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Rabobank: Indian Dairy Market Ready to Engage with Global Players

10 September 2013

GLOBAL - Rabobank says it's time for global players to start engaging with one of the largest volume dairy markets in the world.

The Indian dairy market is complex, particularly for foreign players, and past failures indicate that getting the strategy and timing of entry right is challenging. However, India dairy is emerging as a strong consumption story, with the market growing at a strong pace. Rabobank expects this trend will gain momentum over the next four to five years driven by increasing consumption of value-added products and the formalisation of the value chain.

“For years, the Indian dairy market has remained an enigma for global dairy players,” explained Rabobank Analyst Shiva Mudgil. “Currently, however, the market is in a transition phase. 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 has encouraged global dairy companies to engage with India in the past. However, the challenging environment, with its informal fragmented supply chain, raw milk quality concerns, small base for value-added dairy products and ever-changing trade regulations, proved a challenge and a strong disincentive.

Nonetheless, India’s formal dairy market has shown strong growth in recent years, which is likely to accelerate due to product innovation, enabling government policies and industry consolidation. Rabobank anticipates that this acceleration will help improve industry margins by attaining greater scale, higher capacity utilisation 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 the dairy market in India is not for every company, considering the challenges, many global companies should now be revisiting their Indian dairy strategy,” commented 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.”

TheCattleSite News Desk

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