TABLE OF CONTENT Sr.n o Particulars Page no. 01 Summary of Sem III 01 02 Summary of Sem IV 08 03 Introduction to Indian/Philippines Dairy Industry 18 04 Introduction to Company 26 05 SWOT Analysis of Company 27 06 FDI in India/Philippines 28 07 Policies and Norms of Import/Export 55 08 Global Strategies of Company 63 09 Business Opportunities 79 10 Conclusion 82 11 Bibliography 83 1
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TABLE OF CONTENT
Sr.no Particulars Page no.
01 Summary of Sem III 01
02 Summary of Sem IV 08
03 Introduction to Indian/Philippines Dairy Industry 18
04 Introduction to Company 26
05 SWOT Analysis of Company 27
06 FDI in India/Philippines 28
07 Policies and Norms of Import/Export 55
08 Global Strategies of Company 63
09 Business Opportunities 79
10 Conclusion 82
11 Bibliography 83
1
SUMARY OF REPORT SEM III
The Philippine investment in India is confined to the sectors of telecom, reprocessing
of waste materials and human resources development.
They also expand in the areas of investment in biotechnology, IT, health care, human
resources development and energy sector.
In order to further facilitate bilateral economic cooperation, various institutional
mechanisms have been set up, which conduct regular meetings in both the countries.
The Philippine investment in India is confined to the sectors of telecom, reprocessing
of waste materials and human resources development.
The two countries are also trying to expand the areas of investment in biotechnology,
IT, health care, human resources development and energy sector.
India’s total trade with the Philippines stood at US$730 million in 2006 with
Total Indian exports at US$490 million,
imports of US$235 million.
The major items of Indian exports to the Philippines are iron and steel manufactures
and tools,
frozen buffalo meat,
rice and wheat,
electrical machinery,
pharmaceutical products and
Transport equipment.
Both countries have been competing against each other in sectors such as
Business process outsourcing (BPO),
Medical care,
Agro-products and private businesses interaction.
2
Dairy industry in Philippine
Introduction
Philippines are the second largest agriculture importer in dairy products after wheat.
Philippines are producing less than 1% of the dairy products it consumes in a year.
There are two major sectors that make the Philippines are milk industry. A vast
importing and processing sector and a small milk producing sectors. Importing and
processing sector provide 95% of milk to the Philippines and second sector provide
remaining of the supply. Out of 95% of imported milk 80% is in powder form.
Market Opportunity
Increase in local production
Local production is growing at an annual rate of 5%
Increase on local production from 13.8 thousand MT in 2008 to 14.3 in 2009.
2010 production forecasted at 15.5 thousand MT.
Increase in consumption
Increase in per capita consumption from 16 kg/yr in 2002 to 19 kg/yr in 2009.
Increase in total consumption of about 1717.6 thousand MT in 2008 to 1752.6 thousand MT
in 2009 or an annual average increase of 2%.
2010 consumption forecasted at 1786.2 thousand MT.
PESTEL Analysis
Political Factor
Agro industryPhilippines honesty scheme is pair of the Supreme Court. There is a great level of criminality
due to country’s unbalance and for that death penalty has been added to increase stability
3
Dairy industrySince 2001 to current time, a number of trends in local dairy sector have help to increase
speed growth. The law and the national development plan promote smallholder dairying, as
contained in the following relevant provisions.
Economical Factor
Agro industryEconomy has been on a solid path of economic expansion. The government has persuaded a
series of govt reforms to increase the industry environment.
Australia, New Zealand and the USA supply 80 percent of milk imports.
In 2002, Philippines imported some 215 million kg of milk and milk products at a cost of Php
17.3 billion (US$ 346 million).
Social factor
Agro industryRice and coconut is a main clip for a man serving of food for Filipino men cannot have
enough money to eat without rice.
Enjoys food in restaurants
Tipping is relatively common in restaurants , hotels.
Dairy industryThe Filipino peoples enjoy milk with daily meals.
The demand of milk and other things related with milk increased in day by day.
Technological factor
Agro industryInnovative Rainwater Harvesting System(IRHS): to utilize the patented plastic flexible piping
connection for farming.
4
Dairy industryPhilippines still use old machineries to produce product with milk. Therefore Machineries for
manufacturing have to Import from outside of Philippines.
The advance machinery for making ice-creams is still not well developing.
There is still lack of proper storage facility of ice-cream in bulk.
Ecological factor
Agro industryA number of volcanoes are dynamic, and the island has been subject to constructive
earthquake.
A marine temperature type of weather conditions and has two distinct season raining and dry
season affects the industries.
Dairy industryType I : Two different periods with extreme rain phase from June to September and a dry
phase this lasts from three to six or seven months.
Type II : No dry period with a very distinct extreme rain period from December to February.
Type III : No distinct extreme rain phase with a short dry season lasting only from 1-
3months.
Legal factor
Agro industryMinimum age to be employed to work in the Philippines one must be at least 15 years old.
