The domestic dairy industry is riding on value-added products for growth, agrees Shashi Kant Singh, partner, agriculture, PwC India. “Products such as probiotic yogurt, fortified milk and specialty cheeses will be market drivers in the future,” says Singh.
“For Indians, dairy is a big source of protein,” says Anand Ramanathan, partner and consumer industry leader, consulting, Deloitte India. “Secondly, profitability is a challenge in this business, because milk, per se, is not a profitability driver, it’s a volume driver. Profits come from value-added products,” he adds.
Other dairy companies, including Mother Dairy and Parag Foods, are also expanding their premium product portfolio. Mother Dairy, which plans to introduce over 100 new products in the next three years, launched its ready-to-consume custard, and multiple ice cream and cold coffee variants last year. Mumbai-based Parag Milk Foods’ revenue contribution from value-added products grew to 69.3% in FY23, from 66% in FY19.
Strengthening the farmer network will be another mainstay of Heritage Foods’ expansion plans. The company, which works with 2.5 lakh farmers across 11,000 villages in nine states, started registering them on its Vet+ app in FY23. The app provides farmers the latest on farming techniques, weather updates, or how much money the dairy firm owes them.
Dairy is a challenging business, with inadequate cold storage capacity in the country being a key hindrance to growth, says Kesavan. “If you’re an FMCG business, you can just go out and appoint distributors… We need distributors who have a cold room, refrigeration facilities, etc., so it’s not so easy to expand,” he concludes.
