Hidden Secret of Indian MILK Brands | Open Letter
Summary
TLDRThe Indian dairy industry stands out globally, with its unique structure built on millions of small producers, making India the world's largest milk producer and consumer. Despite economic liberalization, global brands like Danone struggle to penetrate the market due to challenges like milk collection from scattered small farms, the dominance of cooperatives, and cultural barriers. The 'Operation Flood' program and the trust in local brands like Amul and Mother Dairy have shaped a robust, indigenous dairy sector resistant to foreign competition.
Takeaways
- 🌏 India is the world's largest producer and consumer of milk, contributing 24% of global milk production.
- 🏭 The Indian dairy industry is unique, being built with numerous small players rather than a few large ones, unlike in other countries.
- 📉 Global dairy brands often fail in India, such as Danone, which shut down its operations after 10 years.
- 🐄 The Indian dairy industry has a history of over 8000 years and has been an integral part of the Indian diet since ancient times.
- 🚀 The National Dairy Development Board and Operation Flood in 1970 marked a significant turning point, leading to the 'white revolution' in India's dairy sector.
- 📈 India became the largest milk producer in the world in 1998, surpassing the US, despite economic liberalization and the potential for foreign investment.
- 🐮 The Indian dairy landscape is characterized by 8 crore small farms with 1-5 dairy animals each, making milk collection challenging for large companies.
- 🛒 Only 10% of milk produced in India is available for the private market, with the majority being consumed by farmers, their families, or local buyers.
- 🤝 Milk Cooperatives play a crucial role in the Indian dairy industry, providing organized production, processing, and marketing at the grassroots level.
- 🏆 Brands like Amul and Mother Dairy are cooperatives that have gained the trust of local consumers, making it difficult for foreign brands to compete.
- 🍶 Cultural differences in dairy product preferences, such as the Indian preference for ghee, milk, and curd over yogurt, butter, and cheese, pose a barrier for foreign dairy companies.
Q & A
Why do global dairy brands struggle to succeed in the Indian market?
-Global dairy brands struggle in India due to the unique structure of the Indian dairy industry, which is dominated by small players and co-operatives, making it difficult for foreign companies to establish a strong presence and compete with local brands that have deep cultural ties and consumer trust.
What percentage of the world's milk production comes from India?
-India produces 24% of the world's milk, making it the largest milk producer globally.
How does the Indian dairy industry differ from other countries in terms of the number of players involved?
-In contrast to other countries where 2-3 major brands dominate the market, the Indian dairy industry is built with many small players, reflecting a decentralized and diverse market structure.
What was the impact of the 'Operation Flood' program on the Indian dairy industry?
-Operation Flood, launched in 1970, transformed India from a milk-deficient country to the world's largest milk producer. It created a vast network for procuring, processing, and marketing milk, leading to what is known as the 'White Revolution'.
Why did Danone's dairy business fail in India?
-Danone's business in India failed within 10 years due to the challenges of collecting milk from the numerous small producers, the dominance of co-operatives, and the cultural preferences for dairy products that differed from Danone's business model.
How many dairy farms are there in India, and what is the average number of diary animals per farm?
-India has approximately 8 crore (80 million) dairy farms, with an average of 1-5 diary animals per farm, indicating a highly fragmented production landscape.
What is the distribution of milk consumption and sales in India?
-Half of the milk produced in India is consumed by the farmer and his family or sold locally. 40% of this half is bought by cooperative contractors, leaving only 10% for the private market.
What role do co-operatives play in the Indian dairy industry?
-Co-operatives in India are dairy businesses operated by farmers in a region, ensuring organized milk production and marketing. They are known for their strong brand identity and consumer trust, making them formidable competitors to foreign dairy brands.
Why is it difficult for foreign dairy companies to break into the Indian market?
-Foreign dairy companies face challenges such as the need to establish a widespread collection network, competition from organized co-operatives, and cultural barriers related to consumer preferences and trust in local brands.
What are the major dairy products consumed in India, and how do they differ from those in foreign countries?
-In India, the major dairy products are ghee, milk, and curd, which differ from the products commonly sold in foreign countries such as yogurt, butter, and cheese.
How did the cultural barrier affect Danone's attempt to sell flavored yogurt in India?
-The cultural barrier affected Danone's attempt as they failed to recognize that liquid milk has the lowest profit margins in India and that consumers have a strong preference for traditional dairy products like ghee and curd, leading to their failure in the market.
Outlines
🌏 The Uniqueness of the Indian Dairy Industry
The Indian dairy industry stands out globally due to its structure and operations. Unlike most countries where a few large players dominate the market, India is home to millions of small dairy farmers. The country leads the world in both milk production and consumption. Despite the vast potential, global dairy brands like Danone have struggled to establish a foothold in India, often exiting the market within a decade. The script delves into the historical context of the Indian dairy industry, dating back 8000 years, and discusses the transformation brought about by the National Dairy Development Board and Operation Flood, which revolutionized the sector. The unique challenges faced by foreign companies in India, such as the difficulty of milk collection from numerous small producers and the dominance of cooperatives, are highlighted. The video aims to explore these aspects and the reasons behind the Indian dairy industry's resilience against global brands.
