Global production of milk grew at a CAGR of 2.3 per cent between 2010 to 2014, reaching 792 MMT and primarily driven by population growth, rising disposable incomes, urbanisation and westernisation of diets in developing countries like China and India. It is expected that global demand for milk and milk products will grow continuously, even though milk supply in China and India as well as countries within southeast Asia and Africa is not expected to keep pace with higher growth in these developing economies. Between 2015 and 2020, total production of milk and milk products is expected to grow at a CAGR of 2.1 per cent to reach 901.2 MMT by 2020.
The European Union, India and the USA are currently the largest milk and dairy product producers and consumers worldwide, accounting for 20.3 per cent, 18.3 per cent and 11.9 per cent respectively of global production in 2014. China, Russia and Saudi Arabia are the largest importers of milk and dairy products, accounting for 22.4 per cent, 6,5 per cent and 4.2 per cent of total global imports in 2014 respectively, while the largest exporters were New Zealand, European Union and USA with 26.5 per cent, 23.2 per cent and 15.3 per cent in 2014 respectively. Further, milk and dairy products production is expected to increase in India at a CAGR of 4.2 per cent over 2015-20, resulting in India overtaking the European Union to become the largest milk and dairy products producer by 2020. However, India currently lags behind in dairy exports, accounting for only 1.3 per cent of total exports in 2014 – despite the potential for dairy exports from India being immense since it is surrounded by milk-deficit countries like Bangladesh, China, Hong Kong, Singapore, Thailand, Malaysia, Philippines, Japan, UAE, Oman and other Gulf countries.
Rapid urbanisation and increasing income levels in India has resulted in a shift in consumer dietary patterns, where they are moving away from cereals to high value food products like milk, egg, meat and fruits and vegetables – a natural corollary to the negative income elasticity for cereals in India and positive income elasticity for high quality food. This change is now occurring in both rural and urban households where 2012 witnessed monthly consumer expenditure towards milk and cheese at 16 per cent of total expenditure on food in urban areas and 15 per cent in rural areas.
Globally, cow milk represents the preferred milk type across the world. Cows' milk accounts for nearly the entire milk consumption in the developed world, where consumers are aware of its nutritional benefits and advantages over other milk sources such as buffalo milk. Cows' milk accounted for approximately 83 per cent of the total milk production in 2012 and represented the most popular source of milk in the European Union, the United States of America, China, Australia and New Zealand. Cow's milk was followed by buffalo milk which is accounted for 12.9 per cent of the total milk produced in the world.
Although, buffaloes accounted for most of the milk produced in Asian countries including India and Pakistan, the share of cow's milk in total consumption has been steadily increasing. Amongst the major milk producing countries, milk is almost entirely sourced from cow's milk in most developed nations.
India is the world's biggest producer and consumer of milk on a country-wise basis. However, the per capita consumption of milk at 97 litres per year is well below that of other major milk markets, except for China. Milk production volumes in India have grown rapidly from 17MMT in 1952 to 147 MMT in 2015, enabling India to become the world's biggest milk producer. India's population growth and rising incomes witnessed milk consumption of 138 MMT in 2015 to become the world's largest milk consumer. In 2014, India's dairy industry was worth Rs 4,061 billion, with CAGR growth of 15.4 per cent during 2010 to 2014. Total production of milk and dairy products is expected to increase from 147 MMT in 2015 to 189 MMT in 2021, while total consumption of milk and dairy products is expected to increase from 138 MMT in 2015 to 192 MMT in 2021. India's dairy industry is expected to maintain growth at CAGR of 14.9 per cent between 2015 to 2020, to reach a value of Rs 9,397 billion by 2020. In India, milk consumption mainly consists of buffalo milk at 49 per cent – followed by cow milk (48 per cent) for 2014. However, cow milk is growing at a faster pace than buffalo milk and is expected to account for majority of total milk consumed in line with the developed markets. On state level, Uttar Pradesh, Rajasthan and Andhra Pradesh were the largest milk producers accounting for 17.7 per cent, 10.5 per cent and 9.8 per cent of total milk production in 2014. Cow milk is dominant in 24 of the 35 states and union territories in India, where the top five milk-producing states currently are: Tamil Nadu, Uttar Pradesh, Rajasthan, Maharashtra and West Bengal.
The Indian dairy industry is divided into segments that are organised (comprising cooperatives and private dairies) and unorganised segments (traditional milkmen, vendors and self-consumption at home). In 2014, 30 per cent of the total marketable milk in India was processed by the organised segment, with private players processing 55 per cent and cooperatives processing 45 per cent. During 2010 to 2014, the organised segment grew at CAGR 20.7 per cent and unorganised segment at CAGR 14.2 per cent. However, the unorganised segment still dominates the Indian dairy industry at 80 per cent, compared to the organised segment at 20 per cent by value in 2014. The organised segment is expected to grow at CAGR 19.5 per cent between 2015 to 2020, accounting for 25.5 per cent of the Indian dairy industry by 2020. The unorganised segment's expected growth in the same period is at CAGR of 13.2 per cent and is expected to account for 74.5 per cent of the total Indian dairy industry by 2020.
Parag Milk Foods Limited is aiming at modernisation of its infrastructure from the Rs 300 crores sought through their IPO that opened May 4 to May 6 at Rs 220 to Rs 227 per equity share, and is looking at investing Rs 150 crores towards whey and beverages – its Executive Chairman Devendra Shah said, adding: “India is the largest milk producer in the world and milk is surplus, especially after Dr Verghese Kurien started Operation Flood. Unfortunately, the Indian dairy industry is highly fragmented. From 1997 to 2004, we were the highest milk powder exporter before the government ban and then we concentrated on the domestic market where we set up the largest cheese production plant (1200 MMT production capacity and 40 MMT daily) in India, besides pioneering in making fruit and cheese yogurt, and exporting our products to 36 countries. With three lakh dairy farmers in 29 districts of four states in India supplying us milk, we are planning on increasing our collection centres, bulk milk coolers and automated milk collection systems.”
