India’s Dairy Processing Market will Continue to Grow Steadily

India is one of the largest producers of dairy in the world, comprising close to 23% of the global production. The country is home to 305.5 million bovine animals producing 220 million tons of total milk in FY 22, growing by around 4.8% in 12 months. This places India ahead of other major milk-producing countries such as China and Brazil. Presently milk consumption in India is growing at a CAGR of 6%, as per the analysis by The India Watch. By 2032, the overall production is slated to reach 330 million tons. 

48% of the milk produced in India comes from Cows. The share of Cows in total milk production has increased from 45% in 2012. Water buffaloes comprise close to 49% of the production. Other sources include Camel, Yak, etc. 

The state of Uttar Pradesh (UP) is the largest milk-producing state. Other major states include Rajasthan, AP, Gujarat, etc. In India, there are close to 80 million families that own cows or buffaloes, or both, and are involved in the task of milk production. However, the nature of the industry is unorganized. Around 95% of milk producers in India have 5 or fewer animal stock. The percentage of large diaries (50 or more animal stocks) is limited. However, big dairies now expanding their footprint, especially in the state of Punjab, Maharashtra, Gujarat, AP, and Telangana. 

Around 48% of the total milk produced in India is consumed locally or sold at rural levels. The remaining milk is supplied for processing. Milk processing in India consists of mainly packaged milk as well as other value-added products such as yogurt, butter, cheese, paneer, sweets, skimmed milk powder, etc. The size of packaged milk is pegged at 85 million tons in FY 22, jumping by 83 million tones in FY 21. India is also one of the emerging exporters of milk products such as skimmed milk powder, casein milk, cream, etc. Nevertheless, the export from the country is still limited as local consumption is high. 

Indian milk processing business is run by cooperatives, and private enterprises alongside a vast unorganized private sector that comprises local vendors, milkmen, small private companies, etc. 

Factors Driving milk production in India 

There are multiple factors (s) that are driving the growth of milk production in India. 

• India is traditionally a milk-consuming country. For a vast majority of Indians, milk is the main source of proteins. As one-third of the Indian population is aged less than 14, the demand for milk is further rising.  
• In India the influence of Soy milk, almond milk, and other alternatives is still limited, which makes dairy a popular source of nutrition.
• India has vast resources available in the form of large volumes of bovine cattle. The Indian bovine cattle population is growing at a CAGR of 0.82% and has reached 305.5 million in FY 22. 
• In recent years, India is investing heavily in infrastructure, which also includes developing warehouses, supply chains, and the cold chain sector. This has also boosted the production, processing, and supply of milk and dairy products. 
• As the average income of Indian households is growing there is a higher demand for perishable high-value products such as butter, ghee, cheese, yogurt, milk-based sweets, buttermilk, etc. Backed by evolving consumption patterns and a surge in income, the segment will continue to grow fast. 
• India has availability of quality manpower in the dairy processing sector. The Indian government has also taken a host of initiatives to boost the dairy production business in India, which will be discussed in the subsequent segment. 

GOI Initiative to Boost the Dairy Production Segment

The Indian government has taken proactive steps to support the milk production, preservation, and processing industry. 

• A 100% FDI has been allowed in the food processing industry in India. 
• 42 new dedicated mega food parks have been announced all over India, with common infrastructure facilities to support Indian food manufacturers. 
• A fund of USD 240 million has been created with NABARD (National Bank for Agriculture & Rural Development) to assist food parks and units operating within them. 
• New milk processing units can avail of 100% concession on income tax for the first five years of operations. Thereafter the concession is tuned to 25-30%. 
• New processing units can avail discounts on import duty of equipment. 
• 100% income tax deduction is allowed for capital expenditure toward developing cold chains and warehouses for food storage. 

The Indian dairy processing sector is set for tremendous growth. The market will see increased organization and value creation with many new investors pivoting towards high-value products such as Cheese, Yogurt, variants of butter, creams, skimmed milk powder, flavored milk, etc. Meanwhile, the demand for packaged milk will also grow steadily as it remains one of the major sources of proteins. 

This will also unfold tremendous opportunities in ancillary businesses as well such as cold chains, packaging, manufacturing of equipment, milk packaging, veterinary services, etc. 

How The India Watch can Help

If you are an investor or a business looking to enter the dairy production, or processing business or planning to start a milk product venture, The India Watch can be helpful. The Indian dairy (and ancillary industries), though a lucrative venture is also a competitive and complex venture. Before starting a venture on a large scale, it is important to take help in terms of feasibility or a market study, as it can refurbish a lot of actionable data and insights and enable businesses to make informed decisions. The scope of the study will include: 

• Industrial analysis, market size estimation, growth forecasting, category-wise market share analysis, etc. 
• Market opportunity scanning. 
• Distribution and supply chain analysis. 
• Competitive intelligence and information
• Strategic growth and roadmap formation
• Financial planning and revenue forecasting to help businesses understand the business better. 
• Detailed feasibility reports
• Market surveys including consumer satisfaction surveys. 
• For any further information, consult us at info@theindiawatch.com