61 CHAPTER III AN OVERVIEW OF INDIAN DAIRY INDUSTRY AND MARKETING OF DAIRY PRODUCTS Introduction Globalization and Liberalization are the Mantras of the new economy today, which is now on the fast track. Industrial production is rapidly moving forward. The dairy industry is no exception. In India, the dairy sector plays an important role in the country's socio-economic development, and constitutes an important segment of the rural economy. Dairy industry provides livelihood to millions of homes in villages, ensuring supply of quality milk and milk products to people both in urban and rural areas. With a view to keeping pace with the country's increasing demand for milk and milk products, the industry has been growing rapidly. The main objective of the Indian Dairy Industry is to manage the national resources in a manner to enhance milk production and upgrade milk processing using innovative technologies. Then subsequently, milk production has also increased at an exponential rate while the benefits of an increase in milk production also reached the consumers from a relatively lower increase in the price of milk. India is the world’s largest milk producer 121.5 million tonnes of milk during 2010-11, accounting for more than 17% of worlds total milk production. It is the world’s largest consumer of dairy products, consuming almost 100% of its own milk production. Dairy industry: Role of marketing Marketing is generally defined as the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. The word Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark.
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61
CHAPTER III
AN OVERVIEW OF INDIAN DAIRY INDUSTRY AND
MARKETING OF DAIRY PRODUCTS
Introduction
Globalization and Liberalization are the Mantras of the new economy
today, which is now on the fast track. Industrial production is rapidly moving
forward. The dairy industry is no exception. In India, the dairy sector plays an
important role in the country's socio-economic development, and constitutes an
important segment of the rural economy. Dairy industry provides livelihood to
millions of homes in villages, ensuring supply of quality milk and milk products to
people both in urban and rural areas. With a view to keeping pace with the
country's increasing demand for milk and milk products, the industry has been
growing rapidly.
The main objective of the Indian Dairy Industry is to manage the national
resources in a manner to enhance milk production and upgrade milk processing
using innovative technologies. Then subsequently, milk production has also
increased at an exponential rate while the benefits of an increase in milk
production also reached the consumers from a relatively lower increase in the
price of milk. India is the world’s largest milk producer 121.5 million tonnes of
milk during 2010-11, accounting for more than 17% of worlds total milk
production. It is the world’s largest consumer of dairy products, consuming almost
100% of its own milk production.
Dairy industry: Role of marketing
Marketing is generally defined as the process of planning and executing the
conception, pricing, promotion, and distribution of ideas, goods, and services to
create exchanges that satisfy individual and organizational objectives. The word
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62
dairy means the place or a farm etc where milk is kept and butter and cheese are
made. A place where milk and cream are stored and processed. Dairy marketing
truly came into the public consciousness with the introduction of the “Got milk”
campaign in 1993. The basic dairy product became associated with a memorable
and catchy slogan that helped drive sales. There are many other strategies, to
market all types of dairy products. These include promotion of nutritional value,
appeal to the organic market, and use of social media networks and development
of new dairy products.
Marketing plays a vital role not only in stimulating production and
consumption, but also in accelerating the pace of economic development. An
efficient marketing system minimizes costs, increases returns to farmers by
reducing the number of middlemen or by restricting the commission of marketing
system
Dairy marketing strategies
Marketers use an assortment of strategies to guide how, when, and where
product information is presented to consumers. Their goal is to convince
consumers to buy a particular brand or product. Successful marketing strategies
create a desire for a product. A marketer, therefore, needs to understand consumer
likes and dislikes. In addition, marketers must know what information will
convince consumers to buy their product, and whom consumers perceive as a
credible source of information. Some marketing strategies use fictional characters,
celebrities, or experts (such as doctors) to sell products, while other strategies use
specific statements or "health claims" that state the benefits of using a particular
product or eating a particular food. So dairy marketing Strategies in the context of
Globalization should be as:
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1) Focused Approach: While the product portfolio has been growing, Indian
dairy Industry should plan for reach out to newer markets - but the strategy
here is more product-specific.
2) Wider Spread: However, as far as other dairy products are concerned,
Indian dairy Industry should plan to expand across the board.
3) Create Original Marketing: Re-invent a product with a powerful
marketing campaign. No matter whether what is sold is milk, yogurt, butter,
sour cream, or cheese, a truly original commercial or print ad can cause
consumers to think of the products in a new light. A catchy slogan, a
memorable spokesperson or an emotionally powerful commercial can go a
long way. It is better to use viral marketing and social media to get the
products to the masses without spending an enormous amount on
advertising.
4) Focus on Nutritional Value: Use scientific-based guides and studies such
as this to convince consumers to consume the dairy products.
5) Appeal to the Organic Market: Consumer demand for organic milk
continues to grow at an annual rate approaching 20 percent, according to
the Agricultural Marketing Research Center. Many people are attracted to
products that are free of chemicals and are manufactured naturally. Utilize
the organic trend in the product line. Follow the government guidelines to
get the organic seal to include in the product advertising and packaging.
6) Introduce New or Unknown Products: Offering consumers something
they have never heard of is a sure-fire way to peak interest in a product.
