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Dairy sector growth to stay high for now

Capacity expansion and brand building to improve margins

Dilip Kumar Jha  |  Mumbai 

Milk, Milk Product

A study by estimates India’s to grow annually in low double-digits for the medium term. Triggered, it says, by an increase in per capita consumption of milk, with improving affordability, shift towards premium and an increase in consumption of value-added products. This has also prompted many global players to enter India, through the inorganic route, and commit to big investments in value-added products.

production in India has been growing at a four per cent compounded annual growth rate (CAGR) over 1991-92 and 2015-16. price inflation averaged around seven per cent per annum over the same timeframe. Dairy exports from India are negligible, given that the country produces largely and that indigenous value-added products are considerably different from those in developed countries. Hence, the produced in India will be largely consumed in the domestic market and the sector would continue to grow in low double-digits,” said Aniruddha Joshi, analyst at

Strengthening of direct procurement, the right product mix and distribution expansion would be key for revenue and profit growth. Indian consumption trends are still evolving and products such as cheese, spreads and premium will need investment, despite strong growth potential, in the foreseeable future. Companies focusing more on fresh products such as dahi (curd), buttermilk or paneer will enjoy healthy profitability and return on capital.

A report showed global multinationals have invested immensely in Indian dairy over recent years. KKR India, local arm of the New York-based buyout entity, has invested Rs 600 crore in Kwality, producer of dairy products with the same brand name. The world’s largest dairy product group, Lactalis, from France, has invested Rs 1,750 crore and Rs 470 crore in Tirumala and Anik Industries, respectively. Cargill Ventures has invested Rs 110 crore in Dodla Dairy, a Hyderabad-based entity.

Following these moves of multinational companies, Indian private sector players and co-operatives have also changed their strategy, investing in brand building, expansion, direct procurement and distribution. has spent Rs 70-75 crore. Gujarat Cooperative Marketing Federation, producer of the brand of dairy products, proposes to invest Rs 3,000 crore by 2020. Parag Foods and Prabhat Dairy have invested Rs 64 crore and Rs 40 crore, respectively, on strengthening their industry presence.

“The growth in the dairy industry, driven by value added products, largely from the organised players, will drive margin growth. In the medium term, the players will have to focus on improving their procurement strategy and initiate capital expenditure for enhancing capacities and investing in the supply chain. Post stabilisation of the capex, the return ratios and leverage ratios are expected to improve. We expect the credit profile of private dairy players to remain stable over the medium term, till the capex phase is complete,” said Milind Gadkari, senior director,

has increased procurement at a of 11.2 per cent in the past decade. It started collecting outside Gujarat from FY11 and this now accounts for 15 per cent of all the it collects.


First Published: Wed, July 12 2017. 01:50 IST