Dairy Industry To Grow Exponentially Despite Pandemic: DairyTech Players

The dairy industry was among the handful of industries that were allowed to continue operations during stringent lockdowns by the government

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India is the world's largest producer of milk, contributing about 19 per cent of the world's total milk production with over 150 million tonne of milk production every year.

India's milk output surpasses that of all the European Union countries together, and is followed by the US, China, Pakistan and Brazil.

Even in terms of exports, in 2018-19 India's dairy exports rose 126 per cent to 123,877 million tonne (MT), roughly estimated to be worth INR 2,700 crore, from 54,828 MT in the previous fiscal, according to the ministry of animal husbandry, dairying and fisheries.

The dairy industry was among the hand few industries that were allowed to continue their operation during the three months of stringent lockdown implemented by the government to curb the spread of the virus.

In a webinar by Entrepreneur India, three individuals in the dairy tech space shared their thoughts on this outbreak and how they see opportunities in the coming years.

Essential Commodity Amid Lockdown

Needless to say, when the lockdown was implemented with only four hours in hand, businesses across the spectrum found themselves in the dark, unaware of the consequences of how restrictions in movement will hit the supply chain. The dairy industry was no different. Even after the government's clarification that lockdown will have no impact on essential services, in the initial days, the dairy tech players did struggle to operate.

“We deploy a lot of hardware across the supply chain. So we had to send our teams on the ground to check these devices. However, in the initial few days, our teams took some time to reach the ground as police did not let them pass," said Ranjith Mukundan, co-founder and CEO, Stellapps Technologies.

However, with time, and intervention of authorities, police complied and the on-ground team reached the site of work.

"We were among a few companies that had a 100 per cent fulfilment rate throughout the lockdown," added Chakradhar Gade, co-founder, Country Delight. He said right from the time lockdown was announced, the entire team of Country Delight started 'over-communicating' with each stakeholder present in the supply chain.

"When you communicate, you understand what the broad concerns for each of these stakeholders are," he added.

Apart from changing delivery slots, the company reached out to local police stations and built a backup production facility not to hamper the production.

In the following months, Country Delight doubled down on its takeaway centres as it split their distribution centres and installed Bluetooth devices to track distance between people at their centres.

Largest Producer But Low Consumption Rate?

Over the years, India has managed to produce sufficient milk to cater to 1.3 billion people. However, the consumption per capita of milk in the country hovers around 400 gm per day, despite being the largest milk producer. Experts believe the main reason behind a low consumption per capita is the lack of popularity of value-added products such as cheese, paneer, yoghurt, among others. In western countries, consumption per capita of milk range in kilograms as 81 per cent of the milk products are eaten, whereas in India 65 per cent prefer drinking milk.

According to Gade of Country Delight, value-added products are not 'truly Indian' in nature and doesn't fit the lifestyle of Indian consumers.  

Gade said even people living in cities prefer fresh and unadulterated milk to consume directly compared with value-added products as people know that milk is a perishable product.

Apart from this, Gade said Indian milk brands are imitating western companies while producing value-added products. Taking an example of ultra-high temperature milk (UHT) and yoghurt brands, Gade noted that they only comprise four to five per cent of the market. "Bulk of the Indian consumers prefer products like Misti doi, or Rabdi (Indian sweet). So brands need to research to understand consumer preference before launching a new product," he added.

Explaining further he said people generally mix turmeric, ginger or badam in milk while consuming at home.

Opportunities In the Dairy Sector

Though there was a 30 per cent drop in milk consumption in the initial months of lockdown according to a CARE rating report, a significant surge in household consumption and spur in premium milk product for quality packaging has cushioned the consumption fall.

Currently, India produces 572 trillion litres of milk from 300 million cattle every day. This comprises 4.1 per cent of the country's GDP. According to Mukundan, of the 572 million litres, 143 million litres of milk, i.e., 25 per cent, is sourced to the organized sector, 42 per cent is consumed locally whereas 33 per cent is sold at local mom and pop shops.   

"Organized sector is growing at 20 per cent per year, and the dairy industry as a whole is growing at 6 per cent per year. There is a large room for growth as India still comprise 75 per cent of the unorganized sector," added Mukundan.

"India has a huge addressable market, and till now there has been only a handful of players trying to disrupt the market," said Ishpreet Singh Gandhi, founder and managing partner of Stride Ventures.

According to him, India can be a pioneer in terms of deriving technology-based solutions. "There are state-to-state hurdles present in this country. If a player can look into this problem and serve products to consumers in different states, then I believe the particular solution can be used internationally as well," added Gandhi.

From an investor's perspective, Gandhi believes that milk is an underlying commodity, which has not seen disruption despite multiple lockdowns. "That's one factor which excites people supporting these companies despite their limited runways," added Gandhi.

During this tough time, a lot of startups opted for collaboration to stay afloat. Gade believes cross-sector collaboration has been benefiting both parties during these tough times. According to him, dairy tech players can collaborate with edutech or medicine, delivering startups to target similar types of customers and grow faster. 

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