🐄 Challenges and Strategies of the Indian Dairy Cooperatives
This paragraph focuses on the challenges that foreign dairy companies face when entering the Indian market, primarily due to the scarcity of milk availability for them and the high costs associated with establishing a widespread milk collection network. It emphasizes the role of milk cooperatives in the Indian dairy industry, which are farmer-operated businesses that have a strong presence and consumer trust. The paragraph outlines the structure and operations of these cooperatives, which include collection at the village level, processing at the district level, and marketing at the state level. The cultural significance of dairy products in India and the preference for local brands like Amul and Mother Dairy over foreign ones is also discussed. The narrative touches upon the cultural barriers and the importance of trust in the dairy business, illustrating why foreign companies struggle to compete with local cooperatives that are deeply rooted in the Indian consumer psyche.
Mindmap
Keywords
💡Dairy Industry
💡Global Dairy Brands
💡Operation Flood
💡Milk Co-operatives
💡Cultural Barrier
💡Milk Production
💡Economic Liberalization
💡Danone
💡Anand Milk Union Limited (Amul)
💡Adaptation
💡Ghee, Milk, and Curd
Highlights
The Indian dairy industry is unique in that global brands often fail upon entering the market.
India has a diverse dairy industry with many small players, unlike other countries with a few dominant brands.
India is the world's largest producer and consumer of milk, accounting for 24% of global milk production.
The Indian dairy industry's success can be traced back 8000 years to the Indus Valley civilization.
The National Dairy Development Board and Operation Flood were established in 1965 and 1970, respectively, to revolutionize the dairy sector.
Operation Flood aimed to increase milk production in urban areas and later expanded to villages and medium-sized urban centers.
The mission's success led to India being named the 'white revolution' and becoming the largest milk producer by 1998.
Despite economic liberalization in 1991, foreign dairy companies have been hesitant to enter the Indian market.
Milk collection in India is challenging due to the vast number of small dairy farms with 1-5 animals each.
Only 10% of India's milk production is available for the private market, limiting the scope for foreign companies.
Milk Co-operatives play a significant role in the Indian dairy industry, often outperforming private players.
Co-operatives like Amul and Mother Dairy are popular due to their grassroots organization and farmer support.
Cultural barriers and trust in local brands make it difficult for foreign companies to break into the Indian dairy market.
The Indian dairy industry focuses on products like ghee, milk, and curd, unlike foreign markets with a preference for yogurt, butter, and cheese.
Danone's failure in India highlights the challenges of adapting foreign business models to the local market.
Local companies that understand Indian culture, such as Namaste India and Country Delight, have better chances of success.
The Indian dairy industry's unique structure and operations make it an interesting and informative case study.
Transcripts
Something unique is happening in the Indian Diary industry
It is so unique that
The global dairy brands that are popular all around the world
Gets flop as soon as they enter India
It is so unique that if you go to any foreign country
Only two or three players are involved in this industry
These 2-3 brands have captured the whole market
But the Indian dairy industry works entirely different
The dairy industry in India,
Is built with many small players
India is the biggest producer of milk in the world
24% of the milk from all around the world is produced in India alone
For comparison if you look at the combined milk production of the US, China, and UK
India produces more milk than these three countries
And if you look at the consumption of milk around the world
India is the biggest consumer of milk in the world
Hence, one genuine question arises in our minds
Why do the global dairy brands not enter India, which has a vast dairy industry?
The prominent French dairy brand Danone
When entered the Indian market
Their business was completely shut down in a span of 10 years
What is so unique in the Indian dairy industry?
Let's deep dive into this in this video
This topic is interesting as well as informative
Must share this video after watching it
Subscribe to this channel as well and get us to 500K subscribers
Do you know who's got milk?
India is the world's biggest producer and consumer of dairy
3,500,000 farmers
Danone opened its own processing plant in Haryana
But less than a decade later, Danone shut their diary business in India
Asia's biggest dairy cooperative
Health, cleanliness, and a blessed future are the wealth of the dairy industry
To understand this particular topic
You should understand,
The growth of the dairy industry in India
How did it take place?
