India is the largest producer of milk, which is the most widely produced agricultural commodity worldwide. With annual production ranging between 140 and 145 million tons in 2013, India is second only to the EU-27 bloc that collectively produces over 156 million tons, as per the USDA. Further, India’s milk production is expected to total 170 million tons, by 2020, thus surpassing the global average growth rate of approximately 7 percent.
With the ease of availability of raw material, the as-yet-nascent milk processing industry is registering new levels of growth. Milk processing in India accounts for approximately 35-36 percent of the total production, with a majority of the share being consumed in a farm-fresh, or non-pasteurized, state sold through unorganised channels, while the organised dairy segment constitutes merely around 15-20 percent of the total processing market. The main value-added products include milk powder, whitener, packaged milk, butter, ghee, yogurt, cheese, and ready-to-drink milk products, which are, thanks to high consumer demand, growing at anywhere between 15 and 25 percent.
Among the processed dairy products, the most promising segment both in terms of consumer demand and business profitability is the cheese segment. Traditionally, India is not a cheese-consuming nation as the Indian consumer’s palate has been adapted to the softer Indian variant of cheese called paneer. But, in recent years, given the magnitude of the demand from Indian consumers, global industry experts predict that India is the next big market in terms of cheese consumption. This forecast also accounts for the fact that, although Europe and North America are the primary cheese markets today, a saturation therein is forcing suppliers to look elsewhere, to such currently major importers as Japan and Russia, and to developing markets like India.
The Indian cheese market is presently worth around USD 237 mn, but is expected to grow at roughly 15-20 percent annually. Product-wise, the global market deals in almost 3,000 varieties of cheese, whereas in India only about 40-45 variants are being marketed, presenting much room for the market’s expansion. By industry estimates, the current household penetration in terms of cheese consumption is less than 7-8 percent. The per capita consumption of cheese in India is a mere 200 gm per year in contrast to the global average of 7 kg per annum; the average for urban India, however, is 700 gm per person. Geographically, the top six cities consume approximately 60 percent of all the cheese sold in India.
In India, the processed cheese market forms almost 45 percent of the total market that is likely to grow a higher-than-average CAGR of around 25 percent, which includes all spreads, cubes, slices, tins, slabs, etc. Within the processed cheese segment, around 60 percent of the market is dominated by unspreadable processed cheese. The segment is well organised, comprises regional, Indian, and international players, and is registering high levels of entrepreneurial activity. On the other hand, the unprocessed cheese market is largely associated with the soft cheese category in India, usually associated with paneer. The traditional soft cheese constitutes over 55 percent of the total market, with only a small fraction thereof being contributed by the organised sector and is expected to continually form the major chunk, given the Indian consumer’s behaviour, for years to come.
The market has been dominated by the cooperatives and regional players, with only a few international players making any inroads. The Gujarat Cooperative Milk Marketing Federation (GCMMF) with its Amul brand of cheese has been the pioneer and is a formidable player enjoying a majority share in the market, followed by Britannia. The imported gourmet cheese market currently occupies a mere 5-7 percent of the total cheese market, but this niche segment is growing at over 30 percent. The rest of the market is split between other players such as Parag Milk Foods, Gowardhan Foods, Danone, Milky Mist, Heritage Foods, Mother Dairy, Vijaya Foods, Milkfed and Verka. Some of the global brands that have a long-standing presence in India include Dabon International, Bongrain SA, Krafts, Fromageries Bel, and Arla Cheese.
The emergence of entrepreneurial ventures is not new to the cheese industry as the mathematics always seemed right, i.e., margins of 14 percent, with an additional revenue stream in the form of fat and SNF content with which to produce whey proteins, as against the 10 percent available through milk. The Organic Wild Acres offerings from Coonoor, Kodai Dairy’s Niligiris offering, Flanders Dairy, ABC Farms, Exito Gourmet, Himalaya International, etc., have contributed to both exports and domestic consumption with cheese variants such as Mozzarella, Cheddar, Colby-Jack, Churpee, Bandel, Ricotta, Gouda and La Ferme.
Players such as Dabon have realised the importance of “Indianisation” and added paneer to their portfolio, while others are adding tins, cubes, slabs, sticks, etc. to their product offerings. In terms of prices, the average unit price has registered an increase over the past year as a result of consumers upgrading to more premium variants as well as an increase in milk prices and inflation in general.
Also, apart from the traditional ATL and BTL marketing promotions, players are looking at new means of reaching out to consumers. Amul is using packaging as a promotional tool by printing recipes on cheese packets. Cross-selling and bundling, both at the brand and retail level, with complementary products, besides product trials at the retail level, are becoming popular. Localised events are also playing key role.
The institutional sales of such products have been heightened by the emergence of relevant food service formats. The number of specialty restaurants serving such cuisines (both stand-alone and those that are part of hotels) has recorded a steep rise, with the intake of value-added dairy products like cheese surging alongside.
In the time to come, new players including internationally established ones will be investing in existing local and regional players to expand their operations nationwide, implement new technologies both in terms of packaging and processing, and experiment with new products, variants for health and dietary reasons.
About the Authors
Tarun Jain is Vice President and Vidul Sharma is Principal Consultant, Food Services and Agriculture at Technopak.