual Report 2012-13

Animal/
Breeds

Marketing

The demand for packaged,

Branded traditional milk is rapidly
Increasing and also for value-added
Products like flavored milk,
Dahi, Paneer, lassi, kheer etc.

Source: NDDB

Demand for Milk & Milk Products

High
Protein
Diets

Disposable
Income

Lifestyle

Demand
Factors
Change in
food habits
due to
education
levels

Awareness &
Availability

Households

Urbanization

Unorganiz
ed Sector

Organized
Sector

Milk, curd, butter, ghee, buttermilk and

Lassi

Urban liquid Milk, Sweet production

and other traditional products

Pasteurized liquid milk & products for

exports

Global dairy products trade

2000-01 India is the Net Exporter

increase in Exports from USD 3.45MM

in 1996 to 270 MM in 2008& decreased

in 2009

R
T
S
Increase in income levels, urban centers

&

resulted in rapid growth in demand

for processed dairy products reduced

surplus for exports and increased in
imports from USD 1.48 MM in 1996 to
USD 169 MM in 2010

A
D
E

Source: Emerging challenges and strategic references

India dairy products trade

Key Issues & Challenges

Average Milk Yield per cattle remains very low when compared to developed
and other developing countries
Small size of the cattle per producer makes it difficult to adopt mechanized system
of milking, cooling and storage facilities which hampers the quality at the
production stage
Large vegetarian population and dependent on the only source of essential
nutrient milk causing huge domestic demand and low surplus left for exports
In developed countries only cow milk is suitable for human consumption where as
India produces substantial quantity of buffalo milk
Health and disease prevention and control of the cattle is to be given high
importance
Competitive Pricing Points & maintaining high international standards, quality
assurance, clean milk production, reduction of antibiotics, pesticides, and other
contaminant residues in milk & up gradation of the technical processes

Political

E
S
T
E
L
A
N
A
L
Y

MMPO Act 1991 & liberalizing the same act by removing Milk Shed for more private investments.
Programs & projects to develop infrastructure, clean milk production scheme, National Dairy
Development Board research projects in training and awareness on hygienic milk production & cattle
Other welfare programs by rural development agency and womens SHGs
Import duties, quotas, restrictions & domestic subsidies

Economic
availability of finance to the farmers, availability and cost of labor to feed, milk and market the product
and its priority in relation to other demands on the household ,

depreciation of rupee increasing exports, growing consumption & disposable income at the semi
urban and rural level
Rise in retail industry has given consumer a wide choice of brands
Socio-Cultural
Growing nutrition consciousness , changing lifestyle of urban and rural households increased
consumption of ready-made dairy products
Exposure to different forms of media has resulted in increased brand consciousness in the consumers
Technological
Production and processing stages technologies to meet the International standards to boost exports
Consumers are empowered with the technology that provides information about anything they
consume or use

S
I
S

Environmental & Legal

Climatic conditions in which cattle are raised; Input to the cattle in terms of the disease control and
healthcare
Center for Analysis & learning in livestock and food under NDDB, carries out a wide range of analyses
on dairy and food products, feed and feed ingredients, acquired diseases and chromosomal and
genetic disorders.

Threats of New Entrants

Threat Of Substitutes

Economies of Scale
Cost and Resource
advantages
Brand Preferences and
Consumer Loyalty
Access to Distribution
Channels
Inability to match the
technology and specialized
know-how of firms already
in the industry
Capital Requirements

Bargaining power of
supplier

No or low level of
exploitation as cooperatives
are run for the benefit of
the milk farmers
Suppliers are protected by
rules & regulations

PORTERS

Rivalry among competitors

Firms operating in high

margined value added
products market are
expanding into other product
categories with consistent
innovation
International Players M&A
with domestic firms
More Product lines and
brands in the value added
products market

Changing consumer
lifestyles preferring
supplements for nutritional
over dairy products
Local Vendors and Small
time producers offering at
low prices
Indirect threat from the
other product categories in
the food & beverages
segment