By product category, liquid milk, ghee, paneer and curd had highest value sales in 2014 at
Rs 26,21,460 million, Rs 6,18,225 million, Rs 2,93,300 million and Rs 2,16,496 million respectively, with their sales expected to grow at CAGR of 15 per cent, 14 per cent, 14 per cent and 15 per cent respectively and value of sales in 2020 reaching Rs 6, 068,000 million for liquid milk. The organised segment's share in each of these product categories is expected to grow at CAGR of 21 per cent, 17 per cent, 24 per cent and 20 per cent respectively, and by 2020, reach 26 per cent, 21 per cent, three per cent and 7 per cent respectively, according to the IMARC Indian Dairy Industry 2015 report.
Liquid milk: constitutes the largest segment of the Indian dairy industry, valued at Rs 2,621 billion in 2014 and currently 80 per cent of it is sold through the unorganized segment. It's annual per capita consumption is expected to increase from 54.1 litres in 2014 to 68 litres in 2020, resulting in total sales value CAGR growth of 15 per cent from Rs 3,021 billion in 2015 to Rs 6,068 billion in 2020.
Around 45 per cent total liquid milk is consumed in northern India, with Uttar Pradesh, Rajasthan, Punjab and Haryana being the larger markets. Key markets in western and central India include Gujarat, Maharashtra and Madhya Pradesh, while south India includes Andhra Pradesh, Tamil Nadu and Karnataka as top consumers, and Bihar and West Bengal as major milk consuming states in eastern India.
Ghee: which is the second-most consumed product with growth at CAGR 17 per cent during 2007 to 2014 and value of Rs 618 billion, has a market dominated by the unorganised segment with 82 per cent of total ghee sales in India. South India represent the largest ghee market at 26.6 per cent, followed by north india (26.5 per cent), east India (24.3 per cent), and west India (22.6 per cent).
Cheese: represents one of the fastest growing markets in India, which has traditionally been a paneer consuming market dominated by unorganised players. The Indian cheese market grew at CAGR 26.8 per cent during 2007 to 2014, reaching a value of Rs 11.7 billion, and total sales is expected to grow at CAGR 31.3 per cent from Rs 15.2 billion in 2015 to Rs 59.4 billion in 2020. Processed cheese accounts for 88.8 per cent of the cheese market, followed by cheese spread and special cheese at 10.9 per cent and 0.35 respectively. Key drivers here included fast growth expected in the Indian fast food market that uses cheese in pizzas, burgers, sandwiches, besides consumption in traditional Indian food products like paratha, idli, dosa. Maharashtra is the top cheese consuming state with 33 per cent, followed by Gujarat (16 per cent), Delhi (7 per cent) and Tamil Nadu (7 per cent).
Curd: In 2014, the Indian curd market grew at CAGR 16 per cent during 2007-2014 with value of Rs 217 billion in 2014. Total curd sales growth expected is CAGR 15 per cent from Rs 251 billion in 2015 to Rs 493 billion in 2020, and total sales volume from 2,860 MMT in 2015 to 3,598 MMT in 2020. South India represents the country's biggest curd market at 35 per cent, followed by north India (33 per cent), west and central India (20 per cent), and east India (12 per cent).
Flavoured milk: market is currently one of the fastest growing segments in the Indian dairy industry with CAGR of 26 per cent from 2007 to 2014 and sales of Rs 12.6 billion in 2014, while expecting to grow at CAGR 14 per cent from 134 million litres in 2015 to 259 million litres in 2020. Total consumption values is expected to increase from Rs 15.9 billion (2015) to Rs 47.8 billion (2020). North India currently represents India' biggest flavoured milk market at 35 per cent, followed by south India (30 per cent), west and central India (25 per cent), and east India (10 per cent).
Buttermilk: sales volumes are expected to increase from 512.2 million litres in 2015 to 837.1 million litres in 2020. South India is the biggest buttermilk market at 35 per cent, north india (30 per cent), west and central india (26 per cent) and east India (9 per cent).
Paneer: This market in India was valued at Rs 293 billion in 2014 and total sales value is expected to grow at CAGR 14.2 per cent from Rs 337 billion in 2015 to Rs 654 billion in 2020. North India is currently the biggest paneer market with 50 per cent, west and central India (22 per cent), south India (18 per cent) and east India (10 per cent).
Lassi: market touched sales of Rs 12.5
billion during 2007 to 2014 and is expected
to grow from Rs 15.3 billion (2015) to Rs 39.3 billion (2020). North India is the biggest market (57 per cent), west and central India (28 per cent), south India (10 per cent) and east India (5 per cent).
Did you know?
The government has implemented several schemes for the dairy industry including: National Dairy Plan (to increase milk production to 180 MMT annually by 2022 through National Dairy Development Board); Incentive Dairy Development Scheme (70 per cent loan/30 per cent basis funding to rural milk producers and plants having over 20,000 litres daily processing capacity); Assistance to Cooperative Scheme (grants through NDDB to revive sick dairy coop unions at district level and coop federations at state level); Strengthening Infrastructure and Clean milk Production Scheme (Funding for farmer members of primary dairy coop societies for purchase and installation of bulk milk coolers at village level); Dairy Venture Capital Fund Scheme (for urban and rural investors – assistance through bankable projects with 50 per cent interest-free loan component)