Liberalized policy of Philippines.
Dairy industryPresence of the NDA created under the National Dairy Development Act of 1995 to ensure
the quicker expansion of the Philippine dairy industry through policy track and program
application.
SWOT ANALYSIS
Strengths:
Agro industryTheir economic development strength of agricultural products includes rice, corn, cassavas,
mangoes, pineapples, coconuts, sugarcane, pork and fish.
5
Dairy industry To maximize their returns from a premium product, the organizations have to focus on supply
fresh milk to the customer.
The business should focus on the very clear, rising liquid milk market, which involves
demand from middle to upper income group customers, the specialty coffee shops, and
hotels.
Weaknesses:
Agro industry Underdeveloped agriculture sector: Philippines agriculture suffers from low productivity
because of needs of irrigation system, rural infrastructure, post harvest facilities.
Poor state of infrastructure: below standard foundation or little organization at all.
Dairy industryPeriodic vacillations in milk production pattern, area difference of milk supply and species-
wise variation (goat, cow, buffalo etc.) in milk quality expected through milk plants maintain
to pose serious handicaps.
Opportunity:
Agro industryIn Philippines there is a unique scope for innovation in product growth, covering and
presentation.
Expanding market will creation of huge self-employment opportunities and job.
Exporting flowers to India.
Dairy industry Company can introduce value-added products like shrikhand, ice creams, paneer, khoa, dairy
sweets, etc. This will lead to a greater existence and flexibility in the market place beside by
opportunity in the field of brand building.
Threat:
Agro industryA high population growth rate and unsustainable natural resources depletion.
Little access for poor people to productive assets and enterprise opportunities.
6
Dairy industryThe Milk vendors are un-organized sector Today milk vendor are occupy the pride of place in
the industry.
Innovative Product can give either higher profit or higher loss also, so the risk in business is
more.
Porter’s Five Forces Analysis
Threat of new entrants to the industry: LOWSome outstanding characteristics of the milk industry include stable growth, high profit, and
comparatively stable market share. Therefore, in order to enter the market, companies must
have an abundant source of capital to overcome such barriers as:
Product specification: Most major dairy companies in the world have participated in
Vietnam’s dairy market, who have already had a certain and stable market share.
Large capital requirement: Capital source must be abundant enough to cover advertisement
and R&D expenses.
Interview
Philippines has traditionally been outside India's trade radar for a long time. Even
after our 'Look East' policy was launched in the early 1990's, bilateral trade with the
Philippines did not pick up whereas our trade with other countries such as Singapore,
Malaysia, Indonesia, Thailand and Vietnam grew rapidly.
One reason is the aggressiveness shown by these countries as far as trade with India is
concerned. Philippines on the other hand remained an onlooker. Also missing in the
Philippines is the presence of enough Indian companies with effective lobbying capacity back
home.
If bilateral trade is to expand, Philippines has to reciprocate the interest shown by
Indian businessmen. They could start by liberalising the visa regime for Indians further (some
liberalisation under GoaI/Embassy pressure has occurred in the last two years.)
7
CONCLUSIONS
The agriculture sector has been a major player in the Philippine economy. With
changing national and global trends, the sector has identified a number of strategies to
be competitive. A strategy that has helped alleviate poverty and increase productivity
is crop diversification. The passage by the Philippine Congress of the Agriculture and
Fisheries Modernization Act in 1997 is a giant leap towards reaping the previous
efforts of both government and private sectors on crop diversification planting one or
more crops in-between a perennial crop.
SUMARY OF REPORT SEM III
Indian dairy Industry
The Indian dairy industry is rapidly growing, trying to keep pace with the galloping
progress around the world. As he expands his overseas operations to India many profitable
options await him. He may transfer technology, sign joint ventures or use India as a sourcing
centre for regional exports. The liberalization of the Indian economy beckons to MNC's and
foreign investors alike.
India’s dairy sector is expected to triple its production in the next 10 years in view of
expanding potential for export to Europe and the West .Indian dairy sector contributes the
large share in agricultural gross domestic products. Presently there are around 70,000 village
dairy cooperatives across the country. The co-operative societies are federated into 170
district milk producers unions, which is turn has 22-state cooperative dairy federation. Milk
production gives employment to more than 72mn dairy farmers.
Major PlayersThe packaged milk segment is dominated by the dairy cooperatives. Gujarat Co-
operative Milk Marketing Federation (GCMMF) is the largest player. All other local dairy
cooperatives have their local brands (For e.g. Gokul, Warana in Maharashtra, Saras in
Rajasthan, Verka in Punjab, Vijaya in Andhra Pradesh, Aavin in Tamil Nadu, etc). Other
private players include J K Dairy, Heritage Foods, Indiana Dairy, Dairy Specialties, etc.
8
Amrut Industries, once a leading player in the sector has turned bankrupt and is facing
liquidation
Export PotentialIndia has the potential to become one of the leading players in milk and milk product exports.
