Saturday, January 07, 2012: 09:52:21 PM

Food Processing Guest Column

Evolution of Indian dairy industry - Devendra Shah, Parag Milk Foods

Cheese market in India is gradually opening up due to advent of new brands and changing consumer tastes

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The dairy industry plays an important role in the socio-economic development of India, generating huge rural employment and providing cheap nutritional food to a vast population. The Indian dairy industry is growing rapidly, trying to keep pace with the galloping progress around the world. Currently, India is the world’s largest milk producer, accounting for more than 13% of world’s total milk production. In the last decade or so, the dairy boom has been most prominent in Asia, led by India and China, where increased prosperity and rapid growth of the middle class has been triggering a significant rise in consumption. 

Players like Amul and Britannia have been in the business for 50 years but have never been focussed in the cheese segment. What the consumer got from them in the last 40-50 years in cheese was just processed cheese blocks and slices. Besides, these companies never focussed on educating the consumer on how different cheese is used for different applications. As a result, for majority of consumers in India cheese is just cheese. However, players like Go Cheese have changed the scenario and introduced the consumer to a wide variety of cheese.
There have been two significant changes in consumption patterns, affecting each end of the spectrum. In the mass consumption category, Indian consumers are more ready to buy off-the-shelf. Paneer, which all the major cheese producers are marketing as a branded product, was traditionally home-made. Secondly, with greater international exposure, rising income and brand affiliation, the demand for niche cheese products has increased. Cheese consumption continues to be an urban phenomenon, with processed cheese and cheese spreads accounting for about 80% of the total cheese consumption. Also, cheese is mostly consumed by children and is yet to be part of the mainstream adult diet on a mass scale. Therefore, the potential in the market is huge and is still open.
FDI in retailing
Modern format stores exist in the US and Europe and all over the western world. If they were so good and effective how come their economies are in doldrums and their retail sector bleeding? Why are their companies losing to Asian brands?
The US and EU have much smaller population and even then they suffer massive unemployment. We have huge young manpower and modern format stores will create 'servants' and replace entrepreneurial small shop keepers who are self driven and enterprising on micro scale individually.
Such policy shift in a populated country like India could lead to massive unemployment and socio-economic disturbances. Retail in India has always been a micro business with a significant macro impact and employs significantly larger proportion of the population than in any western nation. Asking such small-scale enterprises to compete head on with retails stores and chains of the world is useless unless there is level playing ground. Handing over the keys to a self developed market to foreign firms is only taking the country a step closer to economic bonded labour, killing the self enterprising spirit at grass root level.
Devendra Shah is the chairman of Parag Milk Foods Pvt Ltd, widely known as Gowardhan and Go Cheese

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