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.
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