Locational advantage : India is located amidst major milk deficit countries in Asia and
Africa. Major importers of milk and milk products are Bangladesh, China, Hong Kong,
Singapore, Thailand, Malaysia, Philippines, Japan, UAE, Oman and other gulf countries, all
located close to India.
Low Cost Of Production : Milk production is scale insensitive and labour intensive. Due to
low labour cost, cost of production of milk is significantly lower in India.
Dairy industry in Philippine
Introduction
Philippines are the second largest agriculture importer in dairy products after wheat.
Philippines are producing less than 1% of the dairy products it consumes in a year.
There are two major sectors that make the Philippines are milk industry. A vast importing and
processing sector and a small milk producing sectors. Importing and processing sector
provide 95% of milk to the Philippines and second sector provide remaining of the supply.
Out of 95% of imported milk 80% is in powder form.
Market Opportunity
Increase in local productionLocal production is growing at an annual rate of 5%
Increase on local production from 13.8 thousand MT in 2008 to 14.3 in 2009.
2010 production forecasted at 15.5 thousand MT.
Increase in consumptionIncrease in per capita consumption from 16 kg/yr in 2002 to 19 kg/yr in 2009.
Increase in total consumption of about 1717.6 thousand MT in 2008 to 1752.6 thousand MT
in 2009 or an annual average increase of 2%.
2010 consumption forecasted at 1786.2 thousand MT.
9
ALASKA MILK CORPORATION
Alaska Milk Corporation (AMC) is the leading milk company in the Philippines. It
has consistently maintained its leadership in the canned liquid milk category (evaporated and
sweetened condensed), thus, paving the way into growing Alaska into a mega-brand by
competing in the powdered, ready-to-drink, and creams market, among others.
In 2007, AMC further expanded its liquid milk portfolio by licensing Carnation and
Milkmaid from Nestle and acquiring Alpine, Liberty and Krem-Top. This development led to
AMC’s move to a dominant position in the category.
Apart from growing its core businesses, AMC endeavours to diversify and explore
opportunities in related consumer product categories. In March 2012, Alaska Milk
Corporation partnered with Royal Friesland Campina, the fifth largest dairy company in the
world.
AMC continues to further its mission of nourishing Filipino dreams, bringing in
affordable nutrition across different life stages to every Filipino home for over 40 years. It is
committed in providing nutrition to Filipino households, ensuring high quality standards in its
products, developing innovative marketing plans and programs, and promoting outdoor sports
as part of a healthy lifestyle.
To promote a healthy lifestyle and the brand Alaska, AMC heavily invests in sports
with its ownership of the 14-time champion professional basketball team (Alaska Aces) in the
Philippine Basketball Association (PBA) while maintaining the Alaska Power Camp, a sports
development program involving youth team sports like basketball and football and the
organizing of the 1st Alaska Basketball Cup and the 18th Alaska Football Cup—the single
largest football tournament in the Philippines.
Aside from the Alaska grassroots sports program, in 2011, AMC partnered with the
Jr. NBA Philippines—bringing in the most prestigious basketball camp in the country, NBA-
style. It aim to build participation and enhance skill development among players and coaches
by focusing on fundamental skills and instill values such as Sportsmanship, Teamwork,
Positive Attitude, and Respect or STAR values. As the partnership enter its second
agreement, the Jr. NBA-Alaska program brings the Jr. WNBA in the Philippines for the first
time.
In addition, AMC over the last four years is also the title sponsor of the Iron Kids
triathlon races in the country. Alaska Iron Kids is the junior version of the Ironman.
10
AMC looks beyond selling milk– it sells nutrition and by doing so, the Company and
brand Alaska is doing its part in nation building. Through youth sports development
programs, Alaska Milk is able to help nourish children for them to develop into champions in
the field of interest and, in general, in life.
Today, Alaska is still best known for its tagline “Sa sustansiya’tlasa, wala pa ring
tatalosa Alaska” (In nutrition and taste, nothing beats Alaska).
SWOT Analysis of Alaska dairy
STRENGTHS
1. New technological innovations are there by having higher operational efficiency in
the actions taken by them.
2. It is very well known brand in Philippines.
3. There is a great expertise in management which enables to perform managerial task
effectively and efficiently.
4. There is availability of skilled manpower.
5. This dairy is part of Royal Friesland Campina. The leading dairy company in the
Netherland.
WEAKNESSES
1. There is problem in decision making persuaded by the current events.
2. This dairy having a high dependency on imported raw materials increases
vulnerability against availability and price fluctuations.
3. In terms of marketing strategy, ad campaigns are not eye catching.
4. Some facilities need renovations.
OPPORTUNITIES
1. There is continuous growth in the Philippine economy in a year.
2. There is a continuous growth of the population in the country.
3. Competitors may be slow to adopt the technology.
4. There should be growth in the value by using new equipment’s that the company will
be using.
