Time is right for foreign companies to milk India’s dairy industry

By RJ Whitehead

- Last updated on GMT

Time is right for foreign companies to milk India’s dairy industry

Related tags: Milk

As one of the world’s largest-volume dairy markets, India is often forgotten, but now specialist agricultural bank Rabobank believes the time has come for global players to start investigating the market's potential. 

The Indian dairy market is complex, particularly for foreign players, and past failures indicate that getting the strategy and timing of entry right is a significant challenge. 

However, Indian dairy consumption is emerging strongly, with Rabobank expecting the market’s current rapid pace of growth to gain momentum over the next four to five years, driven largely by increasing consumption of value-added products and the formalisation of the value chain.

Enigmatic market

For years, the Indian dairy market has remained an enigma for global dairy players​,” said analyst Shiva Mudgil. “Currently, however, it is going through a phase of transition. 

“High market growth and favourable market conditions may make now the right time for global players to engage with the Indian dairy sector​."

India's large consumption market, its existing milk supplies and established consumer preference for dairy products encouraged global dairy companies to engage with India in the past. 

However, the country’s challenging environment with its informal and fragmented supply chain, and quality concerns over raw milk proved to be a strong disincentive from outside companies, as did its small base for value-added dairy products and ever-changing trade regulations.

Drivers for change

Nonetheless, product innovations are likely to help the acceleration of India's formal dairy market. This, in turn, should bring about favourable government policies and promote industry consolidation. 

Rabobank anticipates that this acceleration will help improve industry margins by attaining greater scale, higher capacity use and an increasing contribution from value-added products in total dairy revenues.  

In turn these developments are expected to spark interest from global companies for whom India has been a difficult market.

"While India’s dairy market is not for every company, in spite of the challenges, many global companies should now be revisiting their Indian dairy strategy​," added Mudgil. 

"For some, it may prove to be the right time to join the game, even on a small scale, through starting a strategic dialogue on Indian dairy​."

Related topics: Markets, South Asia, Industry growth, Dairy

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