Bargaining power of buyers

Switching to competitors
brands in the high margined
value added products
categories like Ice cream,
curd, milk powders,
confectionary products.
Large no. of buyers & the
products have occupied
regular share in the pockets

The Anand Milk Union Limited (Amul) cooperative formed

in 1946; but it has become a brand name managed by the
Gujarat Cooperative Milk Marketing Federation (GCMMF)

Product Categories:
Bread spreads
Cheese Range
Fresh & UHT Milk
Milk Powders
Ghee Products
Curd Products
Flavored Milk Products
Ice-cream
Chocolate & Confectionary Products
Sweets
Health Drink

Year of Establishment

1973

Members

17 District Cooperative Milk

Producers' Unions (16
Members & 1 Nominal
Members)

No. of Producer Members

No. of Village Societies
Total Milk handling capacity
per day
Milk Collection (Total - 201213)

3.18 Million
16,914
16.8 Million litres per day
4.66 billion litres

Milk collection (Daily Average

12.7 million litres
2012-13)
Cattle feed manufacturing
Capacity

5890 Mts. per day

Sales Offices

48

Dealers

5000

Retailers

1 Million across the country

Sales Turnover -(2012-13)

Rs. 13735 Crores (US $ 2.54

Billion)

 From selling milk to cities, Amul now selling value-added products back to villages
EEE Strategy: Expand, Expand & Expand; Expand in the procurement and
distribution lead to 20 percent compounded annual growth rate for the last 5 years
Investment in increasing milk procurement, processing capacities and distribution
Recent Capital Investments of Rs. 3000 crores Kheda district union recently
inaugurated a new plant in Virar, near Mumbai, and is setting up another processing
facility in Kolkata. The Sabarkantha district union has invested in Rohtak, while the
Banaskantha union is investing in creating capacities in Faridabad and Kanpur
Liquid milk constitutes more than half of Amul's turnover, which is a low margin
business. More focus on the value-added/higher margin products like ghee, butter
milk, curd and ice cream
Decentralizing to increase the reach of these value added products to small towns of
population less than 20,000. due to increase in disposable incomes of the people in
the towns with population less than 100,000 & 1-10 lac towns

 Creating & extending the cold chain for distribution of

the value-added products like flavored milk into the
hinterlands of the country (products like Masti

buttermilk, Kool milk shakes)

Establishment
of a direct
linkage
between milk
producers and
consumers by
eliminating
middlemen

Investing in setting up new company-owned depots in

smaller towns. For example, Kharagpur, which was
earlier under Asansol, now has a depot of its own and
so does Aurangabad, which was fed from Pune
Introduced a new layer in the distribution channel
called a 'super distributor', who operates at district level

Milk
Producers
(farmers)
control
procurement,
processing and
marketing

and supplies to sub-distributors at the taluka level.

already appointed 250 super distributors, each with 50
subdistributors. Business from these areas has increased
by 15%

Professional
management

Strengths

Largest food brand in India & Asia

High Quality at affordable price
Largest Distribution network
Professionally managed and introduced
TQM
Highly diverse product mix having high
margin value added products
Responsible for White Revolution
Successful marketing & advertising
campaigns created favorable brand
perception

Weaknesses

A
M
U

Strong dependency on the weak

infrastructure & completely dependent
on village for its raw materials
Short shelf life of its product
Low market share in confectionary and
other value added segments which are
growing at rapid pace
Lack of control over average yield per
cattle

N
D

Opportunities

Introduce new products in the chocolate

segment
To tap the untapped market, increase its
reach in rural markets
Rise in purchasing power of Indian people
Export to Western economies if
International standard infrastructure
developed in value chain

I
A
S
W
O
T

Threats

Competition from international and

domestic players in high margin oriented
segments
Inconsistent export policies threatening
the pole position
Ban of plastic which is widely used in
packaging
Liberalization lead to large no. of
entrepreneurs
Creation of Non Tariff Barriers by
Developed Nations