5. Exporting of the Alaska product in the different countries.
11
THREATS
1. There is a local major competitor named-Angel brand.
2. Economic problems experiencing in Europe.
3. The increasing rate of raw material affects the whole dairy.
4. Economic problems like not enough infrastructures, increasing population affects the
dairy itself in producing the products.
5. Different cost of utilities such as crude oil, diesel, electricity, water etc can be matter
for arranging the dairy.
FDI ON INDIA
India has been ranked at the second place in global foreign direct investments in 2010
and will continue to remain among the top five attractive destinations for international
investors during 2010-12 period, according to United Nations Conference on Trade and
Development (UNCTAD) in a report on world investment prospects titled, 'World Investment
Prospects Survey 2009-2012'.
The 2010 survey of the Japan Bank for International Cooperation released in
December 2010, conducted among Japanese investors, continues to rank India as the second
most promising country for overseas business operations.
A report released in February 2010 by Leeds University Business School,
commissioned by UK Trade & Investment (UKTI), ranks India among the top three countries
where British companies can do better business during 2012-14.
According to Ernst and Young's 2010 European Attractiveness Survey, India is
ranked as the 4th most attractive foreign direct investment (FDI) destination in 2010.
However, it is ranked the 2nd most attractive destination following China in the next three
years.
Moreover, according to the Asian Investment Intentions survey released by the Asia
Pacific Foundation in Canada, more and more Canadian firms are now focusing on India as
an investment destination. From 8 per cent in 2005, the percentage of Canadian companies
showing interest in India has gone up to 13.4 per cent in 2010.
12
FDI IN PHILIPPINES
The latest value for Foreign direct investment, net (BoP, current US$) in Philippines was
($1,253,000,000.00) as of 2011. Over the past 6 years, the value for this indicator has
fluctuated between $620,000,000.00 in 2007 and ($2,818,000,000.00) in 2006.
Definition: Foreign direct investment are the net inflows of investment to acquire a lasting
management interest (10 percent or more of voting stock) in an enterprise operating in an
economy other than that of the investor. It is the sum of equity capital, reinvestment of
earnings, other long-term capital, and short-term capital as shown in the balance of payments.
This series shows total net, that is, net FDI in the reporting economy from foreign sources
less net FDI by the reporting economy to the rest of the world. Data are in current U.S.
dollars.
Year Value
2005 ($1,665,000,000.00)
2006 ($2,818,000,000.00)
2007 $620,000,000.00
2008 ($1,285,000,000.00)
2009 ($1,604,000,000.00)
2010 ($682,000,000.00)
2011 ($1,253,000,000.00)
The Philippines moved up significantly on an annual index of business
competitiveness and now ranks 72nd out of 132 countries on the World Economic Forum's
enabling trade index, up from 92nd place two years ago.
The Global Enabling Trade Report 2012 ranks countries based on market access,
border administration, transport and communications infrastructure, and business
environment. The Philippines showed the greatest improvement in the area of market access,
moving up 50 places from 64th in 2010 to 14th in 2012. Improvement was also seen in the
category of efficiency of import-export procedures.
Net inflows of foreign direct investments (FDI) to the Philippines for the first two
months of 2012 were $850 million, three times higher than the $335 million during the same
period in 2012. Gross inflows for the first two months of 2012 were $927 million.
13
The Philippines' strong macroeconomic fundamentals are making the Philippines an
attractive environment to invest at a time of continuing concerns over the sovereign debt
crisis in some parts of Europe and the moderation in global activity
POLICY AND NORMS Of INDIA’S IMPORT/EXPORT
India allows imports of milk and milk products without quantitative limitations,
although tariff rate quotas apply and an import permit is required. NFDM imported above the
TRQ attracts a 60 percent basic duty and above quota butter oil imports are charged a 30
percent basic duty
On June 11, 2013, the Food Safety and Standards Authority of India extended the import prohibition on milk and milk products from China for an additional year until June 22, 2014. The ban includes milk, milk products, chocolates and chocolate products, candies, confectionary, and food preparations made with milk or milk solids originating in China.
Philippine Dairy Imports
Dairy products are currently the country’s third largest agricultural import after wheat
and soybean meal. Despite an expanding food processing industry, total 2013 imports
of dairy products are forecast to slightly decline from the previous year’s level of
1,955 MT (LME) to 1,900 MT (LME) due to high global prices early in the year. Post
expects imports in 2014 to increase slightly to 2,000 MT (LME) as growth in local
demand will likely continue to exceed any increases in domestic supply.
GLOBAL SATRATEGY
ALASKA MILK CORPORATION is one of the leading manufacturers of milk
products in the Philippines. It has established a strong brand heritage among Filipino
consumers with its traditional liquid canned milk products marketed under the Alaska label.
The Company has likewise established a strong presence in the powdered milk business and a
growing position in the UHT ready-to-drink and ready-to-use segments.
