Demand and supply framework for dairy business opportunities in India

The demand for value-added dairy products (VADPs) is increasing at a fast rate in India. In the urban areas, the share in average per capita expenditure on milk and milk products from organized sector and unorganized sector has already attained approximately equal proportions. At present, VADPs from organized sector have been found to account for a high proportion in all dairy products, except liquid milk. The income elasticity for pasteurized packed milk has been found to be high, indicating huge future market for it. Besides income, other factors accelerating demand for VADPs are increased urbanization, growing power of supermarkets; concentration in the processing sector; different levels of value addition; increased segmentation of consumption and changes in eating habits. The present trend has shown that growth in dairy plants and their capacity will enhance market share of the organized sector in VADPs as well as reduce their cost of production by economies of scale. These results emanate at the licensing level, whereas nothing has been felt at the field level. The processing capacity registered under the MMPO (as of March, 2006) has already reached about 33 per cent of milk production and 63 per cent of the marketable surplus of the country. The registered milk processing capacity as percentage of per day milk production has attained saturation point in major states like Gujarat (57.92%), Karnataka (38.51%), Tamil Nadu (46.94%), Uttar Pradesh (40.12%) and Haryana (39.54%). The high milk producing states having lower installed milk processing capacity like Punjab (21.6%), Rajasthan (11.03%), Madhya Pradesh (21.77%), Bihar (4.94%) and West Bangal (19.52%) can provide better opportunities for future investments. A magnificent market exists for value-added dairy products. However, challenge for the dairy industry is to identify appropriate markets and focus its efforts on meeting the needs of consumers in these markets.