No Indian dairy among world's top 20

Unorganised market, co-ops stunt local industry

India is the largest milk producing nation in the world at 140 million tonnes a year but no Indian dairy made it to the top 20 of a list drawn up by Dutch financial services company Rabobank.

Industry insiders said the reason was the highly unorganised nature of the Indian dairy industry and also because it was driven by cooperatives and not companies.

The latest annual Rabobank survey of the world's largest dairy companies names Swiss major Nestle as the top dairy firm in the world with a turnover of $27.8 billion in 2014, followed by French Lactalis ($19.5 billion) and Danone ($19.5 billion), while New Zealand's Fonterra follows with $18.5 billion. At 20th place is Germany's Muller with a $5.1 billion turnover in 2014.

RS Sodhi, managing director of the Gujarat Cooperative Milk Marketing Federation (GCMMF), the country's largest dairy cooperative that owns the Amul brand, said if one went by how much milk it processed, the cooperative would be among the top 15 dairies in the world.

According to the International Farm Comparison Network, which has published a list of top 20 global dairies based on their milk intake in 2013, Amul ranked 15th, with a 0.6 per cent share of global production.

As Shiva Mudgil, analyst with Rabobank points out, "Though India is largest in terms of milk consumption; organised business has been local or regional in the past. Most of the dairy players; apart from GCMMF-Amul; are either local (State) or regional in operations. We do see a shift in trend with some of these players scaling up their operations by entering into other regions.". "Amul is located in one part of India and operates primarily out of one state. Major global dairies are operating in multiple countries," Sodhi added.

GCMMF's turnover is around Rs 21,000 crore. Sodhi said if the turnover included district dairies that marketed milk under the Amul brand but which did not reflect in the federation's turnover, it would be around Rs 30,000 crore, or $4.6 billion.

Even then, India's largest milk cooperative fails to make it to the top 20.

The Rabobank list is dominated by European dairies, with 10 making it to the top 20. France alone has four-Danone, Lactalis, Savencia, Sodiaal. The US is another big market, with five dairies-DFA, Dean Foods, Kraft Foods, Schreiber Foods, Land O' Lakes-making it into the list.

In comparison, Indian dairy companies are tiny. Parag Milk Foods, a Maharashtra-based dairy, had a turnover of Rs 1,400 crore in 2014-15.

"In some states like Gujarat, 25 per cent of the milk comes for processing to the organised sector. In Tamil Nadu it is around 28 per cent. Overall, only 20 per cent comes for processing to the organised sector," said RG Chandramogan, managing director of Tamil Nadu-based dairy, Hatsun Agro.

Sodhi said even multinational diaries had not become big in India because of the business model.

"When Amul entered the scene, Nestle was present in the country. However, the business strategy of Amul is diametrically opposite to that of Nestle, we pay the maximum for our raw material. Companies have been unable to compete with cooperatives," he added.

Sodhi said most milk producing nations in the world were dominated by cooperative players, be it New Zealand, the US, or Australia. "The only difference with India is the foreign cooperatives limit themselves to milk procurement and processing. They sell milk in bulk to private firms for value-added products. In India, cooperatives go to the consumer with value-added products," he pointed out.

Indian organised dairy industry is largely packed milk market. Packed milk captures two-third of the organised dairy market in india. Whereas value-added products accounts for one-fifth of the organised dairy market in India. "This trend is epitomised by most of the leading dairy players in India. This is the reason for low realisation per litre of milk handled by organised players in India. However, we see a trend of shift towards value-added products which will be 30 per cent of the organised dairy market in next 5 years. This will help improve the realisation and the margins for the dairy players," adds Mudgil.