Today, more than ever, Alaska endeavours to maintain and reinforce its formidable
position in the Philippine milk market. We seek to cater to a new Generation of consumers by
14
building on the strengths of our portfolio of trusted Brands and capitalizing on the
possibilities created by a continually evolving consumer environment.
For over thirty years, Alaska Milk Corporation has proven its worth as a company of
people driven by a passion to deliver unparalleled value to its consumers and customers
through its quality products and superior services. We take great pride in providing affordable
nutrition for families across the country under a portfolio of trusted brands. Through all the
years of our corporate existence, our strength in the industry has always been our people. We
rely on them – their integrity, skills, talents, enthusiasm and commitment. Holding ourselves
to the highest standards ensures that we achieve our goals in a manner consistent with our
corporate values.
BUSINESS OPPORTUNITIES IN PHILIPPINES
India and the Philippines enjoy healthy and cordial bilateral economic relations. Our bilateral trade has steadily grown over the years -- from $180 million in 1998 to $372 million in 2004 -- with Indian exports to the Philippines at $283 million and imports from the Philippines at $89 million.
However, it remains below potential. India's share in Philippines' global trade is a negligible 0.46 per cent. Our exports are 0.7 per cent of Philippine's global imports, and Philippine's exports to India are 0.22 per cent of their global exports.
Philippines has traditionally been outside India's trade radar for a long time. Even after our 'Look East' policy was launched in the early 1990's, bilateral trade with the Philippines did not pick up whereas our trade with other countries such as Singapore, Malaysia, Indonesia, Thailand and Vietnam grew rapidly.
One reason is the aggressiveness shown by these countries as far as trade with India is concerned. Philippines on the other hand remained an onlooker. Also missing in the Philippines is the presence of enough Indian companies with effective lobbying capacity back home.
If bilateral trade is to expand, Philippines has to reciprocate the interest shown by Indian businessmen. They could start by liberalizing the visa regime for Indians further (some liberalization under GoI/Embassy pressure has occurred in the last two years).
The Philippines pharmaceutical market heavily dependent on bulk importation of basic raw materials, chemicals, semi-finished and finished products from the US, Europe, Canada and Australia, among others. Annual imports are about $450 million.
15
Manufacturing merely involves the formulation and processing of drugs and pharmaceuticals into various forms and dosages, repacking of imported bulk drugs and packaging them for distribution. Since the bulk of the imports are from multinational companies, medicine prices in the country are about 5 to 15 times higher than those in India.
There are two main reasons for the below-potential Indian pharma exports to the Philippines -- a strong multinational lobby working against imports of inexpensive medicines from countries like India, and stringent registration procedures of the Philippines' Bureau of Food and Drugs. We in the embassy have been countering the mischief perpetrated by the multinational lobby, by making the government, companies and people aware of the high quality and low-priced drugs available from India.
We have enlisted the support of the Philippine International Trading Corporation, a government agency, which has been importing medicines worth about $1.5 million a year from India for the last few years.
The PITC has been waging a war on the multinationals and has been promoting affordable-priced medicines from India and other countries. These medicines are supplied to government hospitals and to the 'Boutika Ng Bayan' retail outlets being set up by the Philippine government to make medicines affordable to the poor.
We have also put pressure on the BFAD to simplify the registration procedure for Indian drugs and shorten the time taken. We have been able to have the time shortened from about two years to about a year. It is a prerequisite for any drug imported into the Philippines to be registered with BFAD first. There are now over 50 Indian companies whose products are registered with BFAD.
At present, major items of Indian exports to Philippines are: frozen buffalo meat (for processing), pharmaceuticals, iron and steel manufactures and tools, textile yarn, petrochemicals, auto and motorcycle parts, cereals, organic chemicals, electronic components, etc.
Major imports from Philippines are: semi-conductors, inorganic chemicals, auto parts, newsprint, minerals, garments and miscellaneous industrial products.
There is potential for growth in our exports in pharmaceuticals, IT services, animal feed, iron and steel, auto parts, cereals, chemicals and milk. As regards exports from the Philippine, potential exists in minerals, seaweed, processed foods and auto parts.
16
Opportunities in Dairy Sector.Jul. 12 – As the demand for dairy products increases from the member nations of the Association of Southeast Asian Nations (ASEAN) , India’s dairy sector seems poised to fill the gap, and can expect a large bump in its milk exports to the region in the near future.
Milk consumption throughout the ASEAN region, especially throughout the ASEAN six majors – which is made up of Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – has gone up in recent years thanks to increasing birth rates, improving diets, rapid urbanization and an increasingly health-conscious middle class in the countries. As a result, these countries have been increasingly dependent on the import of dairy products.“Across Asia, India is the only country with surplus milk. Above all, [India has] the location advantage to cater to the Southeast Asian market,” noted R S Sodhi, Managing Director of Gujarat Cooperative Milk Marketing Federation, which produces India’s Amul milk brand.
Indian skimmed milk powder (SMP) reportedly costs around US$3,450 a ton. In comparison, competing nations such as Australia and New Zealand charge between US$3,550-US$3,650 a ton.
