The ever-burgeoning industry
The industry undoubtedly is quite promising provided that the options are interpreted carefully

By Jyoti K. Singh
Right from spending a mere amount of rupees 22 for one liter of full cream milk, we have come far away to shelling out 28 rupees per liter in just few months. But despite the indigenous consumers feeling this price-hike pinch in the milk prices, milk production in India still remains to be at the most viable global position. Furthermore, the industry experts also predict that the Indian dairy sector is fast approaching the brink of consolidation, elevated competence and industrial augmentation, as the big players vie each other to enter the sector.

According to the data from reliable industry sources, the milk production in India accounts for 15% of milk produced all over the world. We also have to our credit the accolades of producing 40% of Asia’s output for milk. Furthermore, the recent years have even observed a steady growth of about 4% per annum in the above production figure whereas the global average remained 1-2% only. As a result some of the leading corporate giants from the food and beverage industry like ITC, PepsiCo, Reliance, and Coca-Cola are all set to reap greater dividends from the milk sector, anticipating colossal future growth. The debut of Yakult-Danone can be considered to be a great milestone here having more action in store for the dairy market of India; the hint for which has already been given by Kraft’s recent acquisition of Cadbury.

To add more, ‘Dairy India’ - the most trusted ready reckoner of the industry, also projects 100% growth for Indian dairy market, expecting its dividends to cross Rs 520,000 million in the fiscal year 2011. Such a gigantic growth for the industry naturally would serve as a potential break not only for dairy MNCs but also for the input suppliers by enabling them to spread out their exports, easing out the transferring of technology, signing up new JVs and/or MOUs. All this would definitely result in the former’s making profitable commercial investments in India.

R.S. Khanna, an international dairy consultant says, “...the cost of milk production here is among the lowest in the world, making it competitive even without any subsidy.”

At present, about 50% of the total milk produced in our country is consumed by the urbanities. Their population is anticipated to go beyond the mark of 400 million by 2011. Needless to say, the milk consumption would automatically rise thus. It is therefore quite essential for a flawless and uninterrupted supply that the milk distribution networks must be strengthened.

“About 80 percent of milk is handled in the unorganised sector and 20 percent is shared equally by cooperative and private dairies,” reports Sharad Gupta, the publisher of ‘Dairy India.’ Gupta further endorses the view that future growth strategies must regard milk as a precious crop and dairy farming as one of the most important agricultural activities rather than allocating it a status ancillary to farming. On similar notes, the farmers also should be armed with specific skills that would make them deliberately cultivate fodder along with investing in their cattle’s productivity thereby lacerating the cost of milk production. Additionally, if the government plans to leverage considerable profits from the sector, it is quintessential that the dairy sector invests heavily into a rural network for procuring milk thus lessening our dependence over the intermediary transporters and collectors of milk. “Private dairies leave milk collection to contractors and local agents. Cost inefficiency apart, the outsourcing model does not allow stringent quality control by the processor. Farmers must receive remunerative prices so that they are highly incentivised to produce and supply more to dairies,” says Gupta. From the figures above, it can be interpreted easily that the dairy industry plays a crucial }part in India’s socio-economic development. Not only does the industry offer economic nutritional food but also engenders an array of employment opportunities for rural Indians- constituting 70% of the total population.

Furthermore, as suggested earlier the industry showcases vast potential for foreign investments promising greater returns. Some of the major factors that may serve as attraction points for the foreign investors include:
a. Abundance of milk
b. An adequate availability of technically skilled labour,
c. Easier availability of technological infrastructure, and
d. Presence of all key elements needed for an independent market system.

The dairy industry is also quite versatile that includes various sectors offering immense opportunities for FDI and FII. Some to name include -

Biotechnology
1. It is a well-known fact that milk yielded by Indian cattle is lesser than their foreign counterparts. Thus the Indian breeders always keep looking out for options to extend the quantity of milk yielded by their cattle through processes like crossbreeding. Therefore, a huge potential lies in the breeding of hybrid cows with quality buffaloes.

2. Various dairy cultures, like dairy biologics, pro-biotics, colouring agents for food processing, and enzymes also can offer promising returns.

3. Manufacturing ingredients of biological preservatives like bulgarian, Nisin, aciophilin, and pediococcin etc founded by dairy fermentation, is also a huge investment opportunity.

Dairy Equipment
Milk and other dairy products being quite perishable in nature require state of the art machinery for processing. This in turn offers a great potential for investing in development and marketing of quality machinery for milk processing.

Packaging Instruments
India may enjoy the status of being the largest milk producer of the Asian region yet marketing of its dairy products has always been a matter of concern for the country. And this can be tackled well by the right kind of packaging. Thus foreign investors may eye the manufacturing of packaging materials that would not only offer a competitive edge to the dairy products but also would improvise the brand loyalty of milk products.

Retailing
When it comes to milk consumption, Indian metropolitans score the highest. This can serve to be a quite beneficial investment opportunity in terms of standardisation and upgradation of dairy products.

Finished Products
Another arena of the industry offering tremendous investment scope lies in the manufacturing of refined dairy products like cheese powder, cheese sauce and so on.

Setting up highly developed industrial units
Last, but not the least important an option is investing in setting up technologically advanced manufacturing units that would support specialised activities related to dairy industry including packaging and/or slicing of cheese, dicing lines, and butter printing.

To conclude, it would not be an exaggeration to mention that the Indian dairy industry offers assorted options for investment in an array of sectors. The investors however are free to choose their pick but what can be guaranteed are profitable returns irrespective of their choice.

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