If you go far behind in the past and look at the archeological and genetic evidence
The history of the Indian dairy industry is older than 8000 years
This trend continued even in the Indus Valley civilization
If you observe the Vedic period as well,
Milk and other dairy products became a very important part of the diet of people in India
But the production of dairy products in India,
Declined as time passed
India always had the potential
But there was a need for a proper vision
That can help this sector grow
And finally, this happened in the year 1965
National Diary Development Board was formed
And operation Flood, that was the World's biggest dairy development program was launched in the year 1970
This mission had a total of three-phases
At the beginning of this program diary production was increased in the cities of Delhi, Mumbai, Kolkata, and Chennai
In the second phase, 147 urban areas were included in this program
In phase three, almost 15000 villages in India,
And more than 200 medium-sized urban centers
A big network of how to procure, process, and market milk started in full flow
And the benefit of this mega mission was,
India that was once suffering from a scarcity of milk
Now started supplying milk to the whole world
After observing the impact of this mission
It was named the white revolution
If you go further in the timeline, in the year 1998,
India became the largest producer of milk in the world surpassing the US
Economic liberalization was introduced in the year 1991
Ideally, foreign dairy companies must have started operating in India by this time
But this did not happen
Even if you observe today, the major foreign dairy brands
Thinks twice before entering the Indian market
There are three reasons behind this that I am going to explain to you now
The first reason is collecting milk in India is a very tough task
Now, you might say this after hearing this statement
Just don't utter anything
But listen carefully,
For comparison let's take the example of France
France is also a major dairy-producing country
In France, if you look, there are around 60,000 dairy farms
And on average 60 diary cows are present at every farm
Now have a look at the US
This is another major diary-producing nation
There are only around 36,000 farms in the US
And on average there are around 300 cows on every farm
Now, return to India
Do you know what is the number of Diary farms in India?
8 crores
On average, every farm has 1-5 diary animals
Big dairy farms do not operate in India so you can collect milk easily
Small milk producers are operating all around this huge country
And collecting milk from all these is next to impossible
During our research, we found that
The milk produced in India,
Very interesting figures are observed in the sales of the milk produced
The overall milk produced in India,
Half of the milk is consumed by the farmer and his family
Or some nearby people buy the milk from them
40% out of the half of the milk is bought by any cooperative contractor
Only 10% of milk is left for the private market
That's why when any foreign company enters the Indian market
There is less availability of milk for the foreign companies
And to buy any amount of milk, the foreign companies had to spread a network all around the corners of India
This will be highly expensive
It would be near to impossible for foreign countries to make profits
You might have heard a word in these statements
Milk Co-operatives
This is the next that makes the Indian dairy industry the most unique in the world
And these foreign private players tremble from these Co-operatives
These Co-operatives are such a diary business
That is operated by all the farmers in a region
All these Co-operatives were set up in India
So that milk production in every state or region
Can be done in an organized manner
Whatever brand of milk you have today
There are high chances of that brand being a cooperative of your or any other state
Anand Milk Union Limited, Amul
Is a cooperative from Gujarat
Mother Diary is a cooperative from Delhi
Parag is a cooperative from Uttar Pradesh
Vita Dairy is a cooperative from Haryana
These all are co-operatives from different states
Look at this chart by pausing this video
Cooperative from every state is visible in this chart
Do you remember the recent controversy between Nandini and Amul during the Karnataka election?
This controversy was related to the respective cooperatives of both the states
There is one more interesting thing in this
If you check the brand logos of all the co-operatives
We will find a drop in most of the logos
This isn't any coincidence
There was a proper strategy behind this
To make the brand identity of all the co-operatives identical
These co-operatives were established basically to protect dairy farmers
From the exploitation of private milk plants
Amul was the first co-operatives among these
And today if you look,
Amul and Mother Dairy are the two most popular co-operatives
There are different stages in these co-operatives
Collect milk from the villages
Processing at the district level
And marketing at the state level
With this structure, the production, sale, and marketing of milk
Is done in a very organized manner at the grassroots level
Since these co-operatives operate with the support of the farmer
Hence these operate very tightly
Any foreign player entering this structure
Is almost near to impossible
The next point is the cultural barrier
When any foreign company enters the Indian market
Breaking the cultural sentiments followed in India is quite difficult
Companies like Amul and Mother Dairy
Are very familiar to the local people
People have trust in the products of these brands
And the milk business operates massively on trust
You might have even observed that
People buy milk openly from their knowns
Because the trust factor is very strong
In Milk and other dairy products,
Adulteration is the biggest problem
That's why when people trust in a particular product,
Changing their mindset is a little tough
And the more important thing is that
The whole milk and dairy industry of India
Is very different from that of the foreign countries
In foreign countries, yogurt, butter, and cheese are majorly sold
In India, people generally have ghee, milk, and curd
When Danone started operating in India
It started selling flavored yogurt
Because liquid milk has the lowest profit margins
Danone thought to sell high-profit margin products and earn a good amount of money
They passed their business model from the US to India
And failed completely
That's why any local company might survive in India
Like Namaste India and Country Delight
But foreign brands that could not understand the culture of India
Getting succeed is next to impossible for these brands
I believe the way the complete Indian dairy industry operates
Is very unique and interesting
That's why I thought to share these facts with you all
If you did not understand anything do let me know in the comment section
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For watching more such interesting topics
I will meet you in the next video
Till then take care of yourselves
Jai Hind Vande Mataram
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