“We expect dairy consumption across the ASEAN-6 to grow 2.4% a year through to 2020. This creates a requirement for an extra three billion liters of milk,” said Michael Harvey, analyst at Australia-based food bank Rabobank.
Indian SMP exports to the ASEAN region is currently 5000 tons a year, but this number is expected to jump to over 10,000 tons by the end of this year. India’s total milk powder exports are likely to touch 100,000 tons this year.
The Indian government lifted the ban on the export of milk powder just last June. This development comes off the heels of recent news that Australia and New Zealand have been gunning to fill the milk export void in the ASEAN region.
CONCLUSION
As Philippines is agriculture based country just like an India, and importing its 80% of dairy products from other countries, so it is an vast opportunity for India in the dairy sector, because India is the world leader in Milk producing and exporting. India already having good trade relation with Philippines in other sectors, except dairy sector, Indian Government has launched many policies to increase the bilateral trade between the ASEAN countries, like “LOOKING EAST”. Recently Indian government lifted the ban on the export of milk powder to increase and encourage Indian dairy sector to increase export in ASEAN.
17
Indian dairy Industry
The Indian dairy industry is rapidly growing, trying to keep pace with the galloping
progress around the world. As he expands his overseas operations to India many profitable
options await him. He may transfer technology, sign joint ventures or use India as a sourcing
centre for regional exports. The liberalization of the Indian economy beckons to MNC's and
foreign investors alike.
India’s dairy sector is expected to triple its production in the next 10 years in view of
expanding potential for export to Europe and the West .Indian dairy sector contributes the
large share in agricultural gross domestic products. Presently there are around 70,000 village
dairy cooperatives across the country. The co-operative societies are federated into 170
district milk producers unions, which is turn has 22-state cooperative dairy federation. Milk
production gives employment to more than 72mn dairy farmers.
While world milk production declined by 2 per cent in the last three years, according
to FAO estimates, Indian production has increased by 4 per cent. The milk production in
India accounts for more than 13% of the total world output and 57% of total Asia's
production. The top five milk producing nations in the world are India ,USA, Russia,
Germany and France.
Source: Export prospects for agro-based industries, World Trade Centre, Mumbai.
Production of milk in India
Year Production in million
MT
1988-1989 48.4
1989-1990 51.4
1990-1991 53.7
1991-1992 56.3
1992-1993 58.6
1993-1994 61.2
1994-1995 63.5
1995-1996 65
1996-1997 68.5
18
1997-1998 70.8
1998-1999 74.7
1999-2000(E) 78.1
2000-2001(T) 81.0
Source: DFPI, Annual Report-1999-2000
World's major milk producers
Country 1997-98 1998-99
( Approx.)
India 71 74.5
Usa 71 71
Russia 34 33
Germany 27 27
France 24 24
Pakistan 21 22
Brazil 21 27
Uk 14 14
Ukrania 15 14
Poland 12 12
New Zealand 11 12
Netherland 11 11
Italy 10 10
Australia 9 10
Growing VolumesThe effective milk market is largely confined to urban areas, inhabited by over 25 per cent of
the country's population. An estimated 50 per cent of the total milk produced is consumed
here. By the end of the twentieth century, the urban population is expected to increase by
more than 100 million to touch 364 million in 2000 a growth of about 40 per cent. The
expected rise in urban population would be a boon to Indian dairying. Presently, the
organized sector both cooperative and private and the traditional sector cater to this market.
19
The consumer access has become easier with the information revolution. The number of
households with TV has increased from 23 million in 1989 to 45 million in 1995. About 34
per cent of these households in urban India have access to satellite television channel.
Potential for further growthOf the three A's of marketing - availability, acceptability and affordability, Indian dairying is
already endowed with the first two. People in India love to drink milk. Hence no efforts are
needed to make it acceptable. Its availability is not a limitation either, because of the ample
scope for increasing milk production, given the prevailing low yields from dairy cattle. It
leaves the third vital marketing factor affordability. How to make milk affordable for the
large majority with limited purchasing power? That is essence of the challenge. One practical
way is to pack milk in small quantities of 250 ml or less in polythene sachets. Already, the
glass bottle for retailing milk has given way to single-use sachets which are more
economical. Another viable alternative is to sell small quantities of milk powder in mini-
sachets, adequate for two cups of tea or coffee.
Marketing Strategy for 2000 ADTwo key elements of marketing strategy for 2000 AD are: Focus on strong brands and,
product mix expansion to include UHT milk, cheese, ice creams and spreads. The changing
marketing trends will see the shift from generic products to the packaged quasi, regular and
premium brands. The national brands will gradually edge out the regional brands or reduce
their presence. The brand image can do wonders to a product's marketing as is evident from
the words of Perfume Princess Coco Channel: In the factory, we pack perfume; in the market,
we sell hope!