STRATEGIC GROUP MAPPING

G
E

Britannia

Amul,
Nestle,
Mother
Diary

O
G
A
P
H
I

Low to High

Aavin,
Vijaya,
Hatsun

Parag,
Heritage,

C
R
E
A
C

PRODUCT

DIVERSITY/MIX

H
Low to High

Parag Milk Foods

Parag had initially started as a Milk company with Ghee being the first product with which they
entered the customer segment
Parag Milk Foods is among the largest milk producers in the country
Pune based company commanding over 2% of the total $10 billion organized market
Company Exports milk products to 27 countries in West Asia, South East Asia and Africa
Operates with more than 300,000 retail outlets
Comprises of more than 2,000 distributors
Major Areas Liquid Milk 20% of the revenues
Cheese 25 to 30% of the revenue
Skimmed Milk Products (SMP) 20% of revenues
UHT/Tetrapak 7 to 8% of the revenue
Fresh Division (Dahi, yogurt, paneer) 15 to 18% of the revenues
Parag also sells byproducts such as whey protein and cheese to processed food makers in the
country

Strategic Move

Prior to 2008:
India used to produce 127 million litres of milk
Out of which, only 40 tonnes was converted to cheese
Majorly dominated by Amul

In 2008, Parag Milk foods decided to take its boldest bet ever
Devender Shah, Chairman of Parag Milk Foods, estimated that the India was at cusp
of huge jump in cheese consumption.
It was observed that there was untapped opportunity in processed cheese
Parag did not want to go for a small plant but it decided to take a huge risk by going
on for the 40 tonne cheese plant
Overnight, Parag Milk foods had doubled Indias cheese production capacity

In addition to focusing on value added products, Parag had worked hard on the
building a brand, Gowardhan.
Parag had hired Mahesh Israni from HUL as the Chief Marketing Officer to change
the marketing strategies of the firm.
Huge investment of Rs 30 Crore was done on Advertising last year and the media
budget was doubled this year in anticipation of getting better rates on TV and print.

Consequences

Decision had paid off in spades

Cheese consumption had zoomed over the years and due to this Parag had a lock-on
institutional clients like Dominos, Pizza Hut, Papa John, etc.
Companys revenue had grown at 20-30 percent over the past 5 years
Last Fiscal was closed with a top-line of Rs 950 Crore, with its majority share coming from the
value added products like Cheese, Ultra High Temperature Milk and Ghee
Other Dairy companies have 20-30% of their top line coming from their value added products.
Whereas, for Parag this is 75%.
Cheese has around 14% margin whereas Milk has 10% margin
Parag enjoys better margins than companies like Britannia and Danone.
Parag made Rs 100Cr on a top line of Rs 950Cr while Hatsun made Rs 44Cr on a top line of Rs
2,165Cr.
All the products of Parag are UHT compliant. This means that even the cheese doesnt need a
cold chain to be transported. This saves lot of money.
Since Isranis arrival, the packaging of Gowardhan products changed from erstwhile staid and
boring to stand out and eye-ball catching.

Strengths

Weaknesses

Hygienic Milk processing

Asias largest cheese producer
State of the art technology
Receiving milk from different centers
Full 100% use of cows to produce milk
Thick dahi
Selling of byproducts like whey protein

A
G

Improper distribution network

Short shelf life of its product
Use of only cow milk
Positioning
Not spread out as much as its domestic
rivals

M
I
L
K

Opportunities

Locking in with institutional clients No

focused competition
High growth of the Indian cheese market
(15-20% annually)
New market for packaged dahi
Creation of more brand loyalty
Rapid expansion
Rise in purchasing power of Indian people
Export to Western economies

F
O
O

Threats

S
S
W
O

Competition from well established

international and domestic players in
high margin oriented segments
Competition from regional and small
time players

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