Why Are Many Dairy Companies Losing Flavour?

If the 1 lakh crore organised dairy industry is growing at a robust 10 per cent year-on-year, and consumption too is growing, why are many dairy companies losing flavour?

- Ajita Shashidhar

When Godrej Industries subsidiary Godrej Agrovet picked up a 25 per cent stake (increasing it to 52 per cent in 2018) in the Andhra Pradesh headquartered Creamline Dairy in 2015, the intent was to be a significant stakeholder in the then 80,000 crore organised dairy industry, which was estimated to grow at 15-16 per cent year on year on the back of value-added products. Segments such as milkshakes, yogurts, cheese and paneer, after all, offer high margins, while in liquid milk, margins are wafer thin.

The dairy industry, over the past few years, witnessed the entry of a host of private companies such as ITC and French dairy major Lactalis. French yogurt maker, Danone, was also bullish about India consumption and set up a milk procurement and processing centre in Punjab. Homegrown food company Britannia Industries went back to the drawing board to rethink its dairy strategy while ITC preferred to play a slow and steady game. All these companies had national ambitions and were set to outwit cooperatives such as Amul, Mother Dairy and Nandhini, which had been ruling the Indian dairy market for decades.

Four years later, Balram Yadav, MD, Godrej Agrovet, is thankful that he did not take his dairy business beyond the five southern states. The dairy arm of Danone exited the Indian market in early 2018. And while Lactalis has made a few big-ticket acquisitions (having acquired Indore-based dairy company Anik for 452 crore and Prabhat Dairy for 1,700 crore), it has restricted itself to a few regions.