Emerging Dairy MarketsFood service institutional market: It is growing at double the rate of consumer market
Defence market: An important growing market for quality products at reasonable prices
Ingredients market: A boom is forecast in the market of dairy products used as raw material
in pharmaceutical and allied industries
Parlour market: The increasing away-from-home consumption trend opens new vistas for
ready-to-serve dairy products which would ride piggyback on the fast food revolution
sweeping the urban India.
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India, with her sizable dairy industry growing rapidly and on the path of modernization,
would have a place in the sun of prosperity for many decades to come. The one index to the
statement is the fact that the projected total milk output over the next 15 years (1995-2010)
would exceed 1457.6 million tonnes which is twice the total production of the past 15 years!
Major PlayersThe packaged milk segment is dominated by the dairy cooperatives. Gujarat Co-operative
Milk Marketing Federation (GCMMF) is the largest player. All other local dairy cooperatives
have their local brands (For e.g. Gokul, Warana in Maharashtra, Saras in Rajasthan, Verka in
Punjab, Vijaya in Andhra Pradesh, Aavin in Tamil Nadu, etc). Other private players include J
K Dairy, Heritage Foods, Indiana Dairy, Dairy Specialties, etc. Amrut Industries, once a
leading player in the sector has turned bankrupt and is facing liquidation.
Export PotentialIndia has the potential to become one of the leading players in milk and milk product exports.
Locational advantage : India is located amidst major milk deficit countries in Asia and
Africa. Major importers of milk and milk products are Bangladesh, China, Hong Kong,
Singapore, Thailand, Malaysia, Philippines, Japan, UAE, Oman and other gulf countries, all
located close to India.
Low Cost Of Production : Milk production is scale insensitive and labour intensive. Due to
low labour cost, cost of production of milk is significantly lower in India.
Concerns in export competitiveness areQuality : Significant investment has to be made in milk procurement, equipment’s, chilling
and refrigeration facilities. Also, training has to be imparted to improve the quality to bring it
up to international standards.
Productivity : To have an exportable surplus in the long-term and also to maintain cost
competitiveness, it is imperative to improve productivity of Indian cattle.
There is a vast market for the export of traditional milk products such as ghee, paneer,
shrikhand, rasgolas and other ethnic sweets to the large number of Indians scattered all over
the world.
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What does the Indian Dairy Industry has to Offer to Foreign Investors?India is a land of opportunity for investors looking for new and expanding markets. Dairy
food processing holds immense potential for high returns. Growth prospects in the dairy food
sector are termed healthy, according to various studies on the subject.
The basic infrastructural elements for a successful enterprise are in place.
Key elements of free market system
raw material (milk) availability
an established infrastructure of technology
supporting manpower
An entrepreneur's participation is likely to provide attractive returns on the investment in a
fast growing market such as India, along with an export potential in the Middle East,
Singapore, Malaysia, Indonesia, Korea, Thailand, Hong Kong and other countries in the
region.
Among several areas of potential participation by NRIs and foreign investors, the following
list outlines a few promising opportunities
Biotechnology: Dairy cattle breeding of the finest buffaloes and hybrid cows
Milk yield increase with recombinant somatotropin
Recombinant chymosin, acceptable to vegetarian consumers
Dairy cultures, probiotics, dairy biologics, enzymes and colouring materials for food
Alaska Milk Corporation and Children’s Hour have enjoyed a shared mission and a long
collaboration in creating a brighter future for Filipino children. Children’s Hour is a non-
profit organization that raises funds through the power of one hour. These funds are then
deployed to carefully selected projects that help children in the areas of education, nutrition,
shelter, protection, and total development in the form of grants.
Since 1999, AMC have participated in the Children’s Hour fund raising campaign, which
taps individuals to donate one hour worth of their salary once a year to programs committed
to the welfare and development of Filipino children. AMC is one of the first companies to
join Children’s Hour campaign and has been recognized as one of the Top 20 contributors.
Alaska Milk looks forward to a continuing partnership with Children’s Hour in “making the
world a better place, one hour at a time.”
Milestones
In 1972, Alaska began caring for the Filipino family by providing quality milk products for
good nutrition and health. Since then, it has shown its caring in other ways: through programs
that promote sports development, campaigns that foster good values among children and
product innovations aimed at enhancing the Filipino’s health and welfare. It is this
commitment to the Filipino that has made Alaska a leading brand. Now in 2012, the mission
of nourishing Filipino dreams grows stronger than ever, as Alaska looks forward to the next
40 years.
BUSINESS OPPORTUNITIES
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India and the Philippines enjoy healthy and cordial bilateral economic relations. Our bilateral trade has steadily grown over the years -- from $180 million in 1998 to $372 million in 2004 -- with Indian exports to the Philippines at $283 million and imports from the Philippines at $89 million.
However, it remains below potential. India's share in Philippines' global trade is a negligible 0.46 per cent. Our exports are 0.7 per cent of Philippine's global imports, and Philippine's exports to India are 0.22 per cent of their global exports.
Philippines has traditionally been outside India's trade radar for a long time. Even after our 'Look East' policy was launched in the early 1990's, bilateral trade with the Philippines did not pick up whereas our trade with other countries such as Singapore, Malaysia, Indonesia, Thailand and Vietnam grew rapidly.
One reason is the aggressiveness shown by these countries as far as trade with India is concerned. Philippines on the other hand remained an onlooker. Also missing in the Philippines is the presence of enough Indian companies with effective lobbying capacity back home.
If bilateral trade is to expand, Philippines has to reciprocate the interest shown by Indian businessmen. They could start by liberalising the visa regime for Indians further (some liberalisation under GoI/Embassy pressure has occurred in the last two years).
The Philippines pharmaceutical market heavily dependent on bulk importation of basic raw materials, chemicals, semi-finished and finished products from the US, Europe, Canada and Australia, among others. Annual imports are about $450 million.
Manufacturing merely involves the formulation and processing of drugs and pharmaceuticals into various forms and dosages, repacking of imported bulk drugs and packaging them for distribution. Since the bulk of the imports are from multinational companies, medicine prices in the country are about 5 to 15 times higher than those in India.
There are two main reasons for the below-potential Indian pharma exports to the Philippines -- a strong multinational lobby working against imports of inexpensive medicines from countries like India, and stringent registration procedures of the Philippines' Bureau of Food and Drugs. We in the embassy have been countering the mischief perpetrated by the multinational lobby, by making the government, companies and people aware of the high quality and low-priced drugs available from India.
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We have enlisted the support of the Philippine International Trading Corporation, a government agency, which has been importing medicines worth about $1.5 million a year from India for the last few years.
The PITC has been waging a war on the multinationals and has been promoting affordable-priced medicines from India and other countries. These medicines are supplied to government hospitals and to the 'Boutika Ng Bayan' retail outlets being set up by the Philippine government to make medicines affordable to the poor.
We have also put pressure on the BFAD to simplify the registration procedure for Indian drugs and shorten the time taken. We have been able to have the time shortened from about two years to about a year. It is a prerequisite for any drug imported into the Philippines to be registered with BFAD first. There are now over 50 Indian companies whose products are registered with BFAD.
At present, major items of Indian exports to Philippines are: frozen buffalo meat (for processing), pharmaceuticals, iron and steel manufactures and tools, textile yarn, petrochemicals, auto and motorcycle parts, cereals, organic chemicals, electronic components, etc.
Major imports from Philippines are: semi-conductors, inorganic chemicals, auto parts, newsprint, minerals, garments and miscellaneous industrial products.
There is potential for growth in our exports in pharmaceuticals, IT services, animal feed, iron and steel, auto parts, cereals, chemicals and milk. As regards exports from the Philippine, potential exists in minerals, seaweed, processed foods and auto parts.
Opportunities in Dairy Sector
Jul. 12 – As the demand for dairy products increases from the member nations of the Association of Southeast Asian Nations (ASEAN) , India’s dairy sector seems poised to fill the gap, and can expect a large bump in its milk exports to the region in the near future.
Milk consumption throughout the ASEAN region, especially throughout the ASEAN six majors – which is made up of Indonesia, Malaysia, the Philippines, Singapore, Thailand and
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Vietnam – has gone up in recent years thanks to increasing birth rates, improving diets, rapid urbanization and an increasingly health-conscious middle class in the countries. As a result, these countries have been increasingly dependent on the import of dairy products.“Across Asia, India is the only country with surplus milk. Above all, [India has] the location advantage to cater to the Southeast Asian market,” noted R S Sodhi, Managing Director of Gujarat Cooperative Milk Marketing Federation, which produces India’s Amul milk brand.
Indian skimmed milk powder (SMP) reportedly costs around US$3,450 a ton. In comparison, competing nations such as Australia and New Zealand charge between US$3,550-US$3,650 a ton.
“We expect dairy consumption across the ASEAN-6 to grow 2.4% a year through to 2020. This creates a requirement for an extra three billion liters of milk,” said Michael Harvey, analyst at Australia-based food bank Rabo bank.
Indian SMP exports to the ASEAN region is currently 5000 tons a year, but this number is expected to jump to over 10,000 tons by the end of this year. India’s total milk powder exports are likely to touch 100,000 tons this year.
The Indian government lifted the ban on the export of milk powder just last June. This development comes off the heels of recent news that Australia and New Zealand have been gunning to fill the milk export void in the ASEAN region.
CONCLUSION
As Philippines is agriculture based country just like an India, and importing its 80% of dairy products from other countries, so it is an vast opportunity for India in the dairy sector,
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because India is the world leader in Milk producing and exporting. India already having good trade relation with Philippines in other sectors, except dairy sector, Indian Government has launched many policies to increase the bilateral trade between the ASEAN countries, like “LOOKING EAST”. Recently Indian government lifted the ban on the export of milk powder to increase and encourage Indian dairy sector to increase export in ASEAN.