Hidden Secret of Indian MILK Brands | Open Letter

Open Letter

20 Jun 202309:09

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

00:00

🌏 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.

05:05

🐄 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

The dairy industry refers to the production and distribution of milk and milk-based products. In the context of the video, it highlights the unique nature of the Indian dairy industry, which is dominated by small players and contrasts with the global trend of a few major brands capturing entire markets. The Indian dairy industry's resilience against global brands is a central theme of the video.

💡Global Dairy Brands

Global dairy brands are large, internationally recognized companies that produce and sell dairy products worldwide. The script discusses how these brands often fail in the Indian market, which is a key point in understanding the video's exploration of the Indian dairy industry's distinctiveness.

💡Operation Flood

Operation Flood was a program initiated in India in 1970 aimed at transforming India's dairy sector. It was a pivotal initiative that led to the growth of the dairy industry and is referred to in the script as the 'white revolution,' illustrating its significant impact on making India the world's largest milk producer.

💡Milk Co-operatives

Milk co-operatives are organizations owned and operated by dairy farmers, which process and market milk collectively. The script emphasizes the importance of co-operatives in the Indian dairy industry, as they have played a crucial role in organizing production and protecting farmers from exploitation by private entities.

💡Cultural Barrier

A cultural barrier refers to the differences in cultural practices and values that can hinder the acceptance or success of a foreign entity in a new market. The video script uses this term to explain why global dairy brands struggle in India, where local brands like Amul and Mother Dairy are deeply ingrained in the culture and have the trust of consumers.

💡Milk Production

Milk production is the process of obtaining milk from dairy animals. The script provides statistics on India's milk production, emphasizing that it is the highest in the world, surpassing the combined production of the US, China, and the UK. This is a fundamental aspect of India's dairy industry's success.

💡Economic Liberalization

Economic liberalization refers to the relaxation of economic controls and encouragement of private enterprise. The script mentions that despite liberalization in 1991, foreign dairy companies have been hesitant to enter the Indian market due to various challenges, such as the difficulty of milk collection and the dominance of co-operatives.

💡Danone

Danone is a prominent French dairy brand that serves as a case study in the script. It entered the Indian market but eventually shut down its operations within a decade. Danone's experience illustrates the challenges faced by global brands in adapting to the Indian dairy market.

💡Anand Milk Union Limited (Amul)

Amul is a cooperative from Gujarat and is highlighted in the script as one of the most popular and successful dairy co-operatives in India. It represents the strength and reach of co-operatives in the Indian dairy industry and serves as an example of how local brands have thrived.

💡Adaptation

Adaptation in this context refers to the ability of a company to adjust its business model to fit the local market conditions. The script points out that foreign dairy brands often fail in India because they do not adapt their strategies to the local culture and consumer preferences, as evidenced by Danone's attempt to sell flavored yogurt.

💡Ghee, Milk, and Curd

These are traditional Indian dairy products that are central to the Indian diet. The script contrasts these with the products typically sold by foreign dairy companies, such as yogurt, butter, and cheese. The preference for local products like ghee, milk, and curd contributes to the challenge faced by global brands in the Indian market.

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.