There were 448 total new dairy product launches in 2010, according to
Dairy Foods. Try new flavors of milk, such as banana or blac
The milk marketing channels
A study of the milk marketing system has shown that there are at least 8
different marketing channels as shown below:
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Chart -1: Milk Marketing Channels M
ilk
Ma
rket
ing
Ch
an
nel
s
Nu
mb
er o
f In
term
edia
ries
Producer – Consumer
0
Producer – milk hawker –consumer
1
Producer –Processor - Consumer
1
Producer – Processor-retailer-consumer
2
Producer-dairy co-operative-Processor-
retailer consumer
3
Producer-Milk transporter-processor-
retailer-consumer
3
Producer-Milk trader-processor-retailer-
consumer
3
Producer-dairy coop-milk transporter-
processor-retailer-consumer
4
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The number of intermediaries involved will have a bearing on both
producer and consumer milk prices. The shorter the channel the more likely that
the consumer prices will be low and the producer will get a higher return. A
notable omission in the milk marketing channel obtaining in the chart is the
absence of wholesalers. Retailers obtain their dairy products directly from
processors. An efficient milk marketing chain is one which enable farmers to
receive at least 50% of the retail price of milk.
Origin and development of dairy farming
Dairy farming has been part of agriculture for thousands of years.
Historically it has been one part of small, diverse farms. In the last century or so
larger farms doing only dairy production has emerged. Large scale dairy farming
is only viable where either a large amount of milk is required for production of
more durable dairy products such as cheese, butter, etc Or there is a Substantial
market of people with cash to buy milk, but no cows of their own. Since 1980 the
demand for the dairy products grew especially in Asian region from 32 kg per
capita in 1981 to 64 kg per capita in 2007, the Asian consumers presented almost a
half of the world demand for milk and milk products. Growing income and change
in food composition in China, India and other Asian countries are the factors of
the increasing demand. The governmental support of milk consumption like
school milk programs and new dairy products supported this expansion (Food and
agriculture organization, 2009). This growing demand and higher prices created
market opportunities for the local producers and in 2005. Asia became the world
largest milk producer with grows 35% in 1997-2007.
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Chart -2: Milk flows from producers to consumer in India
Source: adapted from Dairy India 1997.
In spite of the investment in co-operative development through Operation
Flood and elsewhere, the share of urban milk market served by dairy co-operatives
in the 1990s was only some 9%, compared to about 72% for the
traditional/informal sector. The role of the private sector has been even smaller,
DOMESTIC PRODUCTION: 66.3M mt
RURAL
PRODUCTION
65.0
URBAN
PRODUCTION
1.3
HOME
CONSUMPTION
23.4
SOLD
41.6
URBAN MARKET
37.1
INFORMAL
30.9
COOPS
3.7
PRIVATE
2.5
URBAN CONSUMERS
37.1
RURAL
CONSUMERS
5.8
98% 2%
9%(14%)
63% (97%) 35% 2% (3%)
46% (72%) 6% (9%) 4% (6%)
% of Milk produced
(% of Milk Marketed)
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67
around 6% of the urban market. While the private sector seems to have grown
since the 1990s, these relative proportions are likely to have not changed
significantly and will not do so for the foreseeable future.
Opinion of researchers and some organisation on dairy Industry
According to the National Sample Survey of 1993-94, livestock sector
produces regular employment to about 9.8 million persons in principal status and
8.6 million in subsidiary status, which constitute about 5% of the total work force.
The progress in this sector will result in a more balanced development of the rural
economy. The Agricultural and Processed Food Products Export Development
Authority (APEDA) regulated the export and import of dairy products till early
1990s. However, in the new EXIM Policy announced in April 2000, the Union
Government has allowed free import and export of most dairy products.
According to the World Bank, India is the fourth largest economy in the
world going by the purchasing power parity estimates. Further, India has been
identified as among the first 10 emerging markets in the world. India has the
vastest domestic market in the world with over one billion consumers - a majority
of whom are vegetarians with drinking of milk as habit. The untapped potential of
the dairy sector is immense and opportunity to set up a new dairy venture is great.
In the words of Dr. Amrita Patel, Chairperson, National dairy development board
(NDDB), there is enough place under the scheme for both private and cooperative
sectors. Notwithstanding the above potential it is cautioned that, entering dairy
sector is not going to be a cakewalk.
Union Agriculture Minister Mr. Sharad Pawar said that the government
looks to increase milk procurement by co-operatives from the current 30 per cent
to 65 per cent in the next 15 years. “We have amended the Constitution to increase
transparency in the co-operative sector and facilitate setting up of producer
companies or new generation co-operatives. Today, only 30 per cent of milk is
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procured by co-operatives which we aim to increase to 65 per cent in next 15
years,” said Mr. Pawar at the launch of NDP recently. The total outlay for the
National Dairy Plan has been set at 17,000 crore. The demand for milk is projected
to be around 200 million tonnes in 2021-22. The plan is expected to cover about
1.2 million milk producers in 23,800 villages.
According to the Associated chambers of commerce and industry
(ASSOCHAM) study titled “Indian Dairy Industry: The Way Ahead” Milk
production is likely to reach about 190 million tonnes in 2015 from current level
of about 123 million tones. Growing at about 10 per cent annually, the Indian
dairy industry is predominantly controlled by the unorganised sector, which
accounts for nearly 85 per cent. An upward spiral in prices, the lack of proper
infrastructure like cold storages and absence of a transparent milk pricing system
are affecting retail consumption of milk and leading to escalating milk prices in
the domestic market.The lack of fodder, resulting in low yield from cattle, is
another problem affecting the dairy sector.
International market analysis research and consulting (IMARC) Group, one
of the world’s leading research and advisory firms, finds that the sales of dairy
products in India will nearly double its size from INR 2.6 Trillion (US$ 60
Billion) to around INR 5.1 Trillion (US$ 115 Billion) by 2016.
According to a national survey conducted by the National Sample Survey
Organization (NSSO), an average Indian family’s spend on dairy products was
only next to cereals in terms of food expenditure incurred every month. Such
dependency on dairy products, and more specifically on milk, gives limited scope
for price increases on these products. As such, regional dairy cooperatives and
private manufacturers have to meet the rising demand for packaged milk despite a
limited rise in corresponding production.
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