Lead Story

The dairy explosion

Dairy players are cashing in on the rising demand for high-margin value-added milk products

It is nearing 1pm and you can hear Lata Mangeshkar’s dulcet voice playing on a slightly crude sound system at the sprawling Bhagyalaxmi farm in Manchar, a nondescript town on the Mumbai-Nashik highway. The song is soon relegated to the background as you are captivated by the sight of a huge bovine population of nearly 3,800 trundling towards the milking area in an almost orderly fashion, mooing in consonance. For someone from the city, it’s an exhilarating sight, but for those working at the farm it’s just another day at work. “We play the music to make sure the cows are relaxed. It does make a difference,” says one of the farm workers with a straight face.

The farm is owned by Parag Milk Foods, which also houses Asia’s largest cheese manufacturing facility. For someone who started off as a cattle feed trader in the late 1980s, Devendra Shah is happy to have made the switch into the dairy business in the early 1990s, when the government threw open the sector to private players.  Shah has not done too bad for himself, especially in recent years. Consider this: the company has seen a four-fold increase in revenues from ₹320 crore in FY09 to ₹1,200 crore in FY13.

Shah joins contemporaries such as Heritage, Tirumala, Creamline and Hatsun, which have made impressive progress alongside some state-owned co-operatives. The Gujarat Co-operative Milk Marketing Federation (GCMMF), popularly known as Amul, is in a different league altogether and continues to aim big. That apart, the world’s largest dairy majors such as Nestle, Danone, Fonterra, Kraft and Schreiber are also milking the India story. Sivaramakrishnan Nagarajan, managing director, Mother Dairy, the second-largest player after the Gujarat Co-operative Milk Marketing Federation with revenues of ₹6,000 crore, feels more competition will only help the market grow.

Today, the branded space is not more than 4-5% of the market. If you take liquid milk, unorganised labels will account for a larger share, depending on the city. For example, in the national capital region (NCR), probably 80% of the market is branded as both Amul and Mother Dairy are dominant players. “But if you go to Mumbai or Pune, you will find many labels and unorganised players.

However, as the markets mature over a period of time, unorganised local labels too will be a part of the